Acceleration on construction and engineering projects

Resource type: Practice note Status: Maintained Jurisdictions: England, Wales

A note on accelerating the progress of works on a construction or engineering project, so that the works are completed before the date otherwise required under a building or engineering contract. PLC Construction

Contents
What is acceleration? The completion date can change over time Delay and liquidated damages Express and implied acceleration Obligation to proceed with due diligence Express acceleration The contractor's perspective The employer's perspective Implied acceleration No authority for implied acceleration under English law Other claims may be available Documenting an express acceleration

What is acceleration?
On a construction or engineering project, acceleration refers to speeding up works so that they will complete earlier than anticipated or required. Often, the works to be performed will be pure construction work, to an already completed design, but acceleration could also apply to a professional consultant or a design and build contractor who accelerates the carrying out and completion of design services.

The completion date can change over time

One complication to overcome when considering acceleration is the difference between what the Joint Contracts Tribunal (JCT) Standard Building Contract, 2005 edition, Revision 2 2009 (JCT SBC05) and JCT Standard Building Contract, 2011 edition (JCT SBC11) define as the "date for completion" and the "completion date":

Date for completion. This is the date the parties agree for completion of the works when they start the works and sign the building contract.

Completion date. This is the date that the works must be finished by, as the works progress.

While the date for completion is fixed, the contractor's continuing obligation is to complete the works by the completion date, which can change by agreement or following an award of an extension of time (see Practice note, Time for completion and extension of time (www.practicallaw.com/6-385-2414)). Note that different standard form of construction or engineering contract use different terms to the JCT. For example, the FIDIC Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer, 1999 Edition (FIDIC Red Book) uses the term "time for completion", which may be adjusted by an extension of time for completion. Acceleration usually refers to completing the works before the completion date, although it could also refer to completing the works earlier than the original date for completion. For example, if the date for completion was 1 June, but the contractor had been awarded an extension of time so that the completion date had changed from 1 June to 15 June, the contractor might agree to accelerate the works to complete on the original date for completion (1 June), despite its entitlement to an extension of time. In this example, the contractor would expect to be paid for its additional costs to complete the works ahead of the revised, later completion date (15 June).

Delay and liquidated damages

If a contractor does not complete the works by the completion date, the contract may require it to pay the employer liquidated damages for the period of delay (see Practice note, Liquidated damages in construction contracts (www.practicallaw.com/9-383-6757)). As such, a contractor usually has an incentive to speed up its works if it is falling behind (and it is not entitled to an extension of time). However, the activities of a contractor trying to recover from a delay that it is responsible for is not usually categorised as acceleration, because the contractor is trying to complete its works by the completion date.

Express and implied acceleration

If an employer asks (or instructs) the contractor to complete the works before the date the contractor is required to complete them under the contract, the parties are dealing with express acceleration (also known as directed acceleration): see Express acceleration. However, if a contractor has been delayed and it is entitled to an extension of time, but the employer (or the architect, contract administrator or engineer) has not awarded an extension of

time, the contractor may feel that it has no choice but to accelerate its works, despite its contractual entitlement to more time, to avoid paying liquidated damages (or at least to avoid a costly dispute about liquidated damages). In these circumstances, the contractor's effort may be categorised as acceleration, because the contractor is aiming to complete the works before the date that it should, by rights, have to complete the works under the contract. Here, the parties may be dealing with implied acceleration (also known as constructive acceleration) (see Implied acceleration). Note that this description does not have a firm foundation in English law (see No authority for implied acceleration under English law).

Obligation to proceed with due diligence

Many standard form contracts require the contractor to carry out its works diligently (for example, clause 2.4 of the JCT SBC05 and JCT SBC11). If the architect, contract administrator or engineer finds that the contractor is failing to carry out the works diligently, some contracts go on to allow the architect, contract administrator or engineer to instruct the contractor to make up for lost time (see, for example, clause 46(1) of the ICE Conditions of Contract, seventh edition and clause 46(1) of the Infrastructure Conditions of Contract (ICC) Measurement Version, August 2011). Clause 8.6 of the FIDIC Red Book requires the contractor to pay the employer's additional costs (if any) caused by the contractor having to catch up in this way. While some practitioners may refer to this generically as "acceleration", this is not acceleration in the sense addressed in this note. The contractor's obligation to complete its works by the date provided for in the contract is not affected by these clauses. Top

Express acceleration
In practice, the most common form of express acceleration is where a project has been delayed as a result of an event that the employer takes the risk of, but the employer still wishes to complete the project by the original date for completion. It is best practice to formally document any express acceleration.

