Acceleration claims refer to claims to recover costs incurred to speed-up or accelerate work on a construction project. This post covers:
- Delay Mitigation Methods, including acceleration.
- Acceleration Basics and what warrants a claim to recover costs.
- Preparing Proper Documentation to demonstrate cost of acceleration.
Delay Mitigation, Project Acceleration and Cost Recovery
Oftentimes when delays arise during a project, efforts are made to recover the schedule. An upstream party may direct these efforts, e.g., Owner-to-Contractor, Contractor-to-Subcontractor, etc. or the Contractor may choose to accelerate by its own determination.
Delay mitigation represents the efforts applied to reduce the effect of delays to a project or group of activities and improve the duration of work needed to complete said project or activities. The affected activities are normally on the planned or predicted critical path of the project. Delay mitigation may be applied to delays that have already occurred or are anticipated and can be achieved through a variety of means, including:
Acceleration, usually achieved by working additional hours or adding additional resources. Additional costs associated with acceleration can include overtime, shift differentials, additional equipment costs, and expediting costs. Accelerative efforts may also result in productivity losses, such as labor inefficiency from working extended overtime.
Logic Changes, such as re-sequencing work or performing work out of sequence. Changes to the workplan, such as trade stacking and concurrent operations, may also result in productivity losses.
Scope Reductions or Certain Contractual Concessions, such as reducing contractual turnaround times, eliminating certain inspection requirements, or removing milestone requirements.
While re-sequencing work may result in productivity impacts that increase labor costs, and scope reductions typically require a credit for the value of the work or the cost for another party to perform the work, acceleration is a delay mitigation method that most often results in additional direct costs, which ultimately will become the subject of a claim.
Recovery Schedules: Roadmaps to Recovery
When faced with delays, recovery schedules are a tool for demonstrating how to put the project back on track. The recovery schedule is a special schedule that models the efforts necessary to regain time lost for delays. Recovery schedules are often a contractual requirement under scheduling specifications and must be created as soon as the projected finish date no longer indicates an on-time completion.
Not All Acceleration is Created Equally (for Cost Recovery)
“Acceleration occurs when a contractor’s work is expedited to complete performance earlier than the contract’s time period. This may be earlier than either the originally contracted-for-completion date or the completion date as extended under various contracts provisions.” – Proving and Pricing Construction Claims, 3rd edition.
There are three main types of acceleration:
1. Voluntary Acceleration
This occurs when a contractor unilaterally elects to accelerate his own work. A contractor may voluntarily accelerate work out of necessity to recover late completion. This may be necessary to avoid a potential default, or if the costs to accelerate are determined to be less than the exposure to potential liquidated damages.
A contractor may also choose to accelerate work if an early completion bonus would exceed anticipated acceleration costs. If a contractor is voluntarily accelerating to recover delays for which it is responsible, or in attempt for commercial benefit (i.e., early completion bonus), the associated acceleration costs are generally not recoverable.
2. Directed (Actual) Acceleration
Directed acceleration is a formal instruction by the Owner to a Contractor directing the Contractor to complete at least a portion of the work earlier than planned or to undertake additional work while performing the original contract scope in the previously scheduled timeframe.
Why would an Owner direct acceleration?
Some potential reasons for doing so include:
- deadline with another party, such as a tenant or end-user
- funding or loan requirements
- tax benefits or other financial incentives
- to avoid potential “waterfall” delays, such as seasonal delays or shutdown periods
- to decrease Owner’s own overhead costs
- a lack of provisions or presence of exculpatory provisions in contract which prevent Owner from recovering damages associated with delays.
The right to order acceleration of work may be expressly defined in the contract and is often implemented through the issuance of a change order or change directive. Because this type of acceleration is explicitly ordered, issues of entitlement are rare, although the quantum for what is compensable may be disputed.
4. Constructive Acceleration
“Constructive acceleration occurs when the contractor has a justified claim for an extension of time and the owner refuses to adjust the completion date of performance and, instead, requires the contractor to complete the project by the original completion date.” – Proving and Pricing Construction Claims, 3rd edition.
Constructive acceleration is the type of acceleration most commonly associated with acceleration claims. Constructive acceleration most commonly occurs when a Contractor believes they have a basis for an excusable delay, but are not granted a time extension by the Owner to adjust the completion date.
An Owner’s refusal can take multiple forms including:
- denial of a Contractor’s time extension request
- unilateral direction for change orders or directive to proceed without agreement to an extension of time
- deferring time extension requests or refusing to respond to time extension requests.
The following represents a “constructive acceleration” scenario:
- The Contractor believes they are entitled to an excusable delay resulting from the Owner’s delay in relocating existing utilities, which affects the critical path of the project.
- The Contractor provides notice to the Owner and submits a request for an extension of time in accordance with the contract requirements.
- The Owner does not respond to Contractor’s time extension request.
- Because of the utility relocation delay, the Contractor’s subsequent monthly schedule update shows a completion date beyond the contractual completion date.
- Without explicitly telling the Contractor to accelerate, the Owner rejects the Contractor’s schedule update because it does not demonstrate an on-time completion.
Because the Owner rejected the Contractor’s schedule and did not recognize the Contractor’s entitlement to a time extension, the Contractor has been “constructively accelerated.” At this point, the Contractor should notify the Owner of the perceived requirement for acceleration and undertake the necessary efforts to track the costs associated with acceleration.
Tracking and Documenting Acceleration Costs
A Contractor should treat its acceleration costs like any other change order or claim: with thorough documentation and continued communication / presentation of costs to the Owner. This means making efforts to carefully and discretely track added costs incurred due to acceleration with appropriate supporting documentation to the extent possible. The includes considerations for:
- overtime cost beyond planned overtime
- additional labor costs
- additional supervision costs
- additional equipment costs
- expediting costs to meet acceleration efforts
- subcontractor acceleration efforts.
Contractors should look to present these as actual costs to the extent that proper contemporaneous documentation allows. However, other cost methodologies may be appropriate depending on the circumstances, and even if contemporaneous documentation may not be available, the impacts of acceleration can typically still be evaluated and quantified. As accelerative efforts may cause a decline in productivity, Contractors should endeavor to track productivity to allow for a comparison of productivity rates pre- and post-acceleration.
Maintaining accurate schedules and detailed daily reports are important in documenting acceleration efforts. Contractors and Owners should also be aware that simply because acceleration efforts may not achieve their intended outcome, such as fully recovering a delay, costs incurred accelerating may still be recoverable.