Today, increasing complexities in construction projects and the building of state of the art facilities with advanced technology has resulted in increased claims for acceleration and delays. Although acceleration claims are more common among large scale projects, all owners and contractors should be aware of: (i) the provisions and notice requirements relating to delays and acceleration in their contracts; (ii) the elements of acceleration; (iii) the damages recoverable for acceleration; and (iv) the difficulties in proving acceleration claims. This article provides an overview of acceleration claims and certain difficulties contractors may face when establishing acceleration claims.
Types Of Acceleration
Voluntary acceleration occurs when a contractor performs the contract schedule ahead of the completion date by its own initiative and without any direction by the owner. Claims for voluntary acceleration are not typically common, as in most instances, the contractor is not entitled to damages for additional costs incurred as a result of its own initiative. Voluntary acceleration may occur when a contractor has caused delays on the project and is attempting to mitigate damages and timely complete the project.
Directed acceleration occurs when an owner expressly directs a contractor to perform the original scope of work under the contract in a time shorter than provided by the original schedule. In most instances, directed acceleration is easier to prove and less contentious because the owner has specifically requested acceleration. Generally, an owner who directs acceleration is liable to the contractor for the costs incurred to accelerate the schedule. Further, directed acceleration is often contemplated by virtue of an agreement between the parties, whether it be conditioned in the contract or by a separate agreement or change order.
Constructive acceleration claims are the most highly litigated acceleration claims. Constructive acceleration occurs when a contractor has made a reasonable and legitimate request for contract time extension, including compliance with any contractual notice requirements, and is forced to complete the project by the original completion date provided in the contract. Constructive acceleration claims are often contested because owners and contractors may disagree as to which party was responsible for a given delay, or they are difficult to quantify when both parties are responsible for delays on the project.
Elements Of Proving Constructive Acceleration
To succeed on an acceleration claim, a contractor must establish the following elements:
1) The occurrence of an excusable delay. These factors are beyond the control of the contractor, such as unforeseen site conditions, adverse weather, design defects or other owner caused delays. This is the most significant element in proving that a contractor is entitled to additional contract time and/or compensation. Contractors must consider whether a contract has a valid no damages for delay clause, whether the delay was owner-caused or a concurrent delay, and whether the delay was not contemplated by the parties in the original agreement (i.e., unforeseen site conditions).
2) A contractor’s timely notice of the delay to the owner and reasonable request for contract time extension. Contractors should be cognizant of the applicable notice provisions in their contracts, so as to avoid a waiver or defense to an acceleration claim.
Contractors must ensure that they are adequately documenting all aspects of the project. A contractor should promptly provide the owner with a written notice of impact when it discovers new items or activities that may impact the project schedule and/or cause delays, such as unforeseen site conditions and adverse weather. The notices of impact should provide (i) a detailed account of how the impact will affect the contractor’s (and subcontractors’) work; (ii) what the contractor has done to mitigate any damages resulting from the discovered impact; (iii) whether the contractor is issuing any requests for information; and (iv) propose a recovery schedule for the time needed to complete the additional work required.
3) A reasonable time extension request to the owner, which was denied (or the owner refused to provide a sufficient extension of time).
4) The contractor actually accelerated the work and incurred additional costs in meeting the accelerated schedule. The costs for non-impacted or non-accelerated phases of the work must be separately established.
Contractors are entitled to recover the increased costs incurred for excusable delays and in meeting the acceleration schedule, including costs for mobilization or demobilization, re-sequencing of activities, additional labor and supervision, increased overhead, premium time paid, trade stacking, expediting material and equipment deliveries, productivity loss, and other costs associated with acceleration of the project schedule.
Difficulties In Proving Acceleration Claims
For contractors, one of the most difficult factors in proving an acceleration claim occurs when an owner grants a time extension that is not sufficient or adequate to offset excusable delays encountered by the contractor. A contractor should promptly notify the owner in writing stating the reasons the time extension is inadequate, provide a detailed description of the required work and costs anticipated, and reserve its right for additional compensation as a result of the inadequate time extension, and additional work, including any labor inefficiencies or lost productivity. It is important for a contractor to memorialize the reasons it believes a time extension, if granted by the owner, is inadequate. Failure to do so may constitute a waiver of the contractor’s acceleration claim, since it can be argued that the contractor assented to the time extension provided by the owner, regardless of whether the contractor believed it to be insufficient.
In most instances acceleration will require laborers to work premium hours, which may adversely impact productivity rates. Establishing labor inefficiencies and lost productivity often poses problems for contractors since they are difficult to quantify. Some methods such as the “Measured Mile Method” calculate lost productivity by measuring the contractor’s performance during an impacted period with the contractor’s performance during an un-impacted period on the same project. If a contractor establishes a valid claim for acceleration, the courts generally allow for the recovery for lost productivity. Therefore, if a contractor believes it is suffering from labor inefficiencies or lost productivity, it should give notice to the owner and reserve the right to claim those costs. Contractors should always maintain an adequate record keeping system for each of their projects in order to facilitate any analysis that may be necessary for pricing the acceleration claim.
In many cases, especially for large and complex construction projects, it is recommended that contractors retain a professional to perform a time impact analysis early on in the project, when a contractor has encountered numerous excusable delays. Obtaining a time impact analysis during the project may be beneficial in giving the contractor leverage, as well as a basis for obtaining an adequate extension of contract time from the owner.
Although it may be time consuming and burdensome, the complexity in proving damages in acceleration claims emphasizes the need for contractors to adequately document every aspect of the project. As previously explained, contractors must substantiate all delays encountered, including notices of impact explaining how the delay is impacting the contractor’s work and the proposed recovery schedule to address the impact. Contractors must also maintain records of all communications with the owner (as well as architect and subcontractors), daily reports and job logs, meeting minutes, change orders, budgets and estimates, job cost information, and other documents relating to the project schedule. Contractors should supervise their subcontractors and ensure that subcontractors are also properly documenting all work performed and any setbacks they encounter on the project. By familiarizing themselves with the elements of acceleration claims and maintaining adequate records, contractors can be better equipped in establishing valid acceleration claims against owners.