The contractor's perspective

Additional payment The contractor (or a sub-contractor) will expect to be paid for the additional costs it incurs as a result of acceleration. Commonly, a contractor may be asked to provide a lump sum price for

acceleration (see, for example, paragraph 2 of Schedule 2 of the JCT SBC05 and JCT SBC11, clauses 13.1 and 13.3 of the FIDIC Red Book, clause 36.1 of the NEC3 Engineering and Construction Contract (NEC3 ECC), clause 46(3) of the ICE Conditions of Contract, seventh edition or clause 46(1) of the ICC Measurement Version, August 2011). However, it may be in the contractor's interests to request that it is paid its acceleration costs on a reimbursable basis. This will depend on the form of contract in use and the commercial circumstances of the acceleration. From the contractor's perspective, additional costs such as overtime, the costs of unproductive work as a result of rescheduling, possible wasted materials, supervision, site management and plant hire may be difficult to predict. Whether the parties agree a lump sum or reimbursable payments, the parties should agree when the contractor will be paid. The acceleration may require an additional cash-flow injection, and the employer could agree to reduced payment periods, to an advanced payment, or to weekly or fortnightly payments (in place of the more common monthly payment cycle). Delays to date If the contractor is due a formal extension of time but it has not yet been granted, the contractor may want to formalise the position before it agrees to accelerate. If the employer and the contractor are in dispute about earlier delays, but are still trying to get the project completed "on time", they may need to settle their competing claims about who (contractor or employer) is responsible for an earlier delay in the acceleration agreement. Otherwise, from the contractor's perspective, the employer may agree to make additional payments and then claw back some or all of those payments (through liquidated damages) by arguing that the contractor was not entitled to an extension of time. If the parties cannot agree what the completion date is, then neither of them will have the certainty to agree the basis on which they will accelerate completion of the works. Future delays The contractor will want to ensure that if events occur after the parties have agreed to accelerate, which would usually allow the contractor an extension of time, it will still be entitled to that extension. In other words, the agreement to accelerate re-fixes the completion date to an earlier date, but does not affect the underlying entitlement to an extension of time for a future event. Bonus for accelerated completion

In practice, if the employer wants the contractor to deliver the project "on time", even if the contractor is entitled to a further extension of time, then the contractor could ask the employer to pay it a bonus for completion by the accelerated completion date. If the contractor was granted an extension of time, the parties could agree that the contractor would only be paid the bonus if it still met the employer's required date, but it would not have to pay liquidated damages unless it did not complete the works by the new completion date, taking into account that extension of time. However, if the parties agree a bonus mechanism, they should consider providing that an act of prevention or default by the employer that leads to an extension of time should also extend the date by which the contractor must complete to earn its bonus (see Bywaters v Curnwick (1906) HBC (4th ed) Vol 2, at page 393 and John Barker Construction Ltd v London Portman Hotels Ltd (1996) 83 BLR 31). Otherwise, an employer's act of prevention could, on the face of it, stop the contractor earning its bonus, which could lead to a dispute. For more information on acts of prevention, see Practice note, Time for completion and extension of time: What is time at large? (www.practicallaw.com/6-385-2414). For an example of a bonus for early completion clause, see the NEC3 ECC's Option X6: bonus for early completion. Sub-contractors and suppliers Before formally agreeing to accelerate the works, the contractor will need to check that its suppliers and sub-contractors can also meet the revised programme. Programming and cost management In practice, the contractor will need to update its site programme to allow for accelerated completion. Some forms of contract require the contractor and the employer to agree revised programmes. For example, under the NEC3 ECC, the accepted programme (updated from time to time) has contractual effect and sets the baseline against which future compensation events are measured (clauses 30-32 and 60.1(2), (3), (5) and (19), NEC3 ECC) (see Practice note, NEC3: working under an NEC contract: Programming and cost forecasting (www.practicallaw.com/2-3836001)). On an NEC3 ECC project, the project manager and the contractor should agree the new form of accepted programme as part of the acceleration process. Alongside programming requirements, some contracts (such as the NEC3 ECC Option C) also require the contractor to keep a cost forecast up to date as the project progresses.

