Although acceleration claims may arise in connection with project delays and many of the impacts are the same as those with delay claims, it is important for the steel fabricator to understand the basics of acceleration in order to preserve rights to costs associated with acceleration and to ensure that acceleration claims are preserved.
While the discussion below addresses the legal concepts involving acceleration, the importance of compliance with contractual acceleration and notice provisions cannot be ignored. To be sure that claims for impacts due to acceleration are not waived, the steel fabricator must first comply with the contract.
Overview of Acceleration Claims
Acceleration typically refers to an effort to increase the pace of work to meet a project milestone, to overcome delay, to comply with an owner’s request, or some other justification for progressing the work faster.[1] Acceleration is generally segregated into three categories:
- Voluntary acceleration
- Directed acceleration
- Constructive acceleration
Acceleration differs from delay. In the case of acceleration, a contractor “speeds up his work so that he is performing the job at a faster rate than prescribed in the original contract.”[2] With delay, “there is a slowdown in work” and may be caused “by either party to the contract.”[3] Acceleration is also different from disruption, though disruption is a normal consequence of acceleration.[4]
A. Elements
For an acceleration effort to be compensable, the owner must, either directly or implicitly, order a contractor to speed up its efforts on the site in an attempt to complete the work in a period shorter than allowed by the contract.[5]
B. Directed Acceleration
Directed acceleration occurs when a contractor or owner exercises the “changes” or “change order” provisions of the contract to instruct, or direct, the performing party to complete all the work earlier than the original contract date. Additionally, the parties may also mutually agree to the acceleration, outside of utilizing the changes provisions.[6] [7]
So long as the contractor is directed by unilateral change order or agrees via informal demand to complete the work ahead of schedule—and does so without relinquishing its rights—the contractor may recover its extra costs incurred in carrying out the acceleration directive.[8] However, an owner’s “demand that ‘the contract be completed on time’ [does] not constitute an order to accelerate.”[9]
To recover from a directed acceleration, the contractor seeking the adjustment “bears the burden of proving liability, causation, and resultant injury.[10]
Since directed acceleration normally adds obligations through the change order process, “it is almost uniformly compensable.”[11] Courts will award damages upon a finding, based on sufficient evidence, that a “subcontractor sustained additional cost on account of accelerated performance of [the] subcontract required by prime contractor.”[12] Directed acceleration is “seldom litigated.”[13] When it is litigated, it is usually because of a problem with the “direction to accelerate.”[14]
The best practice when there is a directive to accelerate is to agree on costs upfront and have the directive acceleration memorialized in a change order. However, if not memorialized via a change order, it is imperative that the steel fabricator preserve any claim for directed acceleration by following the notice and claim procedures in the contract and ensuring that the directed acceleration claim is not waived by any lien waivers or progress payments.
C. Constructive Acceleration
Constructive acceleration occurs when an owner/contractor has failed to recognize delays to the project and adjust the contract time accordingly, while at the same time demanding completion of the work by the unextended contract completion date.[15] An affected party must prove the following in order to be entitled to recovery of increased costs due to constructive acceleration: [16] [17] [18]
(1) the contractor experienced an excusable delay entitling it to a time extension;
(2) the contractor properly requested the 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 in order to complete the project by the original completion date and incurred added costs as a result.
It is crucial that the steel fabricator request the time extension in order to be able to pursue a constructive acceleration claim. If a time extension is not requested and denied, a constructive acceleration claim will fail. As with directed acceleration claims, care should be taken to follow the notice and claim procedures of the contract, as well as preserving the claim in relation to any progress payment or lien waiver.
In addition, the contractor must show and prove its damages stemming from the constructive acceleration. Often, courts require acceleration damages to be supported by written requests, consistent with contractual requirements, for extensions of time and/or price.[19] Further, all support for any necessary extra equipment rentals or man-hours must be provided and substantiated with supporting documentation and time sheets. Failure to do so will greatly reduce or even eliminate the ability to recover on a properly preserved constructive acceleration claim.
D. Voluntary Acceleration
Voluntary acceleration arises when a party performs ahead of schedule for its own purposes or motives, not because of the directives of another party.[20] [21] In this situation, the accelerating contractor generally does not have a claim for acceleration damages—because the additional costs were incurred to meet the contractor’s own goals and objectives, making it inequitable to hold another party liable for such costs.[22] [23]
Voluntary acceleration is often used as a project tool “and can be used to effectively manage the work.”[24] [25] “Voluntary acceleration to advance personal interests or to overcome ‘inexcusable’ delay results in acceleration costs being non-compensable.”[26] Indeed, “[a] contractor may accelerate on his own initiative to assure completion within the contract schedule or for other purposes.”[27] However, the contractor cannot recover for acceleration unless it was ordered to accelerate.[28]
To prove voluntary acceleration, one must establish that a contractor accelerated on its own prerogative.[29] Additionally, if a contractor falls behind “in meeting its own accelerated schedule and devotes additional resources to recover the lost time, the contractor typically remains responsible for the cost of those resources.”[30]
Courts generally recognize that a contractor is not entitled to recover damages arising from voluntary acceleration.[31]
E. Proving Acceleration Damages
As with delay claims, proving acceleration damages requires substantiation of labor and equipment costs. Acceleration claims may involve a component of lost productivity, which will require expert testimony to support the damages using a reliable method such as a measured mile. For further discussion regarding lost productivity claims and methods of proof, please refer to the following article: What You Need to Know About Delay Claims and How to Prove or Defend Against Them.
