Loss and expense under the JCT forms compensates a contractor for cost caused by matters for which the client is responsible, where that cost is not recoverable through the valuation of variations.
Three things have to hold: a relevant matter under the contract, compliance with the notice and information requirements, and proof that the loss was actually incurred and was caused by the matter relied on. Claims fail on each of these regularly.
It is not an extension of time
An extension of time relieves the contractor of liability for damages and adjusts the completion date. It does not, in itself, award any money.
Loss and expense is a separate entitlement with separate requirements. A contractor can be entitled to time and not to money, which happens whenever the delaying event is one the contract treats as neutral rather than as a client responsibility.
Treating an extension of time award as an implicit agreement to pay prolongation is the single most common confusion in this area, and it produces settlements that neither party could justify afterwards.
Notice is a gateway
The forms require the contractor to notify when the regular progress of the works is or is likely to be materially affected, and to provide information sufficient for an assessment to be made.
Whether notice is a condition precedent depends on the form and on any amendments. Where it is, a late notice can defeat an otherwise good claim entirely.
Even where it is not, late notice damages the claim in practice: it removes the client's opportunity to mitigate, and it means the assessment is being made from records assembled after the event rather than at the time.
What the loss actually consists of
Prolongation costs: time related preliminaries, site establishment, supervision and plant, for the period of compensable delay. These are assessed against actual cost rather than against the tender allowance.
Disruption: reduced productivity where the works were interfered with, whether or not completion was delayed. Harder to prove and covered separately.
Head office overhead and profit, recoverable in some circumstances and on some bases, with the entitlement depending on the drafting and the facts.
Financing charges on the sums involved, again depending on the contract and the circumstances. Each of these is proved differently and none of them follows automatically from the others.
Actual, not theoretical
The requirement is loss actually incurred. A claim built from the difference between tendered preliminaries and a theoretical entitlement is not evidence of loss; it is arithmetic.
Assessment therefore works from the contractor's own records: what site staff were present, what plant was on hire, what the site establishment cost, for the period in question. Those records exist or they do not.
This is why a contractor who kept proper cost records is in a much stronger position than one who did not, regardless of the merits. The point is made more generally in the discussion of thin records.
Causation is where it usually fails
The loss has to be caused by the relevant matter. On a project with several concurrent problems, some of them the contractor's own, establishing that link is genuinely difficult and it is where careful analysis pays.
A period of delay caused partly by late information and partly by the contractor's own subcontractor is not straightforwardly recoverable, and the assessment has to grapple with that rather than assume it away.
Claims that avoid the analysis by presenting everything as a single consequence run into the problems set out in global claims and why they usually fail.
Assess it during the job
Loss and expense assessed monthly, as it accrues, is a measurement exercise carried out against current records. Assessed at the end it is an argument.
The forms generally contemplate ascertainment as the loss is incurred, and a contract administrator who defers everything to the final account is not following the mechanism.
It is also better for the client. A claim assessed monthly can be mitigated, argued about while the facts are fresh, and settled in parts. Left to the end, it arrives as one number attached to eighteen months of history, which is the position described in variation claim exposure.
What this means for you
Test the three elements separately: relevant matter, notice, actual loss caused. A claim strong on one and weak on another is weak overall, and knowing which element is the problem tells you how to respond.
Then insist on monthly ascertainment. It is in the contract, it is cheaper for both parties, and it is the difference between a manageable item and a dispute. On phased schemes where events overlap heavily, it matters even more, as set out under complex phasing.
Assessing a loss and expense claim?
Send the notices, the programme and the cost records. We will tell you what the three tests support.