FORMAL REQUEST FOR TIME EXTENSION NOT ALWAYS REQUIRED TO SUPPORT CONSTRUCTIVE ACCELERATION

Posted on April 10, 2022April 10, 2022 by Edward Garber

Does a constructive acceleration claim require the contractor to always request an extension of time which is then denied by the owner? While this is certainly the preference and the contractor should be requesting an extension of time as a matter of course for an excusable delay, the answer is NO! in certain circumstances. This is conveyed in the factually detailed case discussed below where a formal request for an extension of time was not required for the contractor to support its constructive acceleration claim.

But first, what is constructive acceleration:

Constructive acceleration “occurs when the government demands compliance with an original contract deadline, despite excusable delay by the contractor.” The Federal Circuit in Fraser defined the elements of constructive acceleration as follows:

(1) that the contractor encountered a delay that is excusable under the contract; (2) that the contractor made a timely and sufficient request for an extension of the contract schedule; (3) that the government denied the contractor’s request for an extension or failed to act on it within a reasonable time; (4) that the government insisted on completion of the contract within a period shorter than the period to which the contractor would be entitled by taking into account the period of excusable delay, after which the contractor notified the government that it regarded the alleged order to accelerate as a constructive change in the contract; and (5) that the contractor was required to expend extra resources to compensate for the lost time and remain on schedule.

Nova Group/Tutor-Saliba v. U.S., 2022 WL 815826, *42 (Fed.Cl. 2022) quoting Fraser Constr. Co. v. U.S., 384 F.3d 1354, 1361 (Fed. Cir. 2004) (internal citations omitted).

Of importance, different formulations proving the elements of constructive acceleration can be used. Id. (where Court discussed three essential elements to constructive acceleration: “excusable delay, an order to accelerate, and acceleration with attendant costs.”

In Nova Group/Tutor-Saliba, discussed below, the Court stated the “Fraser standard requiring the contractor to submit a time extension request would not be appropriate here since the evidence established that the Government was insisting on compliance with the original schedule despite the [known] delay caused by the global stability dispute.” Nova Group/Tutor-Saliba, supra, at *43. A formal request for a time extension was not required by the contractor to support and sustain its constructive acceleration claim.

In this case, a contractor was hired to demolish existing piers and design and construct a new ship wharf and other structures. During construction, the government sent a letter (supported by its engineer) questioning the structural global stability of the contractor’s design and the design’s conformance with the government’s request for proposals AFTER the design had already been approved. This resulted in what the contractor claims was an excusable delay because no reasonable contractor would have moved forward when the government lost confidence in the structural integrity of the design; thus, the contractor could not perform critical path activities until the issue was resolved. When a certain redesign over a different issue (dealing with a batter pile issue) was approved, the global stability issue was put to bed by the government and the contractor implemented its acceleration plan.

The Federal Claims Court went through constructive acceleration factors recognizing different formulations of the elements can be applied to support the claim.

(1) Excusable Delay

The government argued its letter questioning the global stability of the design did not stop the contractor’s critical path work. Rather, the work was stopped so the contractor could complete a batter pile redesign. Further, the government argued that even if the letter caused a delay, it would have been concurrent with the contractor’s redesign which would have prevented the contractor from completing the work absent the global stability issue.

The Federal Claims Court, however, found that the delay was the result of the government’s letter questioning the global stability of the design and design’s conformance with the request for proposals.

Here, months after approving the design, the Government informed [the contractor] that it believed the design might be out of conformance with the RFP, an unforeseeable act given the Government’s prior approval. Because the entire design was called into question, it was reasonable for [the contractor] to stop critical path work until the issue was resolved. [The contractor’s] reaction that the Navy’s March 8 letter questioning its design was a ‘bombshell’ and a ‘very, very scary moment’ underscored its reasonable concern about the Project’s path forward.

Nova Group/Tutor-Saliba, supra, at *44.

The Federal Claims Court also rejected the government’s concurrent delay argument.

The Government further contends that delays due to the Delta 12 [batter pile] redesign and global stability were concurrent, which would preclude Plaintiff from recovering. “Where both parties contribute to the delay, neither can recover damage[s], unless there is in the proof a clear apportionment of the delay and the expense attributable to each party.” However, the record indicates that the Delta 12 redesign delay occurred after the global stability issue delay, not concurrently. This is evident from the fact that [the contractor] was able to start some critical construction work on May 7 — 20 days before the Delta 12 redesign was even approved — once it felt assured the global stability issue would be resolved based on emails from the Government. The Government approved the Delta 12 redesign on May 27, 2010, but work on the redesign was not performed until later. The Court is persuaded by Plaintiff’s expert’s opinion that there were two separate acceleration periods: Acceleration Period 1 covering June through November 2010 resulting from the global stability issue….

