Tips & Tools: Constructive Acceleration

Tips & Tools to Improve Your Bottom Line: Constructive Acceleration

By Rob Sande
In part three of OLSON CONSTRUCTION LAW, P.C.’s new series—Tips & Tools to Improve Your Bottom Line—we examine the issue of constructive acceleration.  As always, we encourage you to share these e-mails with the project managers and superintendents in your company. 

Constructive Acceleration
 
Contractors price and bid work based on the planned production required to meet the owner’s completion deadline.  For example, assume that a project proposal sets a calendar completion date for sewer replacement work three months after the late start date.  If one crew will need three months to perform the work, averaging 50 hours per week, you will bid the work on that basis.  Your pricing assumes one round of mobilizations (for one crew) and 10 hours of overtime per week—your profitability on the project depends on these projections. 

Despite your best efforts, you will sometimes experience excusable delay to your critical path work.  This delay could be caused by extra work added by the owner, differing site conditions, design errors, design changes, suspensions, or other delays beyond your control.[1]  When you experience excusable delay, you must review the contract documents and follow all notice and claim requirements in a timely manner.  Many contracts will require you to immediately notify the engineer of the delay (in writing) and formally request a time extension within a limited amount of time. 
 
If the engineer ignores or wrongfully denies your request for a time extension, you are often left with only two options.  The first is to continue working 50 hours per week and finish the project two weeks after the completion date.  In response, the engineer will likely assess two weeks of liquidated damages, and although the engineer should have granted a time extension, you won’t have much leverage to challenge the engineer’s decision.  There may not be enough dollars at issue to justify a legal dispute, and you’ll find yourself all but begging the engineer for relief.  The assessment of liquidated damages will impact your bottom line on this project, and a history of liquidated damages can sometimes impact a contractor’s ability to secure future contracts.    
 
In the alternative, you could mobilize a second crew and/or increase your production (e.g. from 50 to 70 hours per week).  This decision would result in extra costs, including additional mobilizations, increased overtime wages, and other items. A contractor’s decision to accelerate its work and absorb its extra costs is often driven by a desire to avoid liquidated damages.  However, many contractors don’t realize that acceleration-related extra costs are often recoverable under the theory of “Constructive Acceleration.”  Indeed, it may be possible to both avoid or reduce liquidated damages by accelerating your work and pursue recovery of acceleration costs from the owner.[2] 
 
Constructive Acceleration is an established concept in U.S. federal court decisions, and it typically requires the following elements:[3]
 
  1. The contractor experienced excusable delay to its critical path work;
  2. The contractor requested a time extension in a timely manner (as required by the contract documents);
  3. The engineer wrongfully denied or failed to respond to the time extension request;
  4. The engineer continued to insist on completion by the original deadline (this insistence may be express or implied);
  5. The contractor provided timely written notice to the engineer of its intent to accelerate its work and seek additional compensation for these efforts; and
  6. The contractor actually accelerated performance and incurred extra costs to do so. 
 
If you experience excusable delay and are considering whether to accelerate your work, we encourage you to use OLSON CONSTRUCTION LAW P.C.’s “first call free” service.  We can assess the specifics of your particular situation and help you develop a strategy to address this issue.
 
 

[1] Contractors must review the contract documents to determine whether a particular delay is “excusable”. 
[2] An acceleration claim can also be used as leverage.  Consider a situation where a contractor accelerates its work after experiencing two weeks of excusable delay (for which the engineer refused to provide a time extension, yet still insisted on timely project completion).  With acceleration efforts, the contractor makes up time and finishes only one week late.  If the contractor provided proper notice of the acceleration claim, the engineer may voluntarily agree to waive LDs in exchange for the contractor waiving its acceleration claim.
[3] The availability of a Constructive Acceleration claim will depend on the facts, specific contract language, and location of the project.  The law on this issue varies state-by-state.  Therefore, you should contact an attorney to discuss your situation and determine whether you have a valid basis to recover acceleration costs.
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