Delay and Disruption - Acceleration

THE PROBLEM OF DECIDING WHEN TO ACCELERATE

"Acceleration" is not a legal term. Its natural and common meaning is to "bring about in an earlier point in time" (Webster Dictionary), which is a comparative measure. There must be some benchmark against which to measure the acceleration. In construction, the main issue is the date against which progress is measured.

Acceleration may be achieved by a change in the deployment of resources. In some cases it may be achieved by simply changing the order or sequence for carrying out the work and may therefore not cause additional cost. More usual, acceleration is achieved by adopting longer working hours or additional days of working with the same resources. In many cases acceleration involves employing resources additional to those originally planned either for the same hours or days of working, or in additional shifts or days of working.

EFFECT OF ACCELERATION

When tendering and planning for the efficient completion of the works, Contractors can optimize resources and progress. The interface between different resources can be properly managed so that a pattern develops which the workforce can follow with reduced planning, so increasing productivity.

Most standard form of contract allow the contractor to complete the works before the completion date. It is not unusual for a contractor to decide once work commences to adopt a different approach than assumed at tender. He may see advantages in completing early due to factors which only come to light once more detailed planning is undertaken. In other words the Contractor may decide to accelerate because he perceives a commercial advantage. This may create problems for the Employer in supplying the relevant information or completing other works.

In Glenlion Construction Ltd - v - Guinness Trust (1987) 39 BLR 89 It was held that whilst Glenlion was entitled to complete before the contractual completion date, Guiness was not required to actively co-operate to enable the earlier date to be achieved but was only required not to hinder completion.

It is suggested that the situation will, however, be different if the programme is incorporated in the contract as a contract document or if the entitlement under the contract is bound up with the programme. If the Employer does not wish to take possession of the works early, then this needs to be dealt with by amendment of the contract terms so that the contractor can price accordingly.

If acceleration is adopted as a reaction to events which have caused delay, rather than a planned strategy for optimization of resources, then this will normally result in additional costs. The late or unplanned timing of acceleration measures will normally mean that the resources deployed are different to the resources planned, due to lack of availability. The available additional equipment may operate at less than full capacity, being overcapacity for the work intended but with the additional hire costs involved. The need to use material more quickly than planned may result in reduced number of uses such as formwork, which will increase unit costs. The change in the sequence of working may result in an increased number of moves and/or distances for plant, such as craneage in piling. Additional resources and out of sequence working will place additional burden on the management to order materials and consumables, and increase the supervision required.

Acceleration will affect the pattern of work, and has an effect on efficiency, material delivery, equipment availability and therefore the cost of the work. In most situations acceleration will mean carrying out the work at a rate that is less than optimum in terms of cost. Acceleration in many situations will disrupt the works, affecting smooth trade interfaces and increasing interference between follow-on operations. In some cases it will mean unplanned access to working areas, reduced productivity and increase in defects as well as stoppages.

The additional payments for overtime or weekend working do not necessarily result in increased productivity. Indeed extended overtime and long hours will usually reduce efficiency. Additional shifts are not always productive. Evening or back shifts and night shifts are more likely to be less productive than dayshifts, and may create more defects and less safe working. The out of hours working may increase the cost of delivery of materials, together with the additional cost of larger stockpile areas. New suppliers may need to be found for the increase in consumption, which may involve increase in unit costs.

OBLIGATION TO ACCELERATE

The Employer’s remedy for the Contractor’s breach of contract in failing to complete by the Completion Date will be damages, whether general damages or liquidated damages. Many standard forms require the Contractor not only to complete by the Completion Date but also to proceed regularly and diligently. Many standard forms provide a power for acceleration to be ordered in the event of the contractor’s default in progressing with due diligence, without additional payment. Many standard forms also provide a power for ordering the Contractor to adopt acceleration measures if it is considered that progress is not in accordance with the programme, If due to the Contractor’s default. Such powers do not normally extend to agreeing to accelerate in the absence of the contractor’s default, which requires a separate agreement. If such an agreement is entered into it is important to ensure that the terms relating to liquidated damages still operate.

