Acceleration Claims as the name suggests referring to the claim for costs to speed up or accelerate the work. Such claims are common in construction or real estate projects. Many contractors, however, don’t pay attention to such claims and think of them as irrelevant. But, such claims could prove very useful if the contractors follow the set protocol. Also, to claim such a thing, it is very important that contractors track the work accurately.
- Acceleration Claims – Explanation
- Types of Acceleration Claims
- Issues with Acceleration Claims
- Resolving Constructive Acceleration
- No Damages for Delay Clause
- Final Words
Acceleration Claims – Explanation
In construction contracts, time is money. Thus, such contracts clearly lay crucial milestones, such as the completion dates, damages for delay, and bonuses for early completion. A pre-agreed schedule and milestones allow the owner to plan their operations ahead, such as revenue, cash flows, bookings, and more.
So, if the work is behind schedule, then there is a need for acceleration. Acceleration could be voluntary or enforced. In the case of voluntary acceleration, such as due to contractors’ own delay and inefficiency, the contractor may not be able to claim the additional overheads. Another reason a contractor may accelerate the work is to get the early completion bonuses. In this case, also, the contractor won’t be eligible for the claims.
All the agreements in general have a clause with regard to the circumstances beyond the control of the contractor and so on. Therefore, in such circumstances, if there is a delay and there are additional overhead costs involved then the contractor can claim those extra overheads as acceleration costs. If that delay is due to circumstances beyond the control of the contractor or if the delay is due to any specific instructions of the owner. A contractor can accelerate the construction work by going for overtime, employing more labor and resources, adding a new shift, and more. Employing such techniques will require the contractor to incur additional costs.
Acceleration Claims and Loss of Productivity
Along with incurring the additional direct cost, acceleration could result in the loss of labor productivity as well. There are several studies that support this claim of acceleration, leading to the loss of labor productivity.
Activities such as overcrowding the worksite, performing out-of-sequence work, improper scheduling, availability of material and equipment for the additional workforce, and more are known to result in loss of labor productivity. Also, when the new workers come in, they may take some time to adapt to the work environment or need training before resuming normal work. Such things also result in the loss of labor productivity. A contractor may include the acceleration costs, as well as the productivity inefficiencies in the acceleration claims.
Also, a point to note is that generally, the contractor does not have to prove that acceleration efforts were successful. Usually, the contractor needs to prove that he honestly undertook the acceleration work and it resulted in additional costs.
Types of Acceleration Claims
Primarily there are three types of acceleration claims:
Such a claim arises after the instruction to accelerate the work comes from the client. For example, if a construction agreement states building 1000 sqm in 15 days. But, the customer asks the contractor to complete the same in 10 days. Such a request from the client would come under a directed acceleration claim.
Such a claim helps the contractor to cover the costs of additional supervision, equipments, overtime or extra workers, and others to complete the task ahead of schedule. A contractor can claim the following costs – overtime costs, productivity losses, additional labor, extra material, sub-Contractor costs, and more.
These claims arise because of excusable delays in the project. For instance, a new design came up, the act of god, and more. In such a case, the contractor gets extra time to complete the work. To claim the additional cost, the contractor needs to track the work. In case, the contractor doesn’t get an extension, it is up to the contractor to decide whether or not he or she can meet the completion timeline of the client.
As the name suggests, the contractor voluntarily accelerates the work in this case. The reason for acceleration could be any, such as avoiding potential delays, the work needs to start on a new contract and more. However, in such a case, the contractor may not be eligible to claim the additional cost, like in the above two types of accelerated claims. But such acceleration does help and benefits the contractor indirectly monetarily, improved credentials and goodwill, etc.
Issues with Acceleration Claims
Of the three types of acceleration claims, the directed and voluntarily usually result in fewer conflicts between the contractor and owners in terms of claim settlement. Since directed claims are at the request of the owner, there are no questions over legitimacy. An issue, if any, could come in quantifying the claim. Even this will not occur if the contract documentation is clear on the terms.
In terms of voluntary acceleration, the contractor does it willfully. The owner can not be asked to compensate for the extra costs as there are no such instructions from the owner. All that has been done is by the contractor on his own. However, the owner can still pay for it, but it rests on the relationship between the contractor and the owner.
The issues generally do come up with constructive acceleration claims because it does involve some degree of opinion in deciding whether or not the claim is legitimate. An owner can always argue that the contractor was not eligible to accelerate. The contractor, on the other hand, can argue that he or she had no choice but to accelerate.
In case of such a conflict, there are a few points that help decide the legitimacy of the claims. These include whether or not the client was aware of the delay, whether there were any instructions from the owner, did the contract specify about it, and more.
Resolving Constructive Acceleration
Generally, in the case of a constructive claim, the parties follow a process to decide on the claim. Here is how that process works:
The only way to ensure there is a valid claim is to have an excusable delay for the project. Such a delay includes reasons that were not expected at the time of signing the agreement. Also, these include the reasons that are not in control of the contractor. For instance, natural disasters, change of law, and more.
Request for Time Extension
Once there is a delay due to a reasonable cause, the contractor must request the extension in time. A contractor must not assume that the owner would grant the extension. Rather, they must make a formal request for the extension. If not, the owner can always say they were not aware of the delay, and thus, may deny the claim.
If a formal request is made, and the owner grants it, then there are no conflicts. But if the owner denies the extension, then it becomes the contractor’s liability to do the work. He or she would anyway have to complete the project on schedule. In such a case, a constructive claim would automatically turn into a voluntary claim.
Attempt to Accelerate
The contractor needs to prove that he or she made all efforts to accelerate the work. Also, the contractor must prove that they incurred costs while accelerating performance. Or, we can say, the contractor must prove that he made all efforts to meet the original completion date and incurred additional costs due to acceleration.
No Damages for Delay Clause
Such a clause is also common in construction contracts and could block acceleration claims. This clause protects the owner from the costs in case of a delay in the project even due to the owner’s fault. So, with a No-Damages-or-Delay clause even if the fault is of the owner, the contractor will be responsible for the delay.
Thus, a contractor should watch out for this clause in an agreement. If the owner insists on having such a clause, then the contractor must try to get an exception clearly documented for accelerated claims.
A contractor can take the help of consultancy services to file the acceleration claims. On the other hand, the owner can also use the services of a consultancy to review such claims by a contractor.
One crucial thing for settling acceleration claims is the contract and its detailed terms documented. If the contract is clear on what or what not constitute acceleration claims, then there will not be any issues between the contractor and the owner. The contract must also include how to quantify the additional costs, as well as the treatment of productivity inefficiencies.
Along with the contract, a thorough tracking of the project’s schedule is a must to settle the acceleration claims. Apart from the project schedule, reviewing meeting notes, job reports, and change orders also help in settling these claims.