Acceleration Claims

posted in: Claims | 0
Share Button

Introduction.

Time is an overlying and vitally important factor in construction contracts. Commonly, contracted works will require completion (or more commonly substantial completion) by a defined completion date. The contract may also include charges associated with delay and potential bonuses for the early completion of works.

The development of a baseline programme is also a common feature of construction contracts and for good reason. A clearly defined plan for the completion of works allows the employer to efficiently plan its production operations and forecast expenditure, whilst the contractor can efficiently plan its use of resources to optimise the construction process and maintain healthy cash flow.

When a contractor’s work needs to be expedited to complete a particular work activity earlier than planned, or to overcome delays in order to meet the original deadline (and where an extension of time is not appropriate), acceleration occurs.

A contractor may wish to accelerate voluntarily in order complete works early and transfer resource to its next project or achieve an early completion bonus, to mitigate delays for which it is responsible, or to reduce costs by reducing the project duration, to name a few. The contractor’s voluntary decision to accelerate will not ordinarily result in acceleration claims since, in these situations, the factors causing the requirement for acceleration are entirely the responsibility of the contractor.

A contractor’s claim for acceleration is typically the result of efforts on the part of the contractor to recover the project schedule or programme after the project has suffered delays for reasons beyond its control or, less commonly, at the request of the employer to reduce the agreed programme. Progress can be accelerated using a variety of methods including, but not limited to, working overtime or increasing the number of shifts (i.e. switching from 12 hour to 24 hour working), providing additional resource and re-sequencing activities.

Acceleration may be instructed or requested (also known as directed acceleration), how this is done will depend upon the form of contract employed on the project in question. Acceleration may also be implied (or constructive), for example where an extension of time is rejected on the grounds that the original date for completion must be achieved regardless of cost.

 

Risk Factors and Considerations

There are various risks associated with the acceleration of works; perhaps the greatest of all is that any measures taken will not result in achievement of the completion of works by the desired date for completion. Whilst it is unusual for a contractor to have to prove that the acceleration effort was successful at improving the schedule, it is normally necessary to show that reasonable attempt was made on behalf of the contractor to accelerate the work and that the acceleration efforts resulted in additional costs. An employer is well within their right to request the contractor to provide a warranty that the acceleration measures will be successful (which it must make clear at the time of inviting a quotation), however the employer will need to understand that the assumption of this risk by the contractor will attract further additional cost.

Risks associated with the acceleration itself are another matter for consideration. If overtime is being worked staff are likely to become fatigued which in turn will result in reduced productivity. Issues, which come as a direct result of acceleration also affecting productivity, include performing out-of-sequence work and stacking trades (which can result in the overcrowding of worksites). If labour forces are to be increased there will inevitably be a period of learning or ‘settling in’ required for the newly mobilised operatives, not to mention the time taken up by inductions and safety briefings etc. which will be required. Whilst these are difficult issues to mitigate entirely they are legitimate considerations when pricing the acceleration claim.

Further risks come where acceleration is seen to be implied, but has not been explicitly instructed. Whilst it may seem like the sensible approach for a contractor wishing to avoid the risk of liquidated damages would be to accelerate works, claims in situations where the presence of a recorded instruction is lacking are rarely met with success. Two such cases are Perini Corporation vs Commonwealth of Australia (12 BLR 82) and Morrison-Knudsen vs British Columbia Hydro and Power Authority (85 DLR 3d). Acceleration in each of these cases was implied by the refusal of the employer to consider an extension of time. Despite this lack of consideration resulting in the employer being found to be in breach of contract no awards for costs relating to acceleration of the works were made.

 

Making a Claim

The majority of construction contracts include clauses relating to acceleration and a mechanism for the recovery of cost. Dependent upon the form of contract in use the relevant clauses and procedures for submitting claims vary, although similarities between standard forms are prevalent.



NEC3

Core Clause 36 of the April 2013 edition of the NEC3 standard form of contract refers to Acceleration; “The Project Manager may instruct the Contractor to submit a quotation for an acceleration to achieve Completion before the Completion Date.”

In addition to issuing the instruction to provide a quotation for the Acceleration, under clause 36.1 of the NEC the Project Manager must also inform the Contractor of the revised Completion Date (or dates if completion is to be sectional).

Following receipt of an instruction the Contractor is then required to either provide a quotation and a revised programme setting out aims to achieve the proposed Completion Date(s) or decline to quote giving reason as to why “within the period for reply.” (cl 36.2, p.10).

