Acceleration occurs when the contractor is compelled by the owner to complete the project ahead of schedule. But, it comes at a price to the owner. Changes in contract time, whether delay or acceleration, increase the contractor's cost and often become the subject of a claim.
Constructive acceleration occurs in the absence of an owner directed acceleration, such as where the owner has refused a valid request for time extensions or threatened other action which requires the contractor to accelerate its work to avoid liquidated damages, or other loss or risk of loss. The classic case is when a request for a time extension for excusable delay is denied and the contract provides liquidated damages for late completion. The law construes this as an order by the owner to complete performance within the originally specified completion date, a shorter period at higher cost than provided for in the contract. The constructive acceleration doctrine allows recovery for the additional expenses the contractor can establish.
Case law has identified five elements normally required to establish a claim for constructive acceleration. Those elements are as follows:
2. Timely notice of the delay and a proper request for a time extension must have been given;
3. The time extension must have been postponed or refused;
4. The owner must have ordered (either by coercion, direction or some other manner) the project completed within its original performance period; and
5. The contractor must actually accelerate its performance, thereby incurring excess costs.
Excusable delay means that the contractor is entitled to an extension of time under the contract. It is important for the contractor to be able to demonstrate the reasonableness of the schedule and its status at the time of the acceleration order. One way to show that the excusable delay affected the project completion date is for the contractor to add the period of excusable delay to its current planned schedule updated at the time of the delay and calculate a new completion date. The updated schedule should include all delays whether they are the responsibility of the contractor, owner, or neither (such as weather). If the new calculations indicate that additional time is necessary to complete the project, the claimant will have demonstrated its entitlement to a time extension due to excusable delay.
The contractor must give the appropriate notice of the delay and request an extension of time in order to recover any additional costs of acceleration. It is important, especially when the contractor believes acceleration is occurring without a specific order to accelerate, that the contractor advise the owner that any efforts undertaken by the contractor to accelerate its performance are not being taken voluntarily, and further, that the contractor will demand and expect the owner to pay the additional costs incurred. This notice to the owner of "forced" acceleration will assist the contractor greatly in recovering damages. This notice is not absolutely necessary if (a) the acceleration has been expressly directed; (b) the owner has indicated no time extensions will be permitted; or, (c) the owner has waived the need for notice. Moreover, if the owner has specific knowledge of excusable delays and unequivocally orders the contractor to complete on the contract completion date without regard to excusable delays, the notice requirement is satisfied. Additionally, it is important that the contractor give detailed information on the delay to the owner, so that the owner can determine the reasonableness of the time extension.
It is imperative that the contractor carefully and fully document all delays and other factors which will aid in proving its entitlement to damages. Courts and boards are willing to find for the contractor on constructive acceleration claims, but if not carefully documented, the damages may not be recovered. In M.S.I. Corporation, the contractor appealed a decision of the owner denying its claim for an equitable adjustment for an alleged acceleration of the contract work ordered by the government. The Board held that the contractor was entitled to an equitable price adjustment because it was directed by the government to accelerate the work. The government had insisted on completion of the contract by its original completion date without regard to excusable delays which required the contractor to accelerate a substantial part of the work and consequently, substantially increased the contractor's costs. However, the contractor was not able to prove with certainty the amount of its damages, so the case was remanded to the contracting officer on the issue of damages.
The refusal to grant a time extension can be expressed either by a clear rejection of a time extension or by the postponement of a decision concerning the request. The owner owes a duty to the contractor to timely respond and grant or deny the request. By failing to respond to the request, or even putting off the decision until the completion of the contract, the owner puts the contractor in a precarious position. If the contractor acts as if the time extension will be granted and continues at a pace that will complete the work after the completion date, and the time extension is not granted, liquidated damages may be incurred. If the contractor acts as if the time extension will not be granted and accelerates in order to complete the work at the completion date, the contractor incurs additional expenses that might not be recovered. The contractor's updated schedule showing the contractor's reasonable expectations at the time of the request become especially important to support the decision to accelerate. Damages are recoverable even if acceleration is to avoid risk of liquidated damages. The owner eventually pays the cost created by postponing its decision on time extensions.
The case of Constructors-Pamco is a good example of a situation where constructive acceleration had occurred. The Board found that the government had made it abundantly clear that work had to be completed without any extensions of time by: (1) the use of language in the contract to the effect that the contract date would be strictly enforced; (2) the use of language in the contract to the effect that liquidated damages would be imposed on late-completed work; (3) the refusal to grant a time extension for a blizzard which was an obviously excusable delay; (4) the refusal to respond to the contractor's request for instructions on how to proceed after it had complained about delays and extra costs; and (5) the daily communications with contractor personnel that no time extensions would be permitted. The Board found that the contractor was required to accelerate performance of the work and to work under adverse conditions by direction of the government. A constructive change occurred entitling the contractor to an equitable contract price adjustment.
Louisiana recognizes the doctrine of constructive acceleration. In Nat Harrison Associates, Inc. v. Gulf States Utilities Co. , the contractor's action for damages resulting from acceleration and for a breach of a transmission line construction contract was upheld.
Russel W. Wray is a partner with Wray & Kracht, L.L.P., practicing in the field of construction law and civil litigation. Mr. Wray may be reached at Wray & Kracht, L.L.P., 5643 Corporate Boulevard, Post Office Box 80239, Baton Rouge, Louisiana 70898, (225) 928-3200 for any comments or questions you may have.