The Anatomy of a Construction Acceleration Claim

Ben Hyden

Reprinted from April 2008 Brickerconstructionlaw.com

Highlights. Acceleration claims can be filed by contractors for a wide variety of reasons. Owners faced with an acceleration claim must determine the cause of the claim and make a decision on how to best respond to the claim. This article outlines the basics of acceleration claims, and it provides some best practices for dealing with acceleration claims. A hypothetical acceleration claim scenario is discussed along with how the claim would effect the various construction professionals working on the project.

Perhaps there is nothing more convoluted on a construction project than an acceleration claim made by a delayed contractor. As such, it is critical that an owner understand how each activity on a construction project interrelates. An owner who understands these interrelations and implements procedures that deal with the problems that give rise to acceleration claims will increase its chances of having a project that is not scarred by the expense and aggravation of an acceleration claim.

For an owner, an acceleration claim is a two front battle. On one front, the owner must defend the acceleration claim. This will require the owner to review the delayed contractor’s claim and investigate the facts that, according to the contractor, allegedly caused the delay.

On the other front, an owner may need to prosecute a delay claim against the nonperforming contractor who is responsible for the ultimate delay that resulted in the acceleration. This will require an investigation into the delaying contractor's nonperformance. When prosecuting a claim against the nonperforming contractor, it is not uncommon for the contractor who caused the delay to file additional claims, either against the owner, or other contractors, with the hopes of fending off any damages that the owner may recover.

To be successful, the owner will be forced to decipher thousands of interrelated pieces of information in an attempt to piece together what actually happened on a project. In the end, the goal is for the owner to compensate the innocent contractor(s) fairly but not excessively and recover its damages from any nonperforming contractor(s) to compensate the owner for all of the costs it was forced to expend in investigating the claims and the costs of compensating the innocent contractor(s).

Acceleration Claims – The Basics

It is critical to distinguish between delay and acceleration. Delay is the act that prevents other contractors from performing any work. Acceleration occurs when a contractor either is required to perform its work in less time than originally scheduled.

The party liable for the cost of the acceleration is the party responsible for the underlying delay and/or the party deciding to accelerate. To accelerate its work, a contractor is generally required to add additional labor to a project, either through overtime or additional shifts, thus increasing the contractor's costs. Liability for these costs again depends on the cause of the acceleration, but to the extent the need for acceleration is caused by the contractor pursuing the claim, the contractor would not be entitled to compensation.

Although acceleration and delay are two distinct concepts, they often have a cause and effect relationship. As discussed below, constructive acceleration occurs after an excusable delay has occurred. Thus, the delay can be a necessary component of the acceleration. Likewise, to the extent a contractor delays its own work by failing to prosecute the work in a timely manner, the contractor may have to accelerate the work voluntarily to meet the completion date. In this situation, the contractor would not be entitled to compensation.

There are basically three types of acceleration on a construction project. They are directed acceleration, constructive acceleration, and voluntary acceleration.

Directed Acceleration. Directed acceleration occurs when a contractor is required by an owner to perform the original scope of work in a shorter amount of time than originally scheduled. Directed acceleration is usually the product of some type of incentive to complete a project ahead of schedule and requires the contractor to accelerate its work to complete the project ahead of the schedule.

Constructive Acceleration. Constructive acceleration occurs when a contractor has a justified claim for an extension of time and has complied with all notice and other requirements of the contract documents, but is required to incur additional expenses because the project owner refuses to grant the extension and requires the contractor to complete the project by the original completion date.

The necessary elements for constructive acceleration include: 1) the contractor experienced an excusable delay; 2) the contractor properly and timely requested a time extension; 3) the project owner failed or refused to grant the requested extension; 4) the project owner demanded that the project be completed by the original completion date despite the excusable delay; and 5) the contractor actually accelerated the work to complete the project by the original date.

Voluntary Acceleration. Voluntary acceleration occurs when a contractor unilaterally decides to accelerate its own work. In contrast to directed acceleration or constructive acceleration, in a voluntary acceleration, a contractor is not entitled to damages as a result. A contractor may voluntarily accelerate its work out of necessity, i.e., to make up lost time for the contractor's own delays or to complete its own work.

Preparing for Acceleration Claims – What Does the Contract Say?

