ConstructionPro Week, Volume: 2 - Issue: 26 - 06/28/2013

Is It ‘Acceleration’ When the Contractor Must Complete the Job on Time?

By Bruce Jervis

The elements of “constructive acceleration” of the work are easy to state. The contractor is entitled to an extension of the performance period. The project owner refuses to grant an extension and insists on compliance with the completion deadline. The contractor incurs increased costs adding resources to the job in an attempt to meet that deadline.

Contractor recovery of acceleration costs begins with entitlement to an extension of time. The terms of the contract will be determinative. This was reflected in a recent New York case.

The contract said the contractor assumed the risk of any regulatory or governmental delay. Regulatory delay occurred. The project owner refused to grant an extension of time and insisted the contractor comply with the CPM schedule. The contractor increased its efforts. This was not a compensable acceleration of the work because the contractor had not been entitled to an extension of time. There can be no recovery of “costs incurred in an attempt to bring the job in on time.”

Are there situations where a contractor should recover the increased performance costs it incurs when attempting to meet the needs of the project owner? Or, if the contractual completion deadline is legally enforceable, should all increased costs be the contractor’s responsibility? Should the rule be ironclad? I welcome your comments.

COMMENTS

The contractor should never have accepted a "general" risk of regulatory or governmental delay in its contract. If anything, the contractor should have limited its liability to delays caused by its own actions or those its subcontractors. For the contractor to accept responsibility for the actions or the government or of regulatory agencies, over which it has no control, is a mistake. In case where the government or regulatory agencies cause construction delay, it should be written into the contract that any increased costs for maintaining the schedule are compensable.
Posted by: Fred Wellers - Friday, June 28, 2013 11:12 AM

It doesn't say so in your fact pattern, but I infer that this was a private sector job. Public contract law in most jurisdictions bars no-damages-for-delay clauses.

I would differ somewhat from Mr. Wellers' remarks. While the assumption of regulatory risk may be inadvisable for many contractors, one could envision a large, sophisticated contractor, with good knowledge of the regulatory picture, making a calculated risk and taking the job. They are perfectly at liberty to incorporate that risk into their bid or negotiated price as they see fit. If no regulatory obstacles arise, they've won their bet; if not, they've lost. In other words: the free enterprise system at work.

All that said: once it's made its bet, what the contractor cannot do is come back and claim constructive acceleration due to regulatory delay. That would amount to sharing the risk but not the potential reward.
Posted by: Bill Broz - Friday, June 28, 2013 12:08 PM

Different contractors have different niches in the marketplace. If you're the type to get a job, then figure out how to make money on it, you may have to work harder to get jobs after your reputation gets around. If you fully back up your word, including what you believe is the customer's intent and not just what you can 'get away with', you are likely to be taken advantage of. No clear winners there.

I know most of my local jurisdictions well enough to add some risk $, not much, that helps secure my position locally. Sometimes there's a new King in town, usually not, but it's easier for me to develop two new relationships in my neck of the woods each year with newly hired professionals who speak my 'language' than develop dozens of relationships with customers I may or may not hear from again, who do not speak 'electrical'. I don't like the feeling of asking a customer to open their checkbook every time we have a conversation, but I DO start asking for change orders as soon as I feel they need to commit to something and stop changing things. I use money to get people to attach value to my time if they don't already value their time.

I think most of my customers like that my services are usually offered until my work is fully approved and accepted (except changes after I have been directed to proceed with design to date are compensable because the time to make changes is BEFORE going farther, not after).

I don't accept risks where I don't have a decent idea of what those risks are, unless I throw a very big number at it. In that case, I let the general know, in case they want to assume or share the risk to help secure the bid.

It's hard to ask a beautician over 50 to assume full risk of delays be people she has never heard of when I know these people and can offer assurance for a known price that I am certain I can make money from in the long run.
Posted by: Tony Keller - Tuesday, July 2, 2013 7:18 PM