September 07, 2017

Fast and (Sometimes) Furious: Acceleration and Compensability in Construction Contracts

In construction projects, acceleration broadly refers to the “speeding up of the pace of the work resulting in a compression of contract time available for completion of remaining work.”1 Acceleration is disruptive, requiring a contractor to increase its labor and equipment hours — through overtime, adding shifts, or augmenting labor crews and equipment spreads — in order to do more in less time. Especially amid labor shortages like we’re seeing in many markets across the U.S. in 2017, acceleration is a burden on contractors that adds significant costs to complete a project.

But while acceleration makes contractors go “fast” in completing their work, whether it also leads them to feel “furious” likely depends on a single factor: is the contractor getting compensated for the acceleration? There are three types of “acceleration,” which usually dictate whether a contractor is getting compensated for the additional costs related to the disruption. The three types of “acceleration,” discussed further below, are:

  1. Directed Acceleration
  2. Constructive Acceleration
  3. Voluntary Acceleration

Directed Acceleration

Directed acceleration refers to compression of the work schedule resulting from the exercise of a contract right under a “changes” clause or “change order” provision, which allows a party to order completion earlier than the contract date. Because this type of acceleration adds obligations through the change order process, it is almost uniformly compensable. Owners typically use directed acceleration to "buy back" an excusable or compensable extension of time so that the contract will be completed by its original completion date. This practice may be particularly useful on a project with several prime contractors who may be affected by delays by one of these contractors, because these delays could pose a risk of liability to the owner for possible breach of its implied duties of cooperation and non-hindrance.

Constructive Acceleration

Like directed acceleration, constructive acceleration also arises due to the existence of excusable or compensable delays. Constructive acceleration, however, refers to an owner’s failure to recognize these delays and adjust the contract time, while demanding completion of the work by the unextended contract completion date. Because this acceleration is based on excusable or compensable delays, it is also usually compensable. Due to the significant costs borne by the contractor and potentially added to the project costs for the owner, constructive acceleration claims frequently result in legal disputes, especially where there are significant factual issues as to whether the delays are excusable. To preserve its right to recover for "constructive" acceleration in a legal dispute, a contractor must prove certain elements that show it properly asserted a right to an extension of contract time, was denied, and accelerated its works on the project.2

Voluntary Acceleration

Voluntary acceleration is a catch-all category that generally refers to schedule compression resulting from a contractor’s acceleration of its work to recover schedule or to complete its work early, where there has been no “directed” or “constructive” acceleration. Because this type of acceleration arises due to either non-compensable delays or the business interests of the contractor, this type of acceleration is non-compensable. A contractor has significant incentives to voluntarily accelerate, usually in the form of savings of fixed overhead and equipment costs, but also in bonuses for early completion. More frequently, however, voluntary acceleration arises from the construction contract’s "schedule maintenance" clauses, which require contractors to accelerate to recover their schedules when they’ve fallen behind for non-compensable delays.

1 5 Bruner & O'Connor On Construction Law § 15:89.
2 For a full listing of these factors and an explanation of each, see 5 Bruner & O'Connor On Construction Law § 15:94–15:100.

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