An owner should not receive bids for a project without contract documents that anticipate and account for acceleration claims. This means that an owner should have the proper indemnification provision in the contract so that the owner can be reimbursed for its costs after the dust settles. The proper provision should require the culpable contractor(s) to reimburse the owner for all of the owner's costs that are related to the delay and subsequent claims.

Further, the contract documents should address how and when the delayed contractor is to provide the owner with notice of the claim and what happens if the contractor fails to do so. An owner should think about what information it needs to investigate an acceleration claim. In addition, the owner should require, through the contract, that the contractor making the claim provide the relevant information with the claim, i.e., which contractor caused the delay, or what activities of the delayed contractor were actually delayed.

Lastly, the contract documents should include language requiring each contractor who files an acceleration claim to turn over a wide variety of documents, including bid documents, financial statements, and all documents related to the construction for the owner to review. Otherwise, an owner's only other option may be litigation to gain access to the relevant documents.

The contractual notice requirements and submission of documents are critical for an owner. Without the proper and timely submission of a claim an owner cannot properly evaluate the claim and exercise its many options.

Often the owner-contractor agreement includes a clause where the owner can terminate for convenience. Where the owner is not properly notified of a delay it cannot decide whether or not it is more economical to exercise its right to terminate for convenience. Some of the owner’s other options include supplementing the work with additional contractors, adjusting the schedule to compensate for any delays, and working with other effected contractors to minimize the affect of the delays.

An Ounce of Prevention – Hire Good Construction Professionals and Contractors

It is nearly impossible for an owner to evaluate what happened after an acceleration claim is filed without its construction professionals and other consultants. The construction professionals are the owner's eyes and ears on the construction project. The documents prepared and maintained over the course of a project may be all that an owner has to review when making a decision as to whether an acceleration claim is valid.

When interviewing construction professionals, an owner should request a review of the procedures and policies used by the professional in maintaining and creating the project records. An owner may want to review the construction professional’s records on a current job, so that the owner can confirm that the procedures and policies advertised are being implemented at the jobsite.

In addition, by following the appropriate bidding laws, an owner may be able to identify and reject contractors who make it part of their practice to bring unwarranted delay and acceleration claims on a regular basis. Checking a contractor's references may save an owner time and money.

Hypothetical Constructive Acceleration Scenario: Day One

Assume a mechanical contractor is installing ductwork, as required, in a new school building. The ductwork is supposed to be installed between March 1 and March 31 and the project is schedule to be complete by August 1. However, due to a backup in the mechanical contractor's shop, the ductwork installation is not complete until April 30 thereby delaying the follow-up contractors, i.e., an excusable delay to those follow-up contractors.

Assuming that the follow-up contractors provide the owner with timely and proper notice of the delay pursuant to the contract documents, each follow-up contractor should be entitled to some type of time extension.

Unfortunately for the owner, the first day of move-in to prepare for school is scheduled for August 1, so it is impossible for the owner to grant an extension of time to each contractor. Therefore, the delay combined with the owner's decision to maintain the August 1 completion date caused each follow-up contractor to accelerate its work to complete the project by the original completion date.

The owner may be responsible to each follow-up contractor for the costs expended to increase their production per day and accelerate its work, which could include additional shift, costs of working overtime, and increased supervision. However, if the contract documents for the project properly anticipate acceleration claims, these extra costs would ultimately be paid by any contractors who were the cause of the delays.

Hypothetical Constructive Acceleration Scenario: Owner’s Evaluation of the Claim

There must be basic documentation available to defend against an acceleration claim. These documents include, but are not limited to, the daily job logs with specific information as to where the contractors were working and how many workers were onsite for each contractor.

The documentation for acceleration is usually related to the additional labor, supervision, and direct costs related to the compression of the schedule. The necessary documents must keep track of hours worked and detailed information about the tasks that are being performed.

The critical factor again is timely and proper notice from the follow-up contractors who are forced to accelerate their work. The owner must be permitted an opportunity to review the cause of the delay, consider its options, document the consequences, and make an informed decision regarding the best way to minimize the extra costs created by the delay.

Conclusion

Acceleration claims can be messy and complex. They are time consuming to prosecute and defend. However, understanding the basic elements of acceleration claims will help an owner understand both why a contractor is filing an acceleration claim, and what the owner’s various options are to minimize the costs associated with the claim.