Nova Group/Tutor-Saliba, supra, at *44.

(2) Government Knowledge of Excusable Delay

The Federal Claims Court found that the government was well aware of the delay due to the global stability design issue. Further, government representatives were at the site daily and attended daily production meetings. The delay caused by the government’s concern over the global stability of the design was not a surprise.

(3) Government Statements that Can be Construed as Acceleration Orders

The contractor never formally requested an extension of time because it was understood the government required the project to be completed ahead of the contract completion date, and time extensions would not be granted. Even after the global stability design issue was resolved which included the known work stoppage, the government still pressed the contractor to complete on time. The government even notified the contractor its concern in the decline in the float available in the schedule and that if the float becomes negative the contractor will be required to submit a recovery plan. “Here, the Government’s repeated warnings that [the contractor] maintain the original project schedule despite a critical path work stoppage of over two months constituted an order to accelerate.” Nova Group/Tutor-Saliba, supra, at *48.

(4) Government on Notice of Constructive Change Claim

Although the government claimed it had no notice of the contractor’s constructive change claim, the Federal Claims Court found: “[t]he contracting officer had actual knowledge of the circumstances giving rise to [the contractor’s] constructive change claim, because it was the Government that issued the letters questioning [the contractor’s] previously approved design, requested KPFF [contractor’s engineer] to respond to BergerABAM’s [government engineer’s] letters, and reiterated that [the contractor] needed to adhere to the schedule, which caused [the contractor] to accelerate after the stoppage of critical path work.” Nova Group/Tutor-Saliba, supra, at *48

(5) Costs Incurred for Constructive Acceleration

The Federal Claims Court found that the contractor proved it incurred costs due to the constructive acceleration.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

DEFINING CONSTRUCTIVE ACCELERATION

Posted on February 14, 2021February 14, 2021 by Edward Garber

When it comes to the definition of “constructive acceleration,” the case of Fraser Const. Co. v. U.S., 384 F.3d 1354 (Fed.Cir. 2004) is a cited case and contains an instructive definition, quoted below, for proving a constructive acceleration claim.

In a nutshell, a constructive acceleration claim is when the contractor incurs added costs for trying to complete the contract on time when it should be provided extensions of time to perform based on excusable delay (i.e., delay not caused by the contractor). These added costs could be bringing in additional supervision to manage the work, adding manpower to perform the work, working overtime, working weekends, adding more shift work, stacking trades, etc. However, just because a contractor claims they have been constructively accelerated does not make it so. The contractor has to actually ask for an extension of time based on an excusable delay and the owner either denied the extension or unreasonably sat on the request for an extension of time; thus, the contractor incurred significant costs to accelerate in order to finish the project on time because it was deprived of a requested time extension for excusable delay.

If you are a contractor and need to support a constructive acceleration claim, please take note of this definition by the Fraser Construction court:

A claim of acceleration is a claim for the increased costs that result when the government requires the contractor to complete its performance in less time than was permitted under the contract. The claim arises under the changes clause of a contract; the basis for the claim is that the government has modified the contract by shortening the time for performance, either expressly (in the case of actual acceleration) or implicitly through its conduct (in the case of constructive acceleration), and that under the changes clause the government is required to compensate the contractor for the additional costs incurred in effecting the change.

A claim of constructive acceleration ordinarily arises when the government requires the contractor to adhere to the original performance deadline set forth in the contract even though the contract provides the contractor with periods of excusable delay that entitle the contractor to a longer performance period. Although different formulations have been used in setting forth the elements of constructive acceleration, the requirements are generally described to include the following elements, each of which must be proved by the contractor: (1) that the contractor encountered a delay that is excusable under the contract; (2) that the contractor made a timely and sufficient request for an extension of the contract schedule; (3) that the government denied the contractor’s request for an extension or failed to act on it within a reasonable time; (4) that the government insisted on completion of the contract within a period shorter than the period to which the contractor would be entitled by taking into account the period of excusable delay, after which the contractor notified the government that it regarded the alleged order to accelerate as a constructive change in the contract; and (5) that the contractor was required to expend extra resources to compensate for the lost time and remain on schedule.

