Views: 0 Author: Site Editor Publish Time: 2025-09-09 Origin: Site
Many construction enterprises have extensive management practices, only focusing on overall costs without proper cost control, and even failing to recognize the importance of project duration. This often leads to difficulties in recovering project funds after completion, or even facing huge claims. For construction enterprises, paying attention to project duration is equivalent to safeguarding project profits. The following is a summary of project duration issues in the construction engineering field, hoping to be helpful to construction enterprises.
I. How Much Does Each Extra Day of Project Duration Cost? In the construction industry, when the prospect of a construction project is promising, the project owner will cooperate with the construction enterprise to complete the project as soon as possible, so that the project can generate profits early. Conversely, if the project prospect is poor and it is difficult to make profits even after completion, the project owner may deliberately delay the completion time to reduce or delay the payment of project funds. In such cases, each day of delay will cause huge losses to the construction enterprise. 1.Loss from interest on advance funds Advance-funded construction has become common in the construction market, and most of these advance funds are not entitled to interest as stipulated in contracts. Even if the contract does not specify that no interest is calculated on advance funds, according to Article 6 of *the Supreme People's Court's Interpretation on Several Issues Concerning the Application of Law in the Trial of Construction Contract Disputes*, if the parties have no agreement on the interest of advance funds, the people's court will not support the contractor's claim for interest. 2. Loss from management fees The contractor's management fees mainly cover the salaries of project management personnel. Since the salaries of these personnel are generally calculated based on working hours, a one-year delay in the project means the contractor has to pay an extra year of salaries and social security contributions for all management personnel, which constitutes a significant expense. 3. Expenses for prefabricated houses, tower cranes, elevators, formwork, and scaffolding The above expenses are all calculated based on time. Moreover, in contracts with suppliers, there is usually no agreement on how to calculate fees during work stoppages, so fees are still charged by time. For long-term work stoppages, it is possible to negotiate with suppliers to terminate the agreement; however, short-term work stoppages are difficult to handle, as the transportation of large mechanical equipment to and from the site is cumbersome and incurs additional transportation costs. To prevent work stoppages by the construction enterprise, the project owner usually only slows down the project progress and controls the duration of work stoppages, which puts the construction enterprise in a difficult position and inevitably increases the above expenses. 4. Expenses for turnover materials If the construction enterprise leases turnover materials, work stoppages may lead to increased rental costs for these materials. 5. Subsidies to labor service companies Although the construction enterprise usually settles accounts with labor service companies based on the completed project quantity, a prolonged project duration will inevitably increase the labor service companies' costs. Labor service companies will then pressure the construction enterprise to increase labor fees, which the construction enterprise can hardly refuse. 6. Increased risk of counterclaims If the actual project duration is longer than the agreed duration and the project owner delays the payment of project funds, the owner may require the construction enterprise to bear liability for breach of contract regarding project duration (i.e., file a counterclaim). In such cases, if the construction enterprise has no evidence to prove the extension of the project duration is justified or that the delay is caused by the owner, it may be required to pay liquidated damages for delayed project duration to the owner. 7. Increased litigation risks When the project is short of funds, the general contractor will inevitably reduce payments to specialized subcontractors, labor service subcontractors, and material suppliers. This may lead to litigation initiated by the aforementioned parties. Once litigation occurs, the general contractor will have to bear additional expenses such as attorney fees, litigation costs, liquidated damages, and interest. Construction enterprises must change their mindset, optimize project organization, and properly handle claims and extensions of project duration. Each day the project is completed ahead of schedule saves one day's costs; the difference between early completion and delay will result in significant cost savings for the construction enterprise.
II. When the Commencement Dates Stipulated in the Contract, Stated in the Commencement Report, and Specified on the Construction Permit Are Inconsistent, How to Determine the Actual Commencement Date?