In John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83BLR35 Delays occurred and it was apparent to all concerned that John Barker was entitled to extensions of time. After negotiations it was agreed that the work would be accelerated so that all the work would be completed by 14th August 1994 and John Barker would receive additional payment.

After the acceleration agreement there were further delays and further instructions from the Architect. One of the issues which arose was the effect of the acceleration agreement on the sectional completion provisions of the contract in relation to liquidated damages.

It was common ground that at the time of the acceleration agreement no-one raised the question of abandoning the liquidated damages provisions. It was held that it was neither intended by the parties nor logically necessary that the liquidated damages would no longer apply.

In Ascon Contracting Limited -v- Alfred McAlpine Construction Isle of Man Limited (1999) there had been delays due to a number of causes. Ascon was the concrete subcontractor. Ascon claimed for loss caused by acceleration measures it had undertaken. His Honour Judge Hicks QC stated that acceleration had no precise technical meaning. Acceleration which was not required to meet a contractor’s existing obligations was likely to be the result of an instruction from the Employers for which he must pay. On the other hand pressure from the Employer to make good delay caused by the contractor’s own default was unlikely to be so construed. There was no instruction in this case. Ascon was under pressure from McAlpine to accelerate the works to recover the time lost, but was insisting that it was not going to pay for acceleration. Ascon’s claim on that basis did not therefore succeed.

Ascon claimed that it allocated additional resources, worked longer hours, worked seven days per week and purchased and supplied duplicate plant and equipment. Ascon claimed that these acceleration measures were taken in order to mitigate the delays caused.

It was held that there could not be both an extension to the full extent of the Employer’s culpable delay, with damages on that basis, and also damages in the form of expenses incurred by the way of mitigation, unless it was alleged and established that the attempt at mitigation, although reasonable, was wholly ineffective. Ascon had not put its case in that way. It contended that the work was indeed completed sooner than it would have been in the absence of the accelerative measures. The mitigation claim wholly failed at the outset and the acceleration claim also failed.

In Motherwell Bridge Construction Limited v Micafil Vakuumtecchnik (2002) TCC 81 CONLR44 the issue of acceleration was addressed in a long and complicated judgment by Judge Toulmin CMG QC.

Motherwell was a subcontractor to Micafil for the construction of an autoclave for the employer BICC under modified FIDIC forma of contract. The autoclave was a large steel vessel used in the manufacture of high quality power cables. There were a large number of claims by Motherwell.

One of two claims was for acceleration costs for the work in relation to on site fabrication for hours worked by Motherwell's staff in excess of 46 hours for the period from 8th October 1998 to March 1999. Micafil raised the defence that a term of the contract provided that if unexpected delays and difficulties occurred, Motherwell was required to provide additional personnel at no extra cost at the request of Micafil in order to meet the required completion date. It was held that the delays and difficulties came within the definition of "unexpected". There was no dispute that Micafil constantly urged Motherwell to increase its resources to meet the requested completion date. Accordingly Judge Seymour held that Motherwell could not succeed in recovering damages for this item.

ACCELERATION AGREEMENTS

Some standard Forms make provision for the parties to agree to accelerate the works. Even without such clauses, it is always possible for the parties to agree to vary the contract to their mutual benefit. If the acceleration is necessary solely due to the contractor’s default, it may be argued that the agreement to accelerate has no legal effect for lack of consideration, since the Employer will simply obtain that which he is already contractually required to receive.

In Lester Williams v Roffey Brothers & Nicholls (Contractors) Ltd (1989) 48BLR69 Roffey was the main contractor for the refurbishment of a block of flats known as Twynholm Mansions. Williams was a carpentry subcontractor providing labour for the roof and first and second fix to the flats with a total price of £20,000. The price was too low and a reasonable price should have been £23,783. This was further aggravated by Williams failing to supervise his men adequately, which reduced productivity. Williams therefore were experiencing financial difficulties.

