A STUDY ON TIME OVERRUN IN CONSTRUCTION PROJECTS IN TERMS OF SUITABLE METHODS OF ASSESSMENT FOR LIQUIDATED DAMAGES
Abstract
With notable exceptions, the construction projects in Sri Lanka are poorly organized, highly fragmented and low in productivity. Due to the high complexity of construction projects in the island the management has become so difficult resulting time and cost overruns having adverse effects in the client. To compensate for the loss caused to the client due to the delay of the project the payment of Liquidated Damages (LD) is available as a remedy. This paper studies the shortcomings of the existing Liquidated Damages (LD) system for the modern office buildings in the selected areas of the Colombo city. The market rent lost by the client during the delayed period is the criteria to assess the new LD and it is derived on the analysis of comparable rentals and the professional opinion on reasonable rent. Accordingly this paper suggests new approach to ascertain the actual loss in real estate terms and the recovery of loss safeguarding the client’s financial interest. It further identifies the other relevant factors that should be included in the quantum of Liquidated Damages. This paper presents the findings of the study undertaken to identify the existing system of Liquidated Damages (LD) in construction projects (within selected area) and formulates a new approach to derive the LD actually due to the client in the event of project delays. The basis of calculating LD was the rent and the most reasonable rent for a particular project was ascertained by rental comparisons and professional opinion. Finally, LD based on rent is plotted against the distance from the selected base point of Colombo Fort to Kollupitiya, Union Place, Maradana and Borella. The final outcome of the study is that this existing LD system is not reasonable and the proposed system is more reliable on the part of the client.
Keywords: Construction time overrun, Current LD, Proposed LD
For full Paper: fmscresearch@sjp.ac.lk
