In construction, delays have a ripple effect on the entire project. When one contractor is delayed, so is everyone else. What happens when you need to pick up the pace on a construction project in order to make up for lost time? To catch up to the schedule (or at least to get close to it), the timeframe must be accelerated. But accelerating a time table isn’t free, and it’s not cheap, either. And that’s where acceleration claims come in.
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What is Acceleration in Construction?
Acceleration of a construction project is pretty simple: It’s when the work being performed must be done at a quicker pace than planned. Generally, acceleration occurs after project delays have been encountered. However, acceleration could also become necessary if the scope of work increases during the life of the project, or if the finish date is moved up for some reason. Generally, the instruction to accelerate work will come via change order.
What are Acceleration Claims in Construction?
Acceleration claims are claims for payment that are made as a result of the costs associated with speeding up work – typically consisting of overtime payment, compensation for increased scope of work, change orders, supplementing the workforce, and more. When work must be accelerated during the life of the project, the compensation for that acceleration leads to acceleration claims by the parties performing that work.
Types of Acceleration
Acceleration happens for different reasons. Further, the ability to recover the cost of accelerating work will depend, in part, on why the work is being accelerated. Generally, there are three broad categories of acceleration: Voluntary Acceleration, Directed Acceleration, and Constructive Acceleration.
Voluntary acceleration occurs when the contractor decides to accelerate their work on their own, voluntarily. When acceleration is undertaken on a voluntary basis, typically, a contractor won’t be entitled to claims or damages based on the cost of accelerating work. After all – it was their decision to accelerate! So, when voluntary acceleration occurs, there’s a very real possibility (if not probability) that there won’t be additional compensation for the acceleration that’s undertaken.
When work is being accelerated on a voluntary basis, it’s important to plan for additional costs. Additional funding probably won’t be coming in order to pay for the acceleration (more on that in a second), and that creates risk for everyone involved.
Directed acceleration is a lot more simple. This type of acceleration occurs when a contractor is directed to accelerate the project schedule. Since directed acceleration is performed at the direction of the highest tiers on a project, it’s generally understood that compensation will be made in exchange for that acceleration. Generally, this is accomplished through formal change orders and there should be less question as to where the money will come from to pay for acceleration.
Constructive acceleration occurs as a result of the situation. It’s not explicitly laid out like directed acceleration, but it’s also not undertaken solely based on the contractor’s decision like a voluntary acceleration.
Constructive acceleration generally occurs when the contractor faces an excusable delay, then that contractor requests an extension of time. If that extension request is refused and the contractor must instead accelerate work to catch up with the project schedule, then the contractor has undertaken a constructive acceleration. Constructive acceleration can take many forms, so let’s take a little deeper look.
Making an Acceleration Claim
As discussed above, there are different types of acceleration. Let’s look at acceleration claims based on each type of acceleration.
Voluntary Acceleration Claims
Generally, it’s hard to argue that voluntary acceleration should be paid for by a customer. After all, if acceleration was truly voluntary, they didn’t ask for work to be picked up – and they didn’t agree to pay for it!
As you could imagine, this creates problems. If a contractor pushes their employees to take on overtime, or if subs are putting in time and work beyond what they’d originally bid, the cost of all that work will go up. But, at the same time, the contractor won’t be getting paid extra. So where’s the rub? Will the contractor pay their employees and subs for the accelerated timetable (thereby diminishing their profit margin)? Or, will subs and suppliers go underpaid for that work?
Directive Acceleration Claims
Claims for directive acceleration should be the easiest among the three types of acceleration because the acceleration was explicitly ordered. With everyone on the same page, there should be little to argue about – acceleration was needed, it was undertaken, and it must be compensated. Naturally, there may still be a dispute over exactly what’s owed and by whom. But, as for whether or not delay should be compensated at all, acceleration claims for directive acceleration should come easiest.
Constructive Acceleration Claims
Because constructive acceleration claims exist in the grey area between directive acceleration claims and voluntary acceleration claims, there’s more nuance. A customer might argue their contractor wasn’t entitled to accelerate, and the contractor might argue that accelerating the project was their only choice.
When this deadlock happens, there are some factors generally taken into consideration: whether the owner knew of the delay, made a statement or action that could be interpreted as an acceleration order, and is the contractor provided notice that the order was a constructive change.