The employer's perspective

Additional payment

It would be extremely unusual for the employer to argue that the contractor was not entitled to additional payment where the employer had expressly instructed or asked the contractor to accelerate the works. Any argument that the contractor was not entitled to sums as a result of an acceleration would be more likely to occur in circumstances of implied acceleration (see Implied acceleration). However, while many standard form contracts provide for the agreement of a lump sum payment if the employer and the contractor agree that the contractor will accelerate the works, this may not always be in the employer's best interests. While a lump sum price is likely to give the employer certainty, if it has a good working relationship with the contractor, it may be better off agreeing to pay specified actual acceleration costs on a reimbursable, open-book basis (perhaps with an agreed allowance for profit). This is because, in quickly providing a quotation to accelerate the works, a contractor will need to include a contingency. For example, in this context, the ICE Conditions of Contract seventh edition and the ICC Measurement Version, August 2011, refer to the employer and the contractor agreeing to "any special terms and conditions of payment" before the accelerated working begins (clause 46(3)). In practice, the challenge for the employer may be to get any formal quotation or agreement in place at all, in the time available. If the employer and its advisers need to quickly recover from a delay, they may not have time to negotiate a detailed agreement. As such, if the employer can agree a lump sum payment, that may also have the advantage of avoiding a later dispute about the appropriate contractual or quantum meruit payment due to the contractor. For an example of a dispute under the ICE Conditions of Contract fifth edition, see Amec & Alfred McAlpine (Joint Venture) v Cheshire County Council (1999) BLR 303. For more information on quantum meruit claims in general, see Practice note, Claims arising under a construction contract: Claims for payment under a quantum meruit (www.practicallaw.com/1-381-0129). This means that, for example, under the FIDIC Red Book, the employer may be better to ask the engineer to request the contractor to provide a proposal under clause 13.3, rather than having to pay the contractor the sum due under clause 8.6. Under the JCT SBC05 and JCT SBC11, the employer may find it spends its limited negotiating time agreeing what the lump sum quote should be under paragraph 2 of Schedule 2. Delays to date If the employer has a good commercial reason to agree that the contractor should accelerate the works, that may also suggest that the employer will be willing to settle any dispute with the contractor about whether the contractor is entitled to an extension of time. Such commercial reasons could include meeting a tenant's deadline under an agreement for lease on a commercial

property development, or hitting a target date in an off-take agreement related to a new energy project. To reach a commercial agreement to accelerate, the parties will usually need certainty about any past delays and about the current contractual completion date. Future delays and bonus for accelerated completion The contractor is unlikely to accept an absolute obligation to complete a project by a given date. Although some acceleration agreements seek to avoid the possibility of the contractor being able to claim a further extension of time, the most likely position is that most or all of the rights available to the contractor to claim an extension of time will survive any agreement to accelerate. As such, agreeing to incentivise the contractor to either not claim an extension of time or, even if it claims one, to still complete the project "on time", may also help the employer to achieve its commercial objective. For this reason, the employer may agree to pay a bonus if the contractor completes the works by a specified date. However, the employer should take account of the prevention principle if it agrees to provide a bonus (see The contractor's perspective: Bonus for accelerated completion). Professional team As well as the contractor, the employer should check that its professional team (or, if using design and build procurement, its employer's agent, contract administrator or engineer) can also meet the revised programme for completion of the works. The professional team may have a critical role to play in commercial negotiations about any acceleration. For example, the quantity surveyor may need to advise the employer on the reasonableness of any proposal (under a FIDIC Red Book) or quotation (under a JCT SBC05 or JCT SBC11) to accelerate. Under an NEC3 ECC, the project manager may need to challenge and agree an accepted programme and any revised cost estimate. Top

Implied acceleration
The nature of implied acceleration means that it will not be formally documented or agreed to. The contractor (or a sub-contractor) will argue that it accelerated its works in circumstances where it was not required to do so under its building contract or sub-contract.