Conclusion
Even though projects may involve both delay and acceleration, acceleration is a different concept requiring consideration be given to the type of acceleration at issue. Close attention should be paid to contractual acceleration and change order requirements, as well as proper documentation of acceleration impacts. If the steel fabricator is directed to accelerate, the steel fabricator should be entitled to compensation for the acceleration, and it is advisable to reach an agreement on the amount of compensation via the change order process to avoid a dispute later. Where the steel fabricator is constructively accelerated, it is imperative to request a time extension as failure to do so will likely result in waiver of a claim for acceleration. Finally, remember that voluntary acceleration is not considered compensable. Acceleration claims can be waived if the notice and claim procedures of the contract are not followed, as well as if they are not reserved in connection with progress payments and lien waivers.
Finally, some practical tips to consider when accelerated are: (1) be mindful of deadlines set forth in the contract for requesting change orders associated with acceleration impacts; (2) request a time extension when constructively accelerated; (3) if directed to accelerate, reach an agreement up front that you have been directed to accelerate and that you will be paid for all labor, equipment, and materials; (4) track all labor, material, and equipment expenses with a separate job cost code; (5) keep supporting backup for all expenses organized by expense; and (6) retain a delay expert to consult regarding schedule issues.
[1] W. Stephen Dale & Robert M. D’Onofrio, Construction Schedule Delays 150 (Thomson Reuters, 2018) [hereinafter Construction Schedule Delays].
[2] Philip L. Bruner & Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law, § 15:90 (Thomson Reuters, 2018) [hereinafter Bruner & O’Connor].
[4] See id.; see generally Natkin & Co. v. George A. Fuller Co., 347 F.Supp. 17 (W.D. Mo. 1972).
[5] See generally John Cibinic, Jr., Ralph C. Nash, Jr. & James F. Nagle, Administration of Government Contracts 445–58 (Wolters Kluwer, 4th ed. 2006) [hereinafter Administration of Government Contracts); see also Norair Engineering Corp. v. U.S., 229 Ct. Cl. 160 (1981); Fru-Con Corp. v. State, 50 Ill. Ct. Cl. 50, 93 (1996) (“Acceleration occurs when a contractor is forced to perform the work in a shorter period of time than is called for in the contract. Acceleration can take different forms. A constructive acceleration occurs when the government denies or unreasonably delays in granting the contractor a time extension which is justified, and at the same time holds the contractor to the original completion date.”); Contracting & Material Co. v. City of Chicago, 314 N.E.2d 598, 604 (Ill. App. Ct. 1974), rev’d, 349 N.E.2d 389 (Ill. 1976) (stating that a contractor must prove that it has encountered an excusable delay for which it is entitled to a time extension; it specifically requested an extension of time; the government failed or refused to grant the extension; the government caused the contractor to complete the work within the un-extended contract period, and it actually accelerated the performance.).
[6] S. Leo Harmonay, Inc. v. Binks Mfg. Co., 597 F. Supp. 1014, 1021 (S.D.N.Y. 1984) (“[The subcontractor] was asked to increase its crew sizes, put on a second shift, and work both crews overtime. In addition, the crews were required to sometimes work on weekends and holidays throughout the acceleration period.”); see also Northway Decking & Sheet Metal Corp. v. Inland-Ryerson Constr. Products Co., 426 F. Supp. 417 (D.R.I. 1977); General Insurance Co. v. Commerce Hyatt House, 85 Cal. Rptr. 317 (1970).
[7] See Bruner & O’Connor, supra note 2, at § 15:92; Conti Corp. v. Ohio Dept. of Admin. Servs., No. 88-14568, 1992 WL 12009509, at *13 (Ohio Ct. Cl. 1992) (“Directed acceleration occurs whenever the owner directs the contractor to finish the project in advance of the time for completion.”).
[8] Bruner & O’Connor, supra note 2, at § 15:92; see Bat Masonry Co., Inc. v. Pike-Paschen Joint Venture III, 842 F. Supp. 174, 182 (D. Md. 1993) (finding that a contractor’s informal letter directing its subcontractor “to increase your manpower and equipment to facilitate working in [certain] areas” constituted the contractor’s “request of [its subcontractor] to accelerate the work and an agreement to negotiate in good faith the payment of any additional costs incurred by [the subcontractor] as a result of that acceleration”).
[9] Construction Schedule Delays, supra note 1, at § 3:14.
