By: Daniel M. Drewry
When faced with an excusable and compensable delay claim, a contractor is entitled to recover not only the increased costs incurred as a result of that delay, but also is entitled to an extension of time in which to perform its work under the contract. Often times, however, an owner may not fully recognize the delay due to a lack of expertise or experience in project scheduling or may dispute whether the delay was in fact excusable. The result is the contractor’s request for an extension of time is denied and the contractor is then forced to accelerate its performance of the work in order to meet the original, but now delayed, contract completion date. This article provides a brief overview of the elements of and circumstances under which constructive acceleration claims can arise, in the hope that owners and contractors alike will be able to recognize and proactively resolve an acceleration claim.
Elements of an Acceleration Claim. A constructive acceleration occurs when an owner denies a legitimate claim to a time extension to a contractor and instead forces the contractor to incur additional expenses by requiring it to bring the project in by the original completion date. All acceleration claims share the following elements: (a) the occurrence of an excusable delay; (b) timely notice of the delay to the owner and request for a time extension; (c) the time extension is denied and the owner requires the contractor to complete the project by the original project completion date; (d) notice from the contractor to the owner that the directive is considered to be a constructive change; and (e) the contractor incurs additional costs in order to meet the now accelerated schedule. The contractor bears the burden of proof to establish these elements.
Potential Pitfalls. First and foremost, in order for the acceleration claim to succeed the contractor must first establish that the delay allegedly giving rise to the owner’s acceleration was in fact excusable. See Fraser Construction v. United States, 384 F.3d 1354 (C.A.Fed. 2004). Did the contractor cause the delay (in whole or in part)? Was the delay concurrent? Does the contract contain a valid no damages for delay clause? Additionally, did the contractor comply with the time extension and notice provisions of the contract? The situation often arises in which contractors notify the owner of the occurrence of a delay, but neglect to formally request a time extension under the contract, or fail to timely notify the owner but do request a time extension (albeit late). The failure to comply with the time extension provisions of the contract can provide a defense to an acceleration claim. See Stelko Electric, Inc. v. Taylor Community School Building Corp., 826 N.E.2d 152 (Ind.App. 2005); Murdock & Sons Construction, Inc. v. Goheen General Construction Inc., 2002 WL 243576 (S.D. Ind. 2002).
Types of Recoverable Damages. If the contractor establishes a valid acceleration claim, it is entitled to recover the costs incurred in meeting the owner’s accelerated schedule. These costs may include increased mobilization and demobilization costs due to the need to commit additional resources in terms of labor, equipment and supervision at the project than originally contemplated by the original schedule; specifically, direct labor costs include such items as increased wage costs for additional workers, overtime pay and rental costs for additional equipment. Further, the contractor may incur additional costs for inefficiencies in labor and material costs, due to inherent difficulties in purchasing both on a “hurry” basis. These inefficiencies may include trade stacking, congestion or fatigue from extensive overtime work. Labor inefficiencies are a hidden but very expensive cost of an acceleration. All of these types of damages may be recoverable in an acceleration claim. Nevertheless, while labor inefficiencies are a very real part of an acceleration claim, they are extremely difficult to quantify.
Conclusion. Construction project are becoming increasingly complex, involving and requiring more interaction amongst trades and with the owner. With this growing complexity and interaction come the increased likelihood of delays and a resulting acceleration claim. By understanding the elements and recoverable damages of an acceleration claim, as well as the potential defenses to such a claim, both owners and contractors can better recognize, and move to quickly resolve, these disputes to avoid protracted and expensive claims procedures.
Drewry, Michael F., “New Developments and Trends on Delay & Impact Claims”, Indiana State Bar Association, Construction & Surety Law Section, Annual Meeting, October 2004.
Wickwire, Jon M., et al., Construction Scheduling: Preparation, Liability, and Claims, §§ 5.02, 7.10 (2nd ed. Aspen Publishers 2003).