In April 1989 Roffey agreed to pay Williams an additional £10,300 at the rate of £575 for each completed flat in order to have Williams continue with the works and complete on time. The carpentry work was on the critical pathe of Roffey’s global operations so that failure by Williams to complete the work in accordance with the Subcontract would lead to Roffey being liable for liquidated damages for delay under the main contract. The expected payments were not made by Roffey so that in May 1989 Williams ceased work. Roffey engaged other contractors to complete the work.

It was argued that the agreement to make additional payments was not legally binding on Roffey, since they had agreed to pay for work which Williams was already bound to carry out under the subcontract. There was no consideration.

There was some difficulty in finding consideration. It was held that in this case a benefit was derived from the agreement by each party and that was sufficient consideration for the promise to pay additional sums to be binding.

Although not referred to as such, it is suggested that the agreement was in the form of an acceleration agreement, the delay in this case having been caused by William’s own default.

There may be considerable difficulties in evaluating the additional costs of acceleration and differentiating those costs from the costs of carrying out the works at the normal pace. Good records are vital, but it may be appropriate to simply take a broad approach.

In Amec & Alfred McAlpine (Joint Venture) v Cheshire County Council (1999)BLR303 Cheshire appointed the Joint Venture as contractor for construction of the Wilmslow and Handforth Bypass at Manchester under the ICE 5th Edition. By the end of 1994 there had been various delays for which the Joint Venture was not responsible. An acceleration agreement was entered into for which the joint Venture was paid various sums for completing by 25th October 1995. Early in 1995 it became clear that there was likely to be another overrun and the Joint Venture was entitled to further extensions of time. An informal agreement was entered into inwhich the Joint Venture agreed to use its best endeavours to complete by 25th October 1995 and Cheshire would pay fair and reasonable recompense for the additional acceleration measures necessary. The date was achieved.

No specific method of valuation had been agreed and disputes arose as to the method of valuation, particularly because of delays for which Cheshire was not responsible and because of the difficulties of separating out the cost of work which the Joint Venture was already obliged to carry out under the original contract. A method of valuation was decided as a preliminary issue which was endorsed by the Court.

First the Joint Venture’s actual costs (X) were ascertained for the period of acceleration. The amount that the work carried out in the period of acceleration should have cost was evaluated (Y). The evaluation took into account all the events that had taken place before commencement of the acceleration period. The basic calculation of the acceleration costs was therefore X-Y. Further subtractions were made for factors and events for which the Joint Venture was liable (A). A further subtraction was the cost of variations ordered in the acceleration period (B) since these were included in X but not in Y. The prima facie entitlement was therefore X-Y-(A+B) plus a reasonable amount for overheads and profit. This approach was adopted because of the difficulties of causation by analysis of particular items of work and of how time had been saved.

One issue before the Court was the adjustment to be made for payments received by the Joint Venture from their insurers for events during the acceleration period. The essential question was whether insurance payments should be taken into account in deciding a fair and reasonable remuneration. It was held that to allow a deduction would give Cheshire the full benefit of the insurance cover whereas it was primarily for the benefit of the Joint Venture and only incidentally Cheshire. Further there would be no double recovery because the principles of indemnity which lie at the bais of insurance law would require the joint Venture to be accountable to the insurers for the proceeds of amounts received from Cheshire of the relevant amounts.

CLAIMS FOR ACCELERATION

If the contract does not make completion by a particular date or time an obligation under the contract then the contractor will not be able to make a claim for the cost of acceleration measures. The only obligation will be to complete within a reasonable time which will involve optimization of the resources for greatest efficiency and productivity. In most standard forms the contractor has an obligation to complete by a particular date or within a specified period. Even with such an obligation, the contractor will have some difficulty in pursuing the additional costs of acceleration where the contract entitles him to an extension of time for the delays which have occurred. In the case where the extension of time provisions are not properly operated, the contractor may consider a constructive acceleration claim, but this is not without its difficulties.

If the Contractor is ordered to accelerate in the mistaken belief that the delay is due to the Contractors default, whereas the delay was the responsibility of the Employer under the Contract, then the Contractor may be entitled to the acceleration costs.