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Acceleration Claims

The old saying that “Time is money” is especially true on construction projects. Typically, construction contracts clearly spell out key milestone dates, completion dates, and possibly liquidated damages for delay or early completion bonuses. Thus, time plays an important factor in project decisions.

Agreed-upon project schedules allow the owner the opportunity to efficiently plan its production operations and therefore generate revenue, while the contractor can efficiently plan its use of labor, equipment, and resources to optimize the construction process. Acceleration occurs when a contractor’s work is expedited to complete a particular work activity earlier than planned. A contractor may accelerate voluntarily in order finish the project earlier to move on to its next job, to mitigate its own delays and inefficiencies, or to save money by reducing the project duration, in which case an acceleration claim is unlikely. Additionally, the contractor may decide to accelerate the work in an attempt to complete the project earlier than scheduled to meet project completion bonuses for early completion. Typically, these voluntary decisions by the contractor to accelerate do not result in acceleration claims, as it was the contractor’s decision to accelerate the work.

Acceleration claims are typically encountered on construction projects when the contractor makes efforts to recover the project schedule after the project has suffered delays due to causes it believes are beyond its control. There are several ways in which the work can be accelerated, including, but not limited to working overtime or implementing a new shift, providing additional labor, adding other resources (i.e., equipment), and re-sequencing work activities. Each of these acceleration efforts can be effective in some cases; however, acceleration efforts can be expensive and do not guarantee early or on-time completion of the work. Adding resources, such as labor and equipment carries extra costs. Working overtime hours typically requires paying premium labor rates of 1.5 to 2 times base labor rates to provide incentive to work the additional time.

There are two primary types of acceleration on construction projects that are subject to construction claims: directed acceleration and constructive acceleration. Situations in which the owner directs the contractor to accelerate the work are typically referred to as directed acceleration or, more simply, acceleration. Directed acceleration occurs when the owner directs the contractor to accelerate to complete the project in advance of the planned or specified completion date.

Constructive acceleration, on the other hand, is when a contractor has a valid claim for a time extension, but the owner refuses to adjust the project schedule or completion dates, thus requiring the contractor to accelerate to complete the project by the dates originally specified in the contract or as adjusted by previous change orders. Contractors may have justifiable claims for time extensions due to owner changes or other projects delays and disruptions for which contractual entitlement exists or in situations where there is no contractual entitlement and the delays or extensions have occurred through no fault of the contractor. Constructive acceleration is a concept that is not as well known or easily understood as directed acceleration and thus is frequently the subject of construction claims. The root cause of delays is often a complicated and hotly debated topic on construction projects, and the parties may not agree on who is responsible for the delay and who should bear the acceleration costs.

A claim for constructive acceleration typically must demonstrate the following:

1.         The contractor experienced an excusable delay.

2.         The contractor provided proper notice to the owner of the delay and requested an extension of time.

3.         The owner rejected the time extension request.

4.         The owner directed the contractor to complete the project by the original completion date or the date adjusted by prior change orders.

5.         The contractor made reasonable attempts to accelerate resulting in additional project costs.

As stated, time is money and accelerating a construction project also costs money. In addition to the direct cost of the work, acceleration also may result in an overall loss of labor productivity. It is recognized in the construction industry that acceleration efforts such as working overtime and shift work, performing out-of-sequence work, stacking trades, and overcrowding on the project site contribute to reduced labor productivity. In addition, when a contractor adds labor, there may be a loss of labor productivity as new workers may not be familiar with the work or may require training before achieving normal levels of productivity. It is interesting to note that a contractor typically does not have to prove that the acceleration effort was successful at improving the schedule. It is normally necessary to show that it reasonably attempted to accelerate the work and that the acceleration efforts resulted in additional costs.

Working overtime for extended periods of time is known to reduce labor productivity. Many industry studies, including the Mechanical Contractors Association of America (MCAA), The Construction Industry Institute (CII), and The Business Roundtable have analyzed the impacts of overtime on worker productivity and all generally agree that working overtime can reduce labor productivity. The additional costs associated with accelerating the work, along with the productivity inefficiencies are often included in acceleration claims.

Interface Consulting routinely assists contractors in preparing acceleration claims, and assists owners in reviewing acceleration claims from contractors. As with all claims, it is important to first review the contract as this is typically the controlling document on claims and entitlement issues. In cases of directed acceleration, responsibility for the costs associated with the acceleration is typically specified in the contract and the primary focus is on quantifying the additional costs and productivity inefficiencies. However, with constructive acceleration, a more thorough review of the contemporaneous project record is required to determine the status of the project and the root cause of the delays and subsequent acceleration. This may include an extensive review of project correspondence, meeting notes, job reports, and change orders, as well as a performing a CPM schedule analysis. Interface Consulting has extensive experience evaluating and preparing acceleration-related claims for our clients.