Part of the Ontario construction contracts guide for owners.
A delay claim usually arrives as a thick binder or a long PDF: a narrative, a schedule analysis, a stack of cost spreadsheets and a total at the end. The total is what gets the owner's attention. It's also the least reliable number in the document. Before anyone argues about the amount, the owner's team needs to work out whether the contractor is entitled to anything at all, and for how many days.
This guide sets out how an owner should evaluate a contractor's delay claim: the tests to apply in order, how to review prolongation costs, and the tactics that most often inflate a claim. It doesn't repeat the schedule methods themselves. For those, see our guides to delay analysis methods and concurrent delay in Canada.
Entitlement first, quantum second
Every delay claim has two parts. Entitlement asks whether the contractor has a right to more time, more money, or both, under the contract. Quantum asks how much. They're separate questions, and they should be answered in that order.
Owners often get pulled straight into quantum because that's where the contractor puts the most effort. Pages of rates, crew lists and overhead calculations look rigorous. But a well-documented cost for a delay the owner isn't responsible for is still worth nothing. Settle entitlement first, and much of the quantum argument often disappears.
A practical way to structure the review is as four gates. A claim, or each part of a claim, has to pass all four.
Gate 1: was notice given properly?
Most contracts require prompt written notice of an event that may cause delay or extra cost, often within a fixed period and in a set form. Canadian courts have taken those requirements seriously.
A summary of the case law on a Canadian litigation blog walks through the key decisions. In Technicore Underground Inc. v. Toronto (City) (Ontario Court of Appeal, 2012), late notice barred the contractor's claim, and the owner didn't have to show it was prejudiced by the delay in notice. In Elite Construction Inc. v. Canada (Ontario Superior Court, 2021), emails complaining about delay weren't enough; the notice had to meet the contract's requirements. Older decisions, including Corpex (Supreme Court of Canada, 1982), support enforcing notice clauses even when they don't spell out the consequence of missing them.
There's an important exception. In Colautti Construction Ltd. v. Ottawa (City) (Ontario Court of Appeal, 1984), the owner's consistent pattern of paying for work without the required paperwork meant it couldn't later insist on the strict terms. If your team has routinely ignored the notice process, don't expect to rely on it in a claim.
For each event in the claim, check when notice was given, to whom, in what form, and what it said. Notice issues don't always end a claim, but they often remove parts of it.
Gate 2: is the event the owner's risk?
Next, sort each delay event by who carries the risk under the contract. Generally the events fall into three groups:
- Owner-caused or owner-risk events: late design information, owner changes, late owner-supplied equipment, access restrictions. These typically give time and money.
- Neutral events: events neither party controls, such as some weather or labour disruptions, depending on the contract wording. These often give time but not money.
- Contractor-risk events: late subcontractor submittals, poor productivity, procurement failures. These give neither.
The NSW Government's procurement guide on prolongation claims makes the key point plainly: the contractor must show the cause of delay is one that entitles it to payment. An extension of time doesn't automatically bring money with it. Fenwick Elliott's guide to prolongation costs puts it as "time doesn't always equal money."
Gate 3: did it actually delay completion?
An owner-risk event only supports a time claim if it delayed the critical path, and therefore the completion date, at the time it happened. An event that affected an activity with float may have cost the contractor some inconvenience, but it didn't push out the finish.
This is where the schedule analysis matters, and where claims are most often overstated. Check:
- Is the analysis based on the contemporaneous schedule updates, or on an as-planned schedule with the claimed events dropped in?
- Were the contractor's own delays on the same path at the same time? If so, you're into concurrency, and recovery of money is usually reduced or lost.
- Does the claimed delay match what the monthly updates showed at the time? A delay that never appeared in the updates deserves hard questions.
The NSW guide applies a "but for" test: would the work have finished earlier without the owner's event? If the contractor's own problems would have caused the same late finish anyway, the owner's event didn't cause the loss.
Gate 4: what did the delay actually cost?
Only once a compensable, critical delay is established does quantum come into play. A contractor's prolongation claim usually has three layers.
Site overheads. These are the time-related costs of keeping the site running: supervision, site office, temporary services, equipment on hire. They're usually the most legitimate part of a claim, but they still need testing. Only time-related costs belong here. One-off costs, like mobilization, don't increase because the job ran long.
