Commercial & Contract · Best Practice · Construction

Loss and Expense Claim

A claim for additional costs incurred due to matters for which the client is responsible.

Last reviewed: 29 March 2026 — This guide reflects UK law as of this date. JCT / NEC remains current with no amendments enacted as of 29 March 2026. Next scheduled review: 29 March 2027.

Legal basis	JCT Standard Building Contract 2024 (clause 4.20–4.26) & NEC4 Engineering and Construction Contract (clause 60/61) — Loss & expense is a contractual entitlement, not a claim for damages
What it recovers	Additional costs incurred by the contractor as a direct consequence of employer-risk events (called Relevant Matters under JCT) — distinct from an extension of time, which recovers programme time only
RICS guidance	RICS Practice Information: Loss and/or Expense under Construction Contracts (July 2024) — sets out best-practice methodology for preparation, substantiation, and assessment of loss & expense claims
Claimable heads	Prolongation costs (site overheads during extended contract period), disruption costs (loss of productivity), financing charges (cost of capital), head office overhead (calculated using Emden, Hudson, or Eichleay formulae)
JCT 2024 changes	JCT 2024 adds epidemic/disease and asbestos/contamination as Relevant Matters — reflecting post-pandemic lessons and the increasing discovery of contamination on brownfield sites

1. Loss & Expense

A loss & expense claim recovers the financial cost of disruption and delay caused by employer-risk events during a construction project. Under JCT contracts, these events are called Relevant Matters and include late information, variations, discrepancies in contract documents, failure to give access to the site, and work by statutory undertakers. The contractor is entitled to recover the direct loss and/or expense that has been incurred or is likely to be incurred because regular progress has been or is likely to be materially affected by the Relevant Matter.

It is essential to understand that a loss & expense claim is separate from an extension of time application. An extension of time recovers programme time — it pushes back the completion date so that liquidated damages do not apply. A loss & expense claim recovers the additional cost incurred because of the disruption or delay. A contractor may be entitled to an extension of time without any loss & expense (where the delay event caused no additional cost), or to loss & expense without an extension of time (where the event caused disruption and additional cost but did not delay the completion date).

Under NEC4, the equivalent mechanism is a compensation event. The contractor notifies a compensation event within eight weeks of becoming aware of it and submits a quotation comprising the defined cost of the event plus the fee percentage. The NEC approach is designed to deal with events prospectively, whereas JCT loss & expense is typically assessed retrospectively. Regardless of the contract form, the fundamental requirement is the same: the contractor must demonstrate a causal link between the employer-risk event and the financial loss claimed.

Keep contemporaneous records from day one

The single most important factor in a successful loss & expense claim is contemporaneous records. Site diaries, daily labour allocation sheets, plant records, progress photographs, correspondence, and meeting minutes all serve as evidence linking the employer-risk event to the disruption and additional cost. Records created at the time are far more persuasive than reconstructed narratives prepared months or years later. The RICS Practice Information (July 2024) emphasises that claims should be supported by contemporaneous project records wherever possible.

2. Structure

A well-structured loss & expense claim should present the information in a logical sequence, clearly identifying each Relevant Matter, the period of impact, and each head of claim with supporting calculations. The following table sets out the typical content and structure.

Element	Detail
Relevant Matter	Identify the specific Relevant Matter under the contract (e.g. late information, variation instruction, failure to give access). Quote the contract clause and describe the event with dates and references to correspondence.
Notification	Record the date of the contractor's written notification to the contract administrator / employer's agent. Under JCT 2024, the contractor must notify as soon as it becomes reasonably apparent that regular progress has been or is likely to be materially affected.
Period of impact	State the start and end dates of the period during which regular progress was materially affected by the Relevant Matter. Support with programme analysis, progress records, and delay analysis where appropriate.
Prolongation costs	Site overheads incurred during the extended contract period — including site management salaries, site accommodation, temporary services, plant standing time, insurance, and security. Calculated on a time-related basis for the period of culpable delay.
Disruption costs	Loss of productivity caused by the Relevant Matter — measured by comparing planned output against actual output. Methods include the measured mile approach, earned value analysis, or industry studies. Disruption is distinct from delay: work may be disrupted (performed less efficiently) without the completion date being delayed.
Head office overhead	The contractor's head office overhead contribution lost during the period of delay. Typically calculated using the Emden formula (preferred in UK courts), the Hudson formula, or the Eichleay formula (US origin). The Emden formula uses the contractor's actual audited accounts to determine the head office overhead percentage.
Financing charges	The cost of financing the additional expenditure caused by the Relevant Matter — typically calculated at the contractor's actual borrowing rate or, where no borrowing is demonstrated, at a commercial rate. Interest on late payment is distinct and is governed by the contract terms or the Late Payment of Commercial Debts (Interest) Act 1998.
Total claimed	The aggregate of all heads of claim for this Relevant Matter. Each head of claim should be separately quantified and supported by calculations and evidence. A single global figure without breakdown is unlikely to succeed.
Supporting evidence	List and cross-reference all supporting documents: site diaries, labour allocation records, plant records, invoices, subcontractor accounts, programme revisions, delay analysis, correspondence, and meeting minutes.

3. Common Mistakes

Global claims without linking to specific events

A global claim presents a single total loss figure without attributing specific costs to specific Relevant Matters. Courts and tribunals have repeatedly criticised global claims because they fail to establish the necessary causal link between the employer-risk event and the financial loss. The contractor must demonstrate which Relevant Matter caused which cost. Where multiple events overlap, the claim should still attempt to apportion the loss to individual causes as far as reasonably possible. A claim that simply says “the project was delayed by 12 weeks and the additional cost was £500,000” without linking specific costs to specific events is unlikely to succeed in adjudication, arbitration, or litigation.

Not notifying promptly

Under JCT 2024, the contractor must notify the contract administrator as soon as it becomes reasonably apparent that regular progress has been or is likely to be materially affected by a Relevant Matter. Under NEC4, the contractor must notify a compensation event within eight weeks. Failure to notify promptly can result in the claim being time-barred under the contract. Even where the contract does not impose a strict time bar, late notification undermines the credibility of the claim and deprives the employer of the opportunity to mitigate the impact of the event. Best practice is to notify within days of the event occurring, not weeks or months later.

4. Frequently Asked Questions

What is the difference between an extension of time and a loss & expense claim?▾

An extension of time (EOT) and a loss & expense (L&E) claim are two separate contractual entitlements that often arise from the same event but recover different things. An EOT recovers programme time: it extends the contractual completion date so that liquidated damages do not apply for the period of the extension. A loss & expense claim recovers the additional financial cost incurred because regular progress was materially affected by a Relevant Matter. A contractor may receive an EOT without any L&E (for example, where exceptionally adverse weather delays the works but causes no additional cost beyond the time extension). Conversely, a contractor may be entitled to L&E without an EOT (for example, where a variation causes disruption and loss of productivity but does not delay the completion date because it affects a non-critical activity). Both entitlements require separate notification and substantiation under the contract.

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