No authority for implied acceleration under English law

Although practitioners and contractors in England and Wales (and lawyers and courts in other jurisdictions such as Australia, Canada and the US) may refer to implied acceleration:

"This plea has never succeeded in the English courts." (Richard Wilmott-Smith QC, Construction Contracts - Law and Practice, (Oxford University Press, 1st edition, 2005, paragraph 11.36).) Wilmott-Smith QC argues that there is no need for the law of England and Wales to develop a doctrine of implied acceleration because swift access to adjudication usually prevents an employer (or main contractor) from prevaricating about the contractor's entitlement to an extension of time. He argues that if the contractor is entitled to an extension of time that is not granted, it may adjudicate to determine its entitlement. Note that adjudication may not be available on some projects, such as process engineering or energy projects (see Practice note, Adjudication: do I have a "construction contract"? (www.practicallaw.com/6-204-4037)). In Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (2000) (1999) 66 Con LR 119, HHJ Hicks QC had to consider a claim from a sub-contractor for an extension of time and loss and expense, while the main contractor claimed damages on the basis that it had been required to pay liquidated damages to the employer as a result of the sub-contractor's delay. The subcontractor claimed for constructive acceleration, arguing that the main contractor had required it to try to meet a programmed completion date, despite its entitlement to an extension of time. (The constructive acceleration claim was pleaded as the sub-contractor mitigating the consequences of the main contractor's failure to grant it an extension.) The court held that the sub-contractor could not claim: "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 expense incurred by way of mitigation, unless it is alleged and established that the attempt at mitigation, although reasonable, was wholly ineffective" (at paragraph 56). In other words, the parties' contract provided for the sub-contractor to be able to claim additional time and additional money. It should not also be able to claim damages on the basis of constructive acceleration. This would effectively be having two bites at the cherry; a double recovery. The exception (although clearly a difficult one to prove) would be if the sub-contractor had reasonably tried to mitigate its losses caused by the other party's breach, incurred expense in doing so, but that the mitigation had failed to actually mitigate the losses.

Other claims may be available

If the contractor has incurred additional costs because of implied acceleration, it may have other claims available. The contractor:

May need to enforce its contractual right to an extension of time to ensure that the employer cannot levy liquidated damages against it (see Practice note, Time for completion and extension of time (www.practicallaw.com/6-385-2414)).

May be able to recover loss and expense. (This is a term used in the JCT SBC05 and JCT SBC11, but it is used here to signify a broad range of possible financial claims by a contractor against the employer under many different standard form or bespoke construction and engineering contracts.)

If the contractor can demonstrate that it has suffered a loss, caused by breach of contract (in that it was not awarded an extension of time it was entitled to), it may not need to refer to acceleration at all. For example, clause 4.24.6 of the JCT SBC05 (clause 4.24.5 of the JCT SBC11) refers to direct loss and expense caused by: "any impediment, prevention or default, whether by act or omission by the Employer, the Architect/Contract Administrator... except to the extent caused or contributed to by any default, whether by act or omission, of the Contractor..." On the face of it, a claim for loss and expense as a result of a failure to grant an extension of time would be consistent with Ascon v Alfred McAlpine. Similarly, in Motherwell Bridge Construction Ltd (trading as Motherwell Bridge Storage Tanks) v Micafil Vakuumtechnik and another [2002] All ER (D) 159, the main contractor under a modified FIDIC contract did not want to grant an extension of time because of the critical nature of the completion date for the project. The sub-contractor was contractually entitled to an extension of time, but undertook additional shifts and other measures to complete the works in the time required by the main contractor. The court allowed some of the sub-contractor's claims against the main contractor in connection with those additional measures taken, but the sub-contractor did not need to plead its case on the basis of constructive acceleration. However, note that some commentators suggest that this judgment should be treated with caution, because the precise ratio is difficult to identify from the reported judgment. For more information on loss and expense, see Practice note, Loss and expense claims in a construction contract (www.practicallaw.com/7-384-9652). Top

Documenting an express acceleration

If time allows, the parties may wish to enter into a specific stand-alone acceleration agreement. Following the sometimes-criticised decision in Williams v Roffey Bros and Nicholls (Contractors) Ltd [1991] 1 QB 1, many practitioners regard it as best practice to always avoid any argument about whether there is mutual consideration for an acceleration agreement by entering into the

agreement as a deed (see also Practice note, Contracts: variation: Consideration (www.practicallaw.com/7-380-8331)). At the very least, if the parties' contract does not include a mechanism for acceleration, they should agree any acceleration instruction by letter or e-mail (noting any practical requirements in their contract about service of notices or the method of formally varying their contract). Under a standard form contract that does refer to acceleration, such as the NEC3 ECC, the ICE Conditions of Contract, seventh edition, the ICC Measurement Version, August 2011, the FIDIC Red Book or the JCT SBC05 or JCT SBC11, the parties should use formal quotations or instructions, as set out in their contract.

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