1. There is no clear legal provision on the determination of the commencement date. According to the views in the precedents of the Supreme People's Court, if the commencement dates stipulated in the contract, stated in the commencement report, and specified on the construction permit are inconsistent, the date stated in the commencement report confirmed by the supervision unit shall be deemed the actual commencement date of the project. 2. Although the commencement date stipulated in the contract is agreed upon by both parties, the construction market is highly unregulated, so the contract-stipulated commencement date often differs from the actual one. In such cases, the modified actual commencement date (i.e., the date stated in the commencement report) shall prevail. 3. The date specified on the construction permit does not have absolute, indisputable validity. A construction permit is a certificate issued by the competent construction authority to the project owner, authorizing construction. It only indicates that the construction project meets the conditions for commencement and cannot be the sole basis for determining the commencement date. In practice, it is common for the actual commencement date to be earlier or later than the date on the construction permit. When there is such an inconsistency, the actual commencement date (rather than the date on the construction permit) shall still prevail.
III. How to Determine the Commencement Date When There Is No Commencement Report? 1. Without a commencement report, the most direct evidence to prove the actual commencement date is lacking, making it difficult to determine the date. If the contractor has other evidence to prove the actual commencement date, that date shall be recognized as the commencement date. However, in such cases, higher standards will be applied to the evidence. 2. If the contractor has neither a commencement report nor any evidence to prove the actual construction date, the commencement date shall be determined based on the quality of the evidence—either the date stipulated in the contract or the date specified on the construction permit.
IV. What Severe Consequences May Result from Unbalanced Provisions on Project Duration in Contracts?
In the industry, construction contracts generally stipulate severe liability for the general contractor in case of delayed project duration, but impose light or even no liability on the owner for project delays caused by the owner's own reasons. When the project prospect is poor and the cost of breach of contract is minimal, the project owner may easily deliberately slow down the project progress. This not only increases the construction enterprise's costs but also may lead to the owner filing a counterclaim for delayed project duration when the owner intends to delay payment of project funds—especially if the construction enterprise fails to properly handle the extension of project duration. Without sufficient evidence to prove the validity of the project duration extension, the construction enterprise may face huge compensation for liquidated damages.
V. These Situations Entitle You to Claim Project Duration Extension!
The "owner-dominated market" means that almost all construction contracts stipulate severe liability for the contractor in case of delayed project duration. When the owner deliberately slows down the project progress, if the contractor fails to apply for a project duration extension in accordance with the contract, it will not only incur increased costs but also face counterclaims. 1. The contractor must always pay attention to the project duration. For project delays caused by the following reasons, the contractor shall claim project duration extension in accordance with the contract: - (1) The owner fails to provide drawings as stipulated in the contract or the provided drawings do not meet the contract requirements; - (2) The owner fails to provide the construction site, construction conditions, or basic data as stipulated in the contract; - (3) The owner fails to promptly complete administrative formalities such as permits and approvals; - (4) The survey datum points, datum lines, benchmark levels, and related written materials provided by the owner contain errors or omissions; - (5) The owner fails to approve and issue the commencement notice within 7 days from the planned commencement date; - (6) The owner increases the project workload; - (7) The owner fails to give advance notice of design changes, which affects the construction of the critical path; - (8) The owner fails to supply materials in a timely manner or the supplied materials have quality issues, which affects the construction of the critical path; - (9) Other projects directly contracted by the owner fail to start on-site on time, or the construction of such projects does not comply with the general contractor's construction plan, resulting in a delay in the overall project duration; - (10) The owner fails to pay project progress funds as stipulated in the contract, affecting construction progress. If the situation remains unchanged after the contractor's written reminder, subsequent construction cannot proceed smoothly; - (11) The owner fails to promptly inspect and accept individual projects, making it impossible to continue the overall construction or complete the overall project acceptance; - (12) The owner's reasons make it impossible to complete the completion formalities; - (13) The owner's reasons make it impossible to complete the record-filing formalities; - (14) Force majeure makes construction impossible; - (15) Changes in laws, regulations, rules, or government orders (as stipulated in the contract) make construction impossible. When project delays occur due to the above reasons, the construction enterprise shall keep relevant evidence, and claim project duration extension legally and reasonably based on the contract. 2. The application for project duration extension shall be submitted to the supervisor (or the owner) within the time limit stipulated in the contract, along with a statement explaining the reasons for the claim. If the contractor fails to issue the claim notice within the stipulated time limit, it will lose the right to claim. If the exact duration of the extension cannot be determined within the contract-stipulated time, the contractor may submit a "preliminary application" to the owner within the time limit, explaining the reasons for the extension, and then submit a supplementary application once the specific extension period is confirmed.
