Recoverability of Acceleration Costs

Where a contractor has received express instructions to accelerate the works there can be little doubt about the contractual consequences of such an instruction.

Contractors may however have found themselves in a position where construction has been delayed several times due to variation orders or other circumstances for which valid claims for extensions time may be claimed only to find that requests for extension are refused or ignored.

In such a situation the contractor will be caught on the horns of a dilemma. Should he declare a dispute and run the risk of facing penalties for late completion or accelerate the works and make up the delay?

Clause 29.7 of the JBCC Principal Building Agreement provides that the Principal Agent must decide upon claims by the contractor for a revision of the date for practical completion within 15 working days of receipt of such claims. In terms of clause 29.8 where a Principal Agent fails to convey his decision then the claim is deemed to be refused.
The reasoning behind deeming provision of clause 29.8 is to enable the dispute resolution machinery of the agreement to “kick in” rather than allow the matter to be left in limbo for an indefinite period of time.

Assuming that the claims for delays were valid, a refusal by the principal agent to agree to the claims effectively shortens the contract period. This is known as constructive acceleration. The contractor would then be obliged to take steps to achieve the original completion date. This will naturally involve increased cost related to longer working hours, overtime, additional staff and equipment and generally a host of additional resources to achieve completion within time – all at substantial additional cost.

Best Practice

In circumstances such as those outlined above the contractor is best advised to attempt to resolve the extension of time claims. Where this is not possible the contractor should notify the principal agent as soon as possible (preferably before commencing acceleration) and not later than the 40 working day period referred to in clause 32.6. The notice should set out the basis for claiming acceleration, the action it is going to take and the cost implications of such action. It goes without saying that the contractor must keep accurate records in order to prove the additional costs incurred.

A construction programme can be used to establish the extra resources needed for the accelerated works and if possible agreement should be reached and care should be taken to maintain co-ordination with subcontractors who must remain involved with the re-programming of the works. The design team should also be kept informed of developments as they too will be called upon to provide information at shorter periods of notice.

From the principal agent's point of view he should immediately communicate the situation to the employer who might well decide to give instructions for the reversal of the principal agent's decision to disallow the claims for extensions of time or to reconsider the matter. As always care should be taken to confirm in writing all oral communication to avoid arguments later on.

Bruce Lyle | Membership Services Manager