JCT Standard Building Contract 2005

Acceleration under the JCT 2005 contract is not dealt with directly under the main terms of the contract aside from a definition of ‘Acceleration Quotation’ under clause 1.1: “… a quotation by the Contractor for an acceleration in the carrying out the Works or a Section made under paragraph 2 of Schedule 2.” However, as one would expect, there is capacity for dealing with variations. Schedule 2 describes the “Variation and Acceleration Quotation Procedures” and outlines the requirement for the Contractor to provide quotations for variations at the instruction of the Architect/Contract Administrator and as per the provisions of clause 5.3.1 of the main contract terms.

2.1 of Schedule 2 states that:

If the Employer wishes to investigate the possibility of achieving practical completion before the Completion Date … the Architect/Contract Administrator shall invite proposals from the Contractor in that regard.

Unlike the NEC3 the Contractor must identify the amount of time that can be saved as well as the cost implications within the ‘Acceleration Quotation’, rather than demonstrating achievability of the Architect or Contract Administrator’s request. The quotation must include direct costs, consequential loss and expenses and an allowance for the cost of preparing the quotation.

The timescales are well defined under the contract, with the quotation being required within 21 days of the request (paragraph 3.1) and remaining open for acceptance for 7 days (paragraph 3.2). This total of 28 days may seem excessive, particularly when the timely progress of the works is likely to already be under threat. Therefore, should the process need to be expedited, the time periods for the production and acceptance of a quotation may be varied by agreement under paragraph 3.3. although it should be noted that a rushed, inadequate agreement to accelerate may result in disagreement, dispute and/or one or both of the parties suffering unrecoverable expense.

 

Valuing a Claim

As is the case with the majority of variations, as soon as a party becomes aware that acceleration will be required and additional cost will likely be incurred this should be discussed with the other party in order to preserve a strong working relationship. It is however likely that since time is an overwhelming factor in the claim costs for acceleration should not be submitted simply by following the contract’s variation submission process.



The specific heads of claim and what can be claimed will be impacted by the particular form of contract being worked under, however those items discussed under Risk Factors and Considerations should certainly be a consideration when pricing a claim. Broadly speaking the value which can be extracted from a claim of this sort will cover additional labour and plant and other, perhaps less obvious items, such as re-programming Works, additional Project Management (whether additional Managers are required or the current Management is having to put more time in to the project), the cost of preparing the quotation and any direct and/or consequential losses.

There will need to be sufficient demonstration that there is an additional requirement as opposed to merely a compression of the programme; where the same resource is shown to be required to completion, albeit over a shorter period of time. Employers have been known to suggest that acceleration should incur a cost saving via the reduction in time-related costs. Splitting costs into fixed: mobilisation, demobilisation etc. (which may see a variation in quantity) and variable: actual productive man/machine hours (which can be shown to increase for reasons suggested under Risk Factors and Considerations, amongst others) can help to demonstrate additional entitlement.

 

Conclusion and Further Reading

Valuing a claim for acceleration needn’t be an arduous task, however it does require a keen and experienced eye to ensure that all costs are captured, that risks are managed and opportunities are recognised and that an agreement is robust. It is imperative that the employer is involved at an early stage. The unannounced arrival of a claim will only serve to strain relationships and there may be other mitigating measures that can be taken before acceleration needs to be considered an option.

Whether the contract deals with acceleration directly or not, and a contractor is requested or has the intention to accelerate there needs to be an agreement of contractual terms relating to the acceleration, dealing with all of the relevant matters. My next article, entitled Acceleration Agreements discusses these in more detail.

 

References

Elliott, T. 2010. The Acceleration Game. [Online]. [Accessed 10 February 2014]. Available from: Link.

Interface Consulting. 2014. Acceleration Claims. [Online]. [Accessed 22 April 2014]. Available from: Link.

JCT2005 Standard Building Contract With Quantities (Revision 2 2009). London: Thomson Reuters (Legal) Limited.

NEC3 (2013) Engineering and Construction Contract. London: Thomas Telford Ltd.

RICS. 2013. Acceleration Agreements. [Online]. [Accessed 22 April 2014]. Available from: Link.

Streetwise Subbie. 2014. Acceleration in Construction Contracts and Engineering Contracts. [Online]. [Accessed 22 April 2014]. Available from: Link.
 

Share Button
Follow Daniel Crompton:

Managing Director at Tier Once Commercial Management

Daniel is a Commercial Manager with an MSc in Commercial Management and Quantity Surveying and several years experience, primarily in Rail and Civil Engineering. A keen advocate of commercial procedure development and implementation and commercial involvement in full project life-cycle from tender to close-out.