ACCELERATION COSTS MONEY

UnknownContractors know or should know the concept of acceleration because acceleration costs money. Acceleration occurs when a contractor expedites its performance due to an excusable delay (a delay not its fault) in order complete its performance earlier than it would have considering the delay.

 

Contractors accelerate by incurring increased labor costs to work overtime and premium time (nights and weekends), adding more manpower, or adding more crews (which also may mean adding more supervision to supervise the additional labor). These added labor costs are typically direct payroll costs (factoring in labor burden) as well as equipment costs associated with operating the equipment (especially if it is owned equipment) for longer hours or renting additional equipment to be utilized by the additional manpower or crews. In addition, acceleration can result in inefficient labor hours because manpower is now working longer hours, new manpower is added and there is a learning curve associated with new manpower that is not familiar with the work, and the labor is potentially working under resequenced conditions and in congested locations with other trades. Thus, just because the contractor takes reasonable efforts to accelerate does not mean that it is incurring efficient / productive labor costs or that its acceleration efforts are substantially improving the completion date of the project.

 

There are two types of acceleration claims. The first type is the straightforward direct acceleration claim when the government/owner directs the contractor to accelerate its performance to finish the job in advance of the completion date. Many times, in this circumstance, the government/owner understands that it will need to compensate the contractor for the acceleration efforts.

 

Constructive acceleration is the other type of acceleration claim and the type more likely to lead to a dispute because the dispute centers around both entitlement and quantum. Constructive acceleration occurs where the contractor seeks additional time to complete the project due to what it claims are excusable delays, but the government/owner is unwilling to grant the contractor the additional time. To prove construction acceleration, the contractor needs to prove:

 

  1. there was a delay that was not its fault (an excusable delay) that impacted the completion date;
  2. the contractor notified the government/owner of the delay and requested additional time to complete its performance;
  3. the government/owner expressly directed the contractor to overcome the delay and complete the project in a shorter amount of time than the contractor was entitled to factoring in the delay or implicitly directed the contractor to overcome the delay through the refusal to grant additional time; and
  4. the contractor did in fact incur costs in accelerating its performance.

See Armour of America v. U.S., 96 Fed.Cl. 726, 757 (Fed.Cl. 2011) (“To prove a constructive acceleration claim, and entitlement to an equitable adjustment, which Armour [contractor] did not attempt to do during the proceedings before the court, a contractor must show (1) that the contractor encountered a delay that was excusable; (2) that the contractor requested from the government an extension of time due to the delay; (3) that the government denied the contractor’s request for an extension of time; (4) that the government demanded completion of the contract in a shorter amount of time than the contractor was entitled to, given the excusable delay; and (5) that the contractor was required to expend additional resources to adhere to the schedule on which the government insisted.”). See also Fraser Const. Co. v. U.S., 384 F.3d 1354 (Fed.Cl. 2004).

 

 

What is important to remember is not only will the contractor need to prove the excusable delay that impacted its schedule, but it will need to prove it notified the government/owner of the delay and requested additional time to perform which was denied. After proving all of this, the contractor will still need to establish that it actually accelerated its performance and incurred costs in doing so.

 

As a basic example, assume a project was to be completed December 31, 2014. This marked the date the owner needed to use the project for its intended purpose. However, due to excusable delays (assume many owner-directed change orders and/or design-related issues), this completion date is postponed a year to December 31, 2015. The contractor notified the owner of the delays and impacts to its schedule and requested an extension of time to complete the project; but, for whatever reason, the owner refused to grant additional time and implicitly demanded that the contractor complete the project on schedule. The contractor, as the result of the owner’s refusal to grant additional time, accelerated its performance to finish the project earlier than December 31, 2015 and to avoid the consequence of the owner assessing liquidated damages (i.e., the contractor accelerated to mitigate the impact of the delay). Based on the contractor and its subcontractor’s efforts, the project was completed on May 30, 2015–5 months after the original completion date, but 7 months before the contractor should have been complete considering the excusable delays. In this basic example, the contractor’s acceleration efforts mitigated the overall delay by approximately 7 months (the difference between May 30, 2015 and December 31, 2015) even though the contractor finished 5 months later than the original schedule. The contractor will need to prove the costs associated with these acceleration efforts.

 

It is good practice for contractors to work with attorneys and experts to preserve the acceleration claim and prove the excusable delays through a critical path schedule analysis and the costs incurred in accelerating performance.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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