Building faster but paying more? The reality of acceleration

This is the final article in our construction claims mini-series, where we have travelled ‘end-to-end’ in a typical construction claim with articles focused on entitlement, delay analysis, and quantifying claims.

In last week’s article, we provided some guidance and top tips on quantifying prolongation costs, and in this second article, we will explore acceleration costs.

What is acceleration?

In simple terms, acceleration is an increase in the rate of production, either through increased resources, extended working hours, or both, to achieve an earlier completion date.

A couple of industry definitions for you:

1. RICS: Acceleration generally refers to increasing the originally planned or current rate of progress of the work to complete the project (or, where the contract allows for the project to be completed in sections, a section of the project) earlier than would otherwise be the case.
2. Society of Construction Law: Acceleration is a subset of mitigation and typically refers to the situation where additional costs are incurred to seek to overcome all or part of delay or disruption

Whilst the theory is simple, it should always be remembered that increased production doesn’t always follow the theory. Just because resources are increased, it does not necessarily follow that production will increase. This depends on having dependencies cleared at the same rate.

In a simple example of fixing doors, you can increase resources all you want, but if the number of doors supplied doesn’t increase at the same rate, then it is likely your acceleration efforts will fail!

The types of acceleration

There are said to be 3 types of acceleration:

1. Voluntary acceleration occurs when a contractor acknowledges that it is responsible for critical path delay and accelerates at its own cost to avoid delay damages.
2. Direct acceleration occurs when an employer acknowledges that it is responsible for critical path delay and pays the contractor to recover those delays.
3. Constructive acceleration occurs when a contractor considers it has entitlement to an extension of reason, but the employer has not granted some or all of the extension of time. The contractor faces a choice because, without an extension of time, it is liable for delay damages, so it might mitigate this exposure by accelerating. This is funded by the contractor until its extension of time entitlement is granted.

It is constructive acceleration that is probably the most common and definitely the most controversial. It is not always easy to demonstrate extension of time entitlements, and they are often not quick to prepare or to assess, so there are inevitably situations where that process takes time.

It makes sense, where acceleration is more cost-effective than delay damages, to mitigate your exposure. However, in an already strained claim situation, they add the complication of acceleration into the process and take the cash burden of funding those measures in circumstances where you consider it is being done for the employer’s benefit.

Valuing acceleration

In broad terms, there are two ways you can accelerate: increase resources or extend working hours.

If you increase resources, then, in theory, there may be no extra payment because the resource rate is the same and you are being paid this through the contract sum. However, if the resource rate is different (e.g. you are paying a premium due to short notice recruitment), the production rate is affected because more resources mean slightly slower production, or you need additional supervision or staff to manage the resources, then, if evidenced, these costs would be recoverable.

If you extend working hours, then you will probably need to pay non-productive overtime rates as well as additional management costs to cover the extra shifts. The Construction Industry Joint Council’s Working Rule Agreement provides rules for paying overtime that are generally accepted; however, some trades, such as electricians, have trade-specific rules (JIB Handbook) so that is something to consider when valuing acceleration costs.

In valuing the costs though, it is not usually enough to simply substantiate the costs you have incurred. You will need to show that the acceleration measures made an impact. What did you plan to progress, and what did you actually progress? Which work activities were performed, and how do they improve the crucial path? Was the critical path improved, and by how many days?

The only way to answer these questions is through effective record keeping and progress measurement. If you do not have either, then you will

Final reflections

Carefully planned and executed acceleration can be an effective tactic to cost-effectively reduce critical path delay.

However, the challenges with agreeing to an extension of time entitlements often leave contractors in a position where they accelerate their programme to mitigate delay damages. When this happens, an already complicated claim situation can become even more complicated.

In your valuation of acceleration, you must do more than show the costs incurred. You need to demonstrate that progress was improved, and, to achieve this, you need records and solid programme analysis.

This brings an end to our construction claims mini-series, and next week we will be joined by Mark Stubbs of Browne Jacobson, who will share some practical guidance and top tips on some key construction law topics.

Look out for that, and in the meantime, enjoy the rest of your week.

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