In large part, that means the ability to make a constructive acceleration claim will come down to the process by which constructive acceleration was undertaken. Let’s look at how that process normally goes.
Constructive Acceleration Process
First and foremost, the only way to establish a claim for acceleration damages is to have an excusable delay occur on the project. What’s an excusable delay? An excusable delay is one that was not foreseeable at the time of contracting and that was caused by something outside the contractor’s control. This can include anything from owner change orders, poor weather conditions, natural disasters, or some other unforeseeable and unplanned event.
Here’s a deeper look at excusable delays: Excusable vs. Inexcusable Delays
Request for Time Extension
Once a delay occurs, a contractor examines whether the delay will affect their ability to complete project as-scheduled. If the delay will disrupt the project schedule, then the contractor will typically request for an extension of time. Most contracts will require that comes via written requests for time extensions.
Making the request for a time extension is important! If the contractor assumes that an extension either will be granted or that it won’t, that can create problems. Assuming an extension is fine will create problems when the customer realizes the project is finishing behind schedule. On the other hand, if a contractor assumes an extension won’t be granted, they might accelerate the schedule but be unable to recover the cost of that acceleration. So, what may have been a constructive acceleration (or even a directed acceleration!) would become a voluntary one.
Denial of Time Extension
If the request for extra time is denied or ignored, a contractor may decide that the schedule must be accelerated. After all, without confirmation that the schedule can be extended, the contractor may still be bound by the original completion date in the contract.
This can be achieved either expressly or impliedly. An express acceleration order is when the customer explicitly directs their contractor to accelerate performance through a formal change order. An implied acceleration order is the opposite – no direct order was given, but based on the circumstances, the order to accelerate can be implied by the parties’ actions.
Generally, constructive acceleration is implied. After all, if acceleration has been directly ordered, it’d become directive acceleration. By denying a time extension, but making it clear that your work needs to be completed on schedule, a customer is more or less ordering their contractor to accelerate your performance.
Cost of Acceleration
Lastly, the contractor must be able to prove that they attempted to accelerate their performance. Also, in doing so, they incurred increased costs or damages due to accelerated performance. The keyword here is attempted. The contractor only needs to prove that they attempted to meet the original contract completion date and incurred costs via acceleration.
Additional Acceleration Considerations
Acceleration Claims due to Insufficient Extensions
One of the biggest issues regarding acceleration claims is a situation where the customer does grant a time extension, but it’s for an insufficient amount of time to compensate for the added costs. If this happens, you should immediately notify the client. This notification should include the reasons why the extension was inadequate, a description of the work and anticipated costs, and reserve the right for additional compensation as a result.
Could a ‘No Damages for Delay Clause’ Block Acceleration Claims?
A ‘No Damages for Delay Clause’ is a relatively common clause in construction contracts. The purpose of this clause is to relieve a party from liabilities they may incur due to delays on the project. Usually, an owner/GC is liable to pay for any additional costs associated with delays caused by themselves. But with a No-Damages-or-Delay clause, the contractor will be responsible for any increased costs caused by the delay.
However, there are certain types of delays that will not be covered by an NDFD. Particularly, delays caused by a breach of contract, delays caused by active owner/construction manager interference, unreasonable delays or delays resulting from fraud or bad faith. These clauses will generally refer to time-related damages, but if a valid time extension is denied, and more time is required, acceleration costs may still be recoverable.
Acceleration claims can be time-consuming to both establish and defend against. The difficulty of proving damages and implied acceleration orders reiterate the importance of proper document management. A better understanding of how these acceleration claims work, coupled with proper documentation, can help contractors and owners identify and settle valid acceleration claims.
Take a Deep Dive:
Good Communication is Crucial for Acceleration
Clear communication is crucial for every element of a construction project. However, smoothly accelerating a project schedule is especially dependent on communication and collaboration. If acceleration is not clearly communicated along the entire payment chain, it can lead to serious payment disputes at every link in the chain. But, it’s most important that acceleration is clearly communicated between the owner or project manager and their prime contractor. When the need for acceleration, the expected timetable, and the costs that will be incurred are all clarified from the jump, the rest of the payment chain will fall into place.