When contractors make claims for delay, loss and expense, they sometimes include a claim for acceleration costs. There is quite a lot of muddled thinking about acceleration claims. As Judge Hicks said in Ascon Contracting Limited vs Alfred McAlpine Construction (66 CLR 119), the word “acceleration” tends to be bandied about as if it had a precise technical meaning. it does not, and acceleration claims form an unfortunately woolly and imprecise area of construction law.
Most building contracts require completion by a fixed date, and liquidated damages if it is not met. They also contain provisions enabling extensions of time to be granted and delay costs to be recovered. If extensions of time and delay costs are not granted by the supervising officer, there can be recourse through arbitration.
Sometimes, when a contract is delayed and the contractor believes that the fault lies with the employer, he may speed up work to complete by the completion date and avoid damages. He may then seek to claim the costs of this acceleration.
If a contract is delayed through no fault of the contractor, and the employer or supervisor expressly instructs the contractor to incur acceleration costs, there should be no difficulty in recovering such costs.
Usually things are not that simple. The contractor may not receive explicit instructions but may still feel under pressure to accelerate because no time extensions have been granted. Instead of waiting for an arbitrator to sort the matter out, he decides to throw money at the problem to avoid the risk of liquidated damages.
Under what circumstances can he recover this money? In the absence of express instructions, a contractor may say there has been an implied or constructive acceleration order.
What basis does a contractor have to recover acceleration costs when it has speeded up work in the face of the supervising officer not granting extensions?
Such claims have not met with much success in the English courts, so two Commonwealth cases are sometimes trotted out as authority for such claims: Perini Corporation vs Commonwealth of Australia (12 BLR 82) and Morrison-Knudsen vs British Columbia Hydro and Power Authority (85 DLR 3d). However, in both cases the employer/ supervising officer was in breach of contract in refusing even to consider operating the extension of time clause. This is a very different situation from simply disagreeing that an extension of time is due, and must be relatively rare.
Another tack is for contractors to point to cases in the USA, where constructive acceleration claims seem more acceptable. But, again, these cases do not suggest that in the absence of an instruction, acceleration costs are easily recoverable. Norair Engineering vs The United States 666 F.2d (1981) is an example. A contractor had been delayed significantly and expended sums to accelerate. He recovered them.
The critical point of the case was that letters were written to the contractor asking for “positive action to expedite the work by supplying all materials necessary to accelerate progress” and such like. The court held that such letters were to be construed as orders to accelerate.
Without such instructions, and in the absence of a breach of the type in Morrison-Knudsen, what basis does a contractor have to recover acceleration costs when it has speeded up work in the face of the supervising officer not granting extensions?
It has been suggested that if the delay has been caused by an employer’s breach, acceleration costs can be recovered simply as a reasonable expenditure in mitigation of damage.
This argument was apparently put to Judge Hicks in Ascon. His response was that it was difficult to see how there could be any room for mitigation in relation to damage suffered by the employer’s culpable delay. The parties had expressly agreed contractual machinery for dealing with the situation by extension of time and reimbursement of loss and expense.
Tim Elliott QC is a barrister specialising in construction at Keating Chambers.