In most construction contracts, pressure on achieving a completion date is difficult. It’s harder still when impacted by project delays, which can be of either party’s making. The options available to the contractor are:
- Overrun past completion, which would cause reputational damage and, dependent on the contract conditions, may also mean the levying of delay damages, or;
- Claim for time relief due to delays outside of their control to subsequently make a claim for the recovery of costs over the period of delay or at the very least relief from damages.
However, the client and contractor can both consider a case for acceleration to the works, and determining the costs for acceleration versus the likelihood of them achieving it versus the consequences of finishing late will inform the business case as to whether they implement it or not. However, what is the contractual process for acceleration? How should you begin to build up the quotation, and in the event the period of delay is in dispute, how should you build your case for ‘constructive acceleration’.
If you are operating a JCT contract, the Architect/Contract Administrator can invite proposals from the contractor as to the possibility of achieving practical completion, who then duly provides a quotation for acceleration. However, they do have the option to refuse because they do not believe accelerative measures would have any discernible benefit to the employer’s completion date, for example.
In NEC ECC contracts (NEC4), the Contractor and Project Manager may propose to the other an acceleration to achieve completion before the Completion Date. Crucially, it states, “if the Project Manager and Contractor are prepared to consider the proposed change, the Project Manager instructs the Contractor to provide a quotation.” Therefore, if you consider this against the backdrop of compensation events in NEC contracts, the Project Manager can instruct changes unilaterally versus the provisions stated in clause 36, whereby a quotation for acceleration can only be instructed if both parties are prepared to consider it.
Arguably, the JCT has a right of veto for the contractor. A refusal to provide options is allowed, but this does not stop the Architect/Contract Administrator from asking what options are available and requesting quotations.
If both parties agree on an accelerative option, then in terms of how you should build up a quotation, will need to consider as a minimum:
- Identify the measures you are putting into place to accelerate the programme and the planned effect on completion.
- The level of increased resources required to achieve an earlier completion date, including the costs of the resources.
- Notwithstanding the costs of additional resources, there are many inherent risks associated with increasing the current/planned levels, for example:
- The congestion on site and the consequential disruptive effect this may have to other works.
- The stacking of trades and how this can cause standing time. For example, you are reducing the handover time between trades as you compress the programme, and you have increased the resource levels, so any impact on the follow on trades will dramatically increase the costs of standing time. This risk will need to be built into the programme/acceleration quotation.
- General supply chain inefficiencies and the quality of work can be affected if you are working at a faster pace than industry standards.
- Fatigue across the workforce can lead to an increased accident rate, which means you need to increase the level of supervision to manage working hours.
- Additional indirect costs such as increased site offices and other ancillary resources. For example, if you increase working hours to 24hrs, this may be over 3 x 7.5hr shifts with handover between them or 2 x 12hr shifts, which means additional security and increased supervision.
- There may be a situation where a section of the works is accelerated to hand over to a follow on third party. Therefore the resources involved will need to switch back to a regular working pattern, and the contractor will incur a period of non-productive downtime and cost which will need to be planned and included in the quotation.
- Suppose the works are not yet on site and the delay has occurred during the pre-construction period. In that case, the contractor will usually include checkpoint reviews on their design (if a design and build contract is in operation). Once they achieve a level of completeness, they will sign off the design as approved for construction. The employer could agree to start earlier but take the risk on the post-construction design changes regarding the disruptive effect this could have on operations.
In terms of how to present the quotation, there are a few different ways such as:
- Using the measured mile approach where you demonstrate that an element of works in the current programme is achievable based on your ability to do so elsewhere in the completed works to date. Then, you apply your accelerative measures and demonstrate their effect on the established output and the cost associated with each measure.
- If you cannot establish a measured mile approach because the works have either not started or have been heavily disrupted (the very reason you could be reviewing acceleration), look to establish how the outputs in the current programme are industry-standard outputs. Then, apply the same principle as above to demonstrate the accelerative benefits.
- Submit as a total cost quotation where you forecast the cost to the end of the project, taking into the accelerative measures described above, and then deduct the original tendered cost to provide an extra over cost for acceleration. This is probably the most straightforward way for the contractor to establish the costs they need to recover. Still, this is less appealing for the employer as you could be picking up any tender pricing inefficiencies in accepting such a method.
