Picture this: you were the successful bidder on a state highway project. The project is scheduled to take about two years. Notice to proceed was issued six months ago, you have procured equipment and supplies, your subcontractors are lined up, and work is underway. The project is off to a great start. But a storm is brewing.
A couple days ago you received an e-mail from the project engineer showing “minor” adjustments to the project plans and specifications. On closer inspection, you realize this “minor” update could result in at least three months of delay on the project, and your suppliers have given you a four-week lead time on the materials you need to accomplish the change. You just finished a conference call with the owner and the engineer where you explained the three-month delay. The owner’s reply: “It’s still early. I think you can get it done within the existing schedule. Let’s move forward and see how it works out.” You have a schedule update due next week. What do you do? Do you move forward, hope for the best, and risk being placed in default when the schedule runs over? Do you accelerate the project?
You have just discovered “constructive acceleration” – where your work may be accelerated without owner acknowledgement of the delaying event. Your next steps could determine your right to recover the time lost to the delay and cost to overcome the delay. Constructive acceleration occurs when compensable/excusable events delay the contractor’s work, the time impact of the delay is not acknowledged by the project owner, and the contractor is required to accelerate to maintain the unextended project schedule.
The contractor can preserve a claim for constructive acceleration by showing:
- The contractor encountered an excusable or compensable delay to the project’s critical path that justifies an extension to the contract time;
- The contractor requested a time extension in compliance with the contract;
- The owner wrongfully rejected or ignored the contractor’s extension request;
- The owner gave an express or implied direction to complete the project within the existing unextended schedule;
- The contractor gave timely notice of the contractor’s intent to pursue an acceleration claim; and
- The contractor accelerated performance and incurred extra costs as a result of the acceleration
One author distilled these six points into the following “essential” elements: (1) the contractor encountered an excusable delay; (2) the owner issued or implied an acceleration order; and (3) the contractor incurred extra costs to accelerate the work.
When a constructive acceleration situation develops, the following principles can help the contractor preserve and maintain its claim for extra time and/or compensation for the impending delays:
Know the Contract
The contractor can only recover for acceleration damages if the contract qualifies the delay as “compensable” or “excusable.” Make sure project leaders and superintendents know the contract terms before starting the project and review delay, change order, and claims provisions before acting on any change.
Pay Attention
Compensable/excusable changes in project conditions may be subtle, and the owner may minimize the impact of design/specification changes, especially early in the project.
Speak Up
The contractor will have a hard time justifying a claim at the end of a multi-year project if the contractor never notified the owner when the contractor first learned of the delay. The contractor should give the owner notice of the time impacts of the change as soon as possible via change order request, following the contract’s procedures for formal notice of the changes and their possible impacts. If the owner ignores the communications or refuses to issue a change order based on your assessment, the contractor should confirm the owner’s refusal in writing and provide formal notice of the contractor’s intent to make a claim for the denied delay and resulting acceleration. This includes clear written notice to the owner of the contractor’s intent to pursue an acceleration claim for the added work required to maintain the schedule.
Explain the Impacts
The contractor will need to provide suitable back-up for the acceleration claim, including a time impact analysis and an estimate of the potential costs of the change. For example, the contractor could clarify that the work will either take longer to complete, or it will cost more to finish “on time” because finishing the project within the unextended schedule—if feasible—will require hiring additional crews and/or paying overtime to accelerate the work.
Keep Calm
Work to mitigate the delay.
Document, Document, Document
For best practice, the contractor will keep organized records of:
- In-person and phone conversations related to the change and the resulting delay: follow up with an e-mail summarizing the discussion to confirm content and owner’s position. These conversations should include communications from the contractor to the owner giving an assessment of the change’s impact to the project, including the need to accelerate to maintain schedule.
- Change order request submissions documenting the change, the delay, and the impact to the project.
- Schedule updates made and maintained in accordance with the contract. The contractor should include the impacts of project changes on the updated schedules and describe them in any report that the contractor submits with each monthly impact. If the contractor does not regularly submit monthly schedule reports, then the contractor should make an exception for the month when the delay is requested, pointing out the delay(s) added, identifying successor activities that are affected, and explaining how the change(s) will delay the project. Some contractors omit this step in the next schedule update, with the optimism that they might pick up time. The risk of failing to submit the schedule update report calling out the delay is that later claims will be critiqued based on a contemporaneous showing that the contractor’s own schedule didn’t show any impact or delay to the projected completion date.
- Efforts to resequence the work or otherwise mitigate the delays. The contractor should present these to the owner for consideration.
- Documentation of the owner’s refusal of change order requests.
- Documentation of verbal or written instructions from the owner related to the schedule and the change (communications that imply acceleration is required to meet the schedule).
- Records of the costs required to accelerate the project. If work is pushed into later periods where labor or materials are more expensive, the contractor should document the incremental added cost. The contractor should compute the net change in cost due to acceleration and present the calculation to the owner.
- Lost productivity and impact to other work due to acceleration. These impacts are often substantial and can be the most difficult portion of the acceleration claim to quantify. The contractor should consider what can be done to establish these costs in real time so when it comes time to prosecute the claim there is evidence to support these costs.
Claims for delays are often resolved after the project is completed. At that point, it is too late for the owner to assess the risks of delay and acceleration costs. Early formal notice of the change’s impact on the project schedule and the cost of acceleration through requests for information, change order requests, and claims, allows the owner an opportunity to make priority judgments, including whether completing the project within the existing schedule is important; whether the owner wants a change that will delay project completion; and whether keeping the date and moving forward with the change is worth the risk of paying additional acceleration costs.
Construction projects change regularly, and misunderstandings abound about how those changes impact the project. A prudent contractor can prevent turmoil at the end of the project by knowing the contract, understanding the impacts of changes, communicating promptly and effectively, submitting timely requests for information, change orders, or claims, and keeping track of the costs and time to complete the work. The contractor’s timely communications and systematic documentation will help the owner make important value judgments and will support the contractor’s claims for more time and compensation.
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The views expressed in this article are not necessarily those of ConsensusDocs. Readers should not take or refrain from taking any action based on any information without first seeking legal advice.