VI. If the Project Prospect Is Poor, Should the Project Duration Be Extended Indefinitely?
When the project prospect is poor and the construction enterprise deliberately slows down the construction pace—resulting in stagnant progress or work stoppages—the contractor may consider terminating the construction contract. 1. The advantages of terminating the contract for the contractor are as follows: - (1) After termination, the construction enterprise is no longer obligated to advance funds for construction; - (2) Project funds that have not reached the contract-stipulated payment node shall be repaid by the owner after contract termination; - (3) No retention money (for maintenance) needs to be retained after contract termination; - (4) The contractor can exercise the priority right to claim compensation from the proceeds of the construction project in a timely manner. 2. The key issue is: on what grounds and how can the contractor terminate the contract? If the contractor's grounds for terminating the contract are insufficient and not supported by the court, the contractor will not only fail to achieve the goal of terminating the contract but also bear liability for breach of contract for unilaterally stopping work or terminating the contract. Therefore, before deciding to terminate the contract, the contractor must conduct a legal analysis, identify valid grounds for termination, collect sufficient evidence, and ensure the termination is legally valid. 3. The contractor may consider the following grounds for terminating the contract: - (1) If the owner fails to pay project progress funds in a timely manner and still does not make payment after the contractor's reminder, the contractor may terminate the contract. According to the *Contract Law* and *the Supreme People's Court's Interpretation on Several Issues Concerning the Application of Law in the Trial of Construction Contract Disputes*, mere arrears of project funds do not necessarily entitle the contractor to terminate the contract. Two additional conditions must be met: first, the amount of arrears is so large that construction cannot proceed normally; second, the contractor must fulfill the obligation of notification—only after notifying the owner of "the impact of arrears on construction progress" can the contractor exercise the right to terminate the contract. Unannounced termination is not allowed. - (2) If the owner fails to fulfill its obligation to cooperate in construction, the contractor may terminate the contract. The owner has multiple obligations to cooperate with the contractor, such as delivering the construction site, providing drawings, supplying owner-designated materials and confirming prices, and ensuring the on-site arrival and cooperation of subcontractors for owner-directly-contracted projects. If the owner fails to fulfill these obligations, making construction impossible, and still does not perform them within a reasonable time after the contractor's reminder, the contractor may terminate the contract. - (3) The contractor may terminate the contract when other contract-termination conditions stipulated in the contract are met. If the contract stipulates other conditions for termination (e.g., the right to terminate after a certain period of work stoppage), the contractor may terminate the contract flexibly in accordance with the contract.
VII. When the Project Duration Is Unduly Prolonged, How Can the Contractor Minimize Losses?
Advance-funded construction and arrears of project funds by the owner are the main risks for contractors. Therefore, contractors must always pay attention to the owner's asset status and business conditions, and take reasonable measures to protect their rights based on specific circumstances. When the owner deliberately slows down the construction progress, the contractor must be alert, investigate the owner's ability to perform the contract and repay debts, and formulate practical solutions based on the investigation results, contract provisions, and actual performance. The contractor may consider the following measures to address the owner's risks: 1. Terminate the contract. 2. Suspend construction. When the owner faces financial problems, the greater the workload, the higher the risks. In such cases, the contractor may consider suspending construction, but must identify sufficient grounds to "suspend work legally" in accordance with the contract. 3. Request the owner to provide guarantees. Guarantees are the most effective way to mitigate risks. During business negotiations with the owner, the contractor may require the provision of valid guarantees (e.g., real estate mortgages, guarantees from third parties with sufficient financial strength) as a condition for resuming construction, continuing construction, or delaying payment. 4. Sign a supplementary agreement to increase the owner's liability for breach of contract. Both parties may agree on more severe liability for the owner's breach of contract (e.g., regarding subsequent progress payment) to deter the owner and provide a basis for claiming rights in case of disputes. 5. Sign an agreement specifying the contractor's right to dispose of the owner's assets. In case of serious breaches by the owner, the contractor may realize its claims by disposing of the owner's assets in accordance with the agreement.
