Methods for the Calculation of the Lost Profit in Construction Contracts

Abstract

The aim of each investor is to procure the construction work in an efficient and economical way. This goal can be achieved by managing costs from the beginning of the investment process. It is necessary to determine the estimated price of the construction work in all phases of the investment process and not to underestimate the importance of this activity. It is almost a rule that the contractor or investor does not allow sufficient time for the contractor to prepare the construction for good quality, which may lead to insufficient preparation. The consequences of poor construction preparation vary from poorly built construction to litigation over the lost profits of the contractor—and this is the topic we discuss in this paper. The issue of asserting lost profits on the contract by the contractor is the subject of legal disputes between the contractor and the customer of construction work. In such cases, the question becomes the design of a methodology suitable for its calculation. The article deals with the presentation of the existing methods of loss of profit calculation, two of which are applied to the example of litigation from construction practice, with the definition of their results and differences.

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“…After this step and installation, another important task before pouring the concrete in terms of static performance and construction is to check the position and dimensions of the formwork and reinforcements. Formwork is a significant cost factor in reinforced concrete construction [14][15][16]. Therefore, his proposal is a feedback judgment also with the management of the costs of a construction project, which leads to the need to use information technology enabling a new connection in the design and budgeting of buildings [17][18].…”

Application of machine learning in predicting construction project profit in Ghana using Support Vector Regression Algorithm (SVRA)

“…The high level of uncertainties encountered in the construction industry worldwide renders most construction companies bankrupt (Majer et al, 2020). Of all the uncertainties that contribute to the bankruptcy of construction companies, financial and budgetary factors play significant roles (Majer et al, 2020;Arditi et al, 2000).…”

“…The high level of uncertainties encountered in the construction industry worldwide renders most construction companies bankrupt (Majer et al, 2020). Of all the uncertainties that contribute to the bankruptcy of construction companies, financial and budgetary factors play significant roles (Majer et al, 2020;Arditi et al, 2000). It is established that over 60% of construction company failures worldwide have their roots traced to financial issues, which affect their profitability status (Majer et al, 2020).…”

“…Of all the uncertainties that contribute to the bankruptcy of construction companies, financial and budgetary factors play significant roles (Majer et al, 2020;Arditi et al, 2000). It is established that over 60% of construction company failures worldwide have their roots traced to financial issues, which affect their profitability status (Majer et al, 2020). According to Zhu et al (2019), most of these construction projects fail to achieve their expected profits because of the difficulties in managing certain risks in a more complex web of project organisation.…”

Information Technology Impact Factor Model in Life Cycle Cost Management of Construction Project

“…The issue of successful management of construction projects and key performance indicators (KPIs) in construction is discussed by more studies, which agree on the importance of this issue [1], [2], [3]. A study of authors from Slovakia addressed the issue of lost profits in construction [4]. Other researchers discussed the issue of constriction workers productivity from KPIs [5].…”