It’s also worth noting that, in terms of NEC4 ECC with a compensation event, the Project Manager has the option to make their own assessment if they disagree with the valuation put forward by the contractor. However, for a quotation for acceleration, the Project Manager’s choices are to notify that the quotation is accepted or not. There is no right to challenge, and whereas the contract has a prescribed process for the assessment of compensation events, there is no such description for acceleration quotations, which means the Project Manager could receive a quotation that is a ‘one-liner’, but it would appear their options are limited to either accept it or not.
As a contractor, you may find yourself in a situation whereby you consider taking accelerative measures to finish by the original completion date. Still, you believe that you have a strong case for the retrospective award of an extension of time. Points to consider in establishing the argument include:
- Likelihood of success that you will be granted an extension of time in whole or in part.
- The loss and expense that you will be able to recover because of the award of time.
- The value of delay damages that you may face across a sliding scale of the success of an Extension of Time claim.
- The costs of accelerative measures and the likelihood of being able to recover the costs in full.
Once you have the above picture, you will be able to take a risk-based approach to your decision making. If you do decide to accelerate, there are several vital things that you must do to increase the chances of your success in recouping the cost, for example:
- Provide your position – including details of your Extension of Time claim and how you believe the employer has (or should have) instructed acceleration.
- Correspondence – keep a record of all minutes, instructions, agreements, letters and emails that refer to accelerative measures and ensure that you are documenting and issuing these to the employer weekly, highlighting that you consider you have entitlement to an Extension of Time and are undertaking accelerative measures.
- Schedules of costs – you need to keep a record of the additional costs you are incurring, both direct and indirect, and issue this periodically to the employer so that later on, you can rely upon this as a notice that you kept the employer informed of the running total you were incurring.
- Programmes – keep the employer informed about the effect the accelerative measures are having on the current completion date and how you have identified any particular constraints in the programme, and what you are doing to overcome these through the measures you are implementing.
You must keep lots of contemporaneous records regarding the above points. You submit these to the employer frequently, including highlighting that you consider the costs to be recoverable and reference your extension of time submission. Establishing your entitlement through retrospective action to recover your position is still not ideal. It should be avoided wherever possible, including referring to dispute resolution if needed to establish agreement on programme delays or to clarify the intent of perceived acceleration instructions.
Implied obligation to mitigate
When providing quotations for acceleration, a challenge might be put to the contractor regarding how they have considered their general obligation to mitigate delays under the contract. For example, in the JCT form of contract the contractor is to use their ‘best endeavours‘ to prevent delay or further delay to completion.
However, it is well established that such endeavours are not considered to include a unilateral decision to acceleration, but rather they are limited by reasonableness, i.e., the contractor will take reasonable steps to minimise the losses of the employer in the event of delay and also not to take unreasonable steps to increase their losses.
A worked example of this could be where a contractor re-sequences a programme to pull the completion date forward, but there are no-cost increases to do so. In terms of the element of reasonableness, the contractor should be careful not to reduce down the amount of time risk allowance in their programme or equally reduce their terminal float as both of these would arguably have a financial impact.
In the case of Ascon Contracting Ltd vs Alfred McAlpine Construction Isle of Man Ltd (1999), a situation had occurred whereby Ascon had mitigated delay via constructive acceleration as they had an obligation to complete the subcontract works “reasonably in accordance with the Works”. However, once the project was completed, they submitted their claim for an extension of time, and McAlpine found no entitlement. The matter was referred for dispute resolution. The findings were that Ascon did not have an open obligation to comply with the main contractor’s programme or the programmes of their other subcontractors.
However, the judge also stated that Ascon could not claim loss and expense linked to an extension of time claim whilst also claiming acceleration costs in mitigating the delay. They noted that if Ascon had made a case for the recovery of accelerative costs to mitigate client delays and that such endeavours were reasonable but also ineffective, they would have a case for claiming damages; however the contract mechanism for the recovery of costs in regards delay was via the extension of time provisions and loss and expense that follows.