Head office overheads. Contractors often claim a share of head office costs using a formula such as Hudson, Emden or Eichleay. Fenwick Elliott stresses that these formulae don't measure the contractor's actual costs. They're approximations that can only be used once causation is proven, and usually only where the contractor can show it lost other work because of the delay. The NSW guide goes further and rejects the Hudson and Eichleay formulae outright.
Other items. Financing costs, escalation and lost profit sometimes appear. Each needs its own proof.
The period also matters. Both Fenwick Elliott and the Society of Construction Law Protocol, as Fenwick Elliott summarizes it, assess prolongation costs for the period when the delay's effect was actually felt, not at the rates of whatever was on site at the end of the job. A month of delay during structure costs something very different from a month during final finishes.
Disruption is a separate claim
Many delay claims carry a second claim inside them: disruption, or lost productivity. The two are often blended, and they shouldn't be. As Global Law Experts' overview of Canadian delay claims explains, delay pushes out the completion date, while disruption makes the work less efficient and may not move the finish at all.
A disruption claim needs its own proof. The NSW guide says the contractor has to show that actual progress was interrupted by an owner-risk event, and that comparing planned and actual progress isn't enough on its own. Comparing the tender allowance with what the work ended up costing isn't accepted either. That comparison mostly measures how good the original estimate was.
Stronger disruption claims compare productivity on the affected work with productivity on similar, unaffected work on the same job, often called a measured-mile analysis. When the claim instead takes the total labour overrun and attributes it to the owner, treat it as a global claim and test it the same way.
Common inflation tactics
Most overstated claims aren't dishonest. They're advocacy. But the same patterns appear again and again:
- The global claim. The total overrun is presented as the result of the owner's events, with no link between each event and its cost. Fenwick Elliott notes that global claims assuming that link will fail.
- End-of-job rates. Daily site costs are taken from the period of peak staffing and applied to the whole delay.
- Double counting. Overhead and time already paid through change orders are claimed again as delay costs. The NSW guide flags this duplication specifically.
- Idle equipment at operating rates. Standby equipment should be priced at standby or rental rates, not full operating rates.
- Formula overheads with no proof of lost work. Head office formulae applied automatically, without evidence the contractor turned work away.
- Markup on markup. Profit and overhead applied at every tier and again at the top.
View the data
| Step | Amount |
|---|---|
| Claimed total | $1200k |
| Events without valid notice | −$180k |
| Contractor-risk and concurrent | −$260k |
| Non-time-related costs | −$90k |
| Already paid in change orders | −$70k |
| Peak rates repriced to period | −$110k |
| Unproven formula overheads | −$140k |
| Assessed amount | $350k |
What owners should do
- Review entitlement before quantum. Work through notice, risk and critical path for each event before looking at a single rate.
- Ask for the records. Payroll, equipment invoices, site diaries and monthly schedule updates. A claim that can't be backed by records made at the time is a claim to discount.
- Price the delay period, not the project. Test claimed daily costs against the resources actually on site during the delay.
- Check change orders for duplication. Any time or overhead already paid through changes should come off.
- Respond in writing, item by item. Accept what's justified, reject what isn't, and explain why. A clear response narrows the dispute and positions you well for adjudication or settlement.
- Get legal advice early. Notice, waiver and concurrency are legal questions as much as technical ones.
The bottom line
A delay claim is a case to be tested, not a bill to be negotiated down. Owners who work through entitlement, causation and quantum in order usually find that the defensible amount is a fraction of the headline total. Owners who start haggling over the total usually pay for some of the contractor's own problems.
Facing a delay claim and need an independent review of entitlement and quantum? Book a 30-minute call with Benjamin R. Consulting.
Sources: Commercial Litigation Blog, No notice, no claim: a primer on the importance of giving notice of claims under your construction contract; Fenwick Elliott, Contractor claims for prolongation costs: a comprehensive guide; NSW Government, Construction procurement guide: handling prolongation and disruption claims; Global Law Experts, Construction delay claims in Canada. The worked example is illustrative. This article is general information, not legal advice. Get legal advice on your contract and specific circumstances.