In America, contractors have had success in relying upon what has been referred to as “Constructive Acceleration” to found a claim for the costs of accelerating the work in the absence of an instruction or agreement to accelerate. In the UK and in South Africa, the more conservative approach of these jurisdictions has resulted in the approach being less successful than in the USA. Indeed in South Africa we do not have a reported case on Constructive Acceleration. Author Chris Binnington is of the opinion that in the appropriate circumstances a claim based on constructive acceleration may well succeed albeit it will not be an easy case to win.
Constructive acceleration occurs when the employer/principal agent requires the contractor to complete construction as originally scheduled rather than within the extended time the contractor was entitled to as a result of excusable delays. Seven elements are often required:
- The contractor encounters one or more excusable delays (including additional varied work), which would entitle it to an extension of time;
- Timely notice by the contractor of such delay;
- The contractor timeously requests an extension of time;
- The principal agent fails or refuses to grant a time extension;
- The employer/principal agent indicates lie requires the contractor to complete within the original contract period either expressly or impliedly by the employer’s actions;
- The contractor after giving notice to this effect reasonably attempts to accelerate its rate of performance; and
- The contractor incurs additional costs as a result of the acceleration.
The theory of recovery of additional costs due to constructive acceleration is based on the premise that when a contractor is excusably delayed, the contractor is entitled to a time extension. If the employer/principal agent fails to recognise excusable delay and demands performance in accordance with the original schedule, an acceleration of the work pace takes place, since the contractor is expected to do in less time that which should be given more time.
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During acceleration, the contractor may be forced to hire additional workers, work overtime, accelerate material delivery schedules, utilise additional supervision, and use additional equipment. Any of these actions may cause an increase in the cost of performance which the contractor should be entitled to recover.
The contractor may be entitled to recover these additional costs even though it did not achieve the requested completion date, hut it is a fundamental requirement that the contractor gives notice of its intention to constructively accelerate and provide reasons before it incurs the additional expense
The most difficult issue in constructive acceleration is determining what type of statement or action constitutes a requirement to accelerate. It is clear that a direct order to accelerate by the owner/principal agent or designer to complete by the contract completion time despite the existence of excusable delays constitutes a requirement to accelerate sufficient to permit the contractor to recover additional costs. It is much more difficult to determine whether an acceleration has been required when no direct order by the owner/principal agent or its representative has been made. A request to accelerate may be equal to an order to accelerate. Threats to terminate a contract for default, when a known excusable delay is present, may constitute acceleration.
An order to accelerate may also be found in a statement of the urgency of completion on the original contract completion date, coupled with the owner/principal agent threatening to issue an unsatisfactory performance report regardless of the circumstances or threatening to apply penalties
Courts have found these actions by an employer/principal agent put precisely the kind of pressure on the contractor that the contractor may reasonably infer as an order to speed up.
Cost recovery even without an instruction
Another determination to be made is whether the contractor must actually request a time extension. Generally, the delayed contractor or sub-contractor must seek a time extension as required by the contract. However the failure to grant an extension of time when requested does not imply an order to accelerate. Under some circumstances, the contractor may not be required to ask for a specific time extension. For example, a formal request may not be necessary when the employer has specific knowledge of excusable delays and unequivocally orders the contractor to complete on the contract completion date without regard to excusable delays. However, the prudent contractor will always request an extension of time rather than assume that the employer/principal agent is on actual notice of the excusable delay. It should be recognised that the answers to these and the questions in the acceleration area turn on the facts of a particular situation rather than rules or formulas. Even when the employer does not implicitly or expressly order acceleration, the contractor may be entitled to recover its constructive acceleration costs. For example, in one case, owner-caused delay was likely to force the contract performance into the rainy season and the completion was likely to be delayed another three months, The contractor ordered overtime and completed the work before the commencement of heavy rains, As a result, the contractor was allowed to recover these costs under a theory of the voluntary mitigation of damages rather than an acceleration theory.
Sri Lankan precedent
Of particular interest is the report of a hallmark case in Sri Lanka involving the construction of irrigation canals. In that case the contractor was forced to spend a large sum on duplicating his temporary equipment due to the failure of the principal agent to award an extension of time timeously. The ICC Arbitration awarded the contractor some US$56-million being approximately 95% of its proven costs of constructive acceleration. What makes this case of particular interest is that the law of the contract was Sri Lankan law and Sri lanka is one of the few countries outside South Africa having a Roman-Dutch legal foundation. Chris Binnington is the Managing Director of Binnington Cope/and Associates.
THE CIVIL ENGINEERING CONTRACTOR JANUARY 2006