[10] See, e.g., CEMS, Inc. v. U.S., 59 Fed. Cl. 168, 189 (2003); Ralph L. Jones Co., Inc. v. U.S., 33 Fed. Cl. 327, 331 (1995); Servidone Constr. Corp. v. U.S., 931 F.2d 860, 861 (1991) (“To receive an equitable adjustment from the Government, a contractor must show three necessary elements—liability, causation, and resultant injury.”); Wunderlich Contracting Co. v. U. S., 173 Ct. Cl. 180 (1965) (“leniency as to the actual mechanics of computation does not relieve the contractor of his essential burden of establishing the fundamental facts of liability, causation, and resultant injury.”).
[11] Faegre Drinker, Fast and (Sometimes) Furious: Acceleration and Compensability in Construction Contracts, (Sept. 07, 2017), https://www.faegredrinker.com/en/insights/publications/2017/9/fast-and-sometimes-furious-acceleration-and-compensability-in-construction-contracts.
[12] See Baker & Ford Co. v. U.S. for Use & Benefit of Urban Plumbing & Heating Co., 363 F.2d 605 (9th Cir. 1966).
[13] See Barry B. Bramble & Michael T. Callahan, Construction Delay Claims, § 6.02 (Wolters Kluwer 5th 2013).
[14] Id.; see also K.P. Meiring Constr. v. La Quinta Inns, No. 04-02-00425-CV, 2003 Tex. App. LEXIS 1048 (Tex. App. Feb. 5, 2003).
[15] See Bruner & O’Connor, supra note 2, at § 15:94.
[16] Murdock & Sons Constr., Inc. v. Goheen Gen. Constr., Inc., 461 F.3d 837, 840 (7th Cir. 2006)
[17] See also Fraser Constr. Co. v. United States, 384 F.3d 1354, 1360–61 (Fed. Cir. 2004). Cf. Norair Engineering Corp. v. U.S., 229 Ct. Cl. 160 (1981) (three elements); Appeal of McNutt Const. Co., Inc., E.N.G.B.C.A. No. 4724, 85-3 B.C.A. (CCH) ¶ 18397, 1985 WL 17278 (Corps Eng'rs B.C.A. 1985). See generally Administration of Government Contracts, supra note 5, at 445–56 (2006); see also Sherman R. Smoot Co. v. Ohio Dept. of Adm. Serv., 736 N.E.2d 69, 78 (Ohio Ct. App. 2000) (“Constructive acceleration occurs when a contractor has a justified claim for an extension of time, 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.”).
[18] Bruner & O’Connor, supra note 2, at § 15:94.
[19] See Azure v. U.S., 129 F.3d 136 (Fed. Cir. 2016).
[20] See Bruner & O’Connor, supra note 2, at § 15:89
[21] See also Siefford v. Hous. Auth. of City of Humboldt, 223 N.W.2d 816 (Neb. 1974); Mobil Chem. Co. v. Blount Bros. Corp., 809 F.2d 1175 (5th Cir. 1987).
[22] See, e.g., Robert F. Cushman et. al., Proving and Pricing Construction Claims § 4.03 (3d ed., 2020) [hereinafter Proving and Pricing Construction Claims].
[23] See also Iconco v. U.S., 224 Ct. Cl. 692 (1980); O’Hair Constr. Co., AGBCA No. 82-115-1, 89-1 B.C.A. (CCH) ¶ 21,384 (1989).
[24] Construction Schedule Delays, supra note 1, at §3:8
[25] Bruner & O’Connor, supra note 2, at §15:101.
[27] O’Hair & O’Hair Construction Co., AGBCA 82-115-1 (1988).
[29] Dep’t of Transp. v. Anjo Constr. Co., 666 A.2d 753, 758 (Pa. 1995).
[30] Proving and Pricing Construction Claims, supra note 22; O’Hair Constr. Co., ¶ 21,384 (1989).
[31] See Envirotech Corp. v. Tennessee Valley Auth., 715 F. Supp. 190, 192 (W.D. Ky. 1988) (holding contractor who worked at maximum pace to earn a bonus was not entitled to damages because the Owner did not order the contractor to accelerate); Nello L. Teer Co. v. Washington Metro. Area Transit Auth., 695 F. Supp. 583, 592 (D. D.C. 1988) (ruling acceleration damages were not compensable where record did not support a finding the Owner ordered the contractor to accelerate); Allen L. Bender, Inc., PSBCA No. 2324 (1991) (finding no recovery where there was no directive from the government to accelerate); O’Hair & O’Hair Construction Co., AGBCA 82-115-1 (1988) (“We find the subcontractor’s decision to change his method of performance, so as to complete the project in one season despite acknowledged overruns, to be a business judgment.”); Iconco v. U.S., 224 Ct. Cl. 692 (1980) (holding contractor not entitled to recovery where there was no denial of a request for time extension); Solar Foam Insulation, ASBCA No. 46278 (1993) (holding no recovery where acceleration was not directed); McNutt Construction Co., Inc., ENGBCA 4724 (1985) (finding contractor with motives to complete the work aside from directives from the owner was not entitled to compensation); Mobil Chemical Co. v. Blount Bros. Corp., 809 F.2d 1175, 1179 (5th Cir. 1987) (ruling contractor stood to gain by accelerated completion of the project and holding contractor “was the perpetrator and not the victim of the acceleration.”).