Fraser Const. Co., supra, at136.

ACCELERATION COSTS MONEY

Posted on October 22, 2013October 22, 2013 by Edward Garber

Contractors know or should know the concept of acceleration because acceleration costs money. Acceleration occurs when a contractor expedites its performance due to an excusable delay (a delay not its fault) in order complete its performance earlier than it would have considering the delay.

Contractors accelerate by incurring increased labor costs to work overtime and premium time (nights and weekends), adding more manpower, or adding more crews (which also may mean adding more supervision to supervise the additional labor). These added labor costs are typically direct payroll costs (factoring in labor burden) as well as equipment costs associated with operating the equipment (especially if it is owned equipment) for longer hours or renting additional equipment to be utilized by the additional manpower or crews. In addition, acceleration can result in inefficient labor hours because manpower is now working longer hours, new manpower is added and there is a learning curve associated with new manpower that is not familiar with the work, and the labor is potentially working under resequenced conditions and in congested locations with other trades. Thus, just because the contractor takes reasonable efforts to accelerate does not mean that it is incurring efficient / productive labor costs or that its acceleration efforts are substantially improving the completion date of the project.

There are two types of acceleration claims. The first type is the straightforward direct acceleration claim when the government/owner directs the contractor to accelerate its performance to finish the job in advance of the completion date. Many times, in this circumstance, the government/owner understands that it will need to compensate the contractor for the acceleration efforts.

Constructive acceleration is the other type of acceleration claim and the type more likely to lead to a dispute because the dispute centers around both entitlement and quantum. Constructive acceleration occurs where the contractor seeks additional time to complete the project due to what it claims are excusable delays, but the government/owner is unwilling to grant the contractor the additional time. To prove construction acceleration, the contractor needs to prove:

there was a delay that was not its fault (an excusable delay) that impacted the completion date;
the contractor notified the government/owner of the delay and requested additional time to complete its performance;
the government/owner expressly directed the contractor to overcome the delay and complete the project in a shorter amount of time than the contractor was entitled to factoring in the delay or implicitly directed the contractor to overcome the delay through the refusal to grant additional time; and
the contractor did in fact incur costs in accelerating its performance.

See Armour of America v. U.S., 96 Fed.Cl. 726, 757 (Fed.Cl. 2011) (“To prove a constructive acceleration claim, and entitlement to an equitable adjustment, which Armour [contractor] did not attempt to do during the proceedings before the court, a contractor must show (1) that the contractor encountered a delay that was excusable; (2) that the contractor requested from the government an extension of time due to the delay; (3) that the government denied the contractor’s request for an extension of time; (4) that the government demanded completion of the contract in a shorter amount of time than the contractor was entitled to, given the excusable delay; and (5) that the contractor was required to expend additional resources to adhere to the schedule on which the government insisted.”). See also Fraser Const. Co. v. U.S., 384 F.3d 1354 (Fed.Cl. 2004).

What is important to remember is not only will the contractor need to prove the excusable delay that impacted its schedule, but it will need to prove it notified the government/owner of the delay and requested additional time to perform which was denied. After proving all of this, the contractor will still need to establish that it actually accelerated its performance and incurred costs in doing so.

As a basic example, assume a project was to be completed December 31, 2014. This marked the date the owner needed to use the project for its intended purpose. However, due to excusable delays (assume many owner-directed change orders and/or design-related issues), this completion date is postponed a year to December 31, 2015. The contractor notified the owner of the delays and impacts to its schedule and requested an extension of time to complete the project; but, for whatever reason, the owner refused to grant additional time and implicitly demanded that the contractor complete the project on schedule. The contractor, as the result of the owner’s refusal to grant additional time, accelerated its performance to finish the project earlier than December 31, 2015 and to avoid the consequence of the owner assessing liquidated damages (i.e., the contractor accelerated to mitigate the impact of the delay). Based on the contractor and its subcontractor’s efforts, the project was completed on May 30, 2015–5 months after the original completion date, but 7 months before the contractor should have been complete considering the excusable delays. In this basic example, the contractor’s acceleration efforts mitigated the overall delay by approximately 7 months (the difference between May 30, 2015 and December 31, 2015) even though the contractor finished 5 months later than the original schedule. The contractor will need to prove the costs associated with these acceleration efforts.

It is good practice for contractors to work with attorneys and experts to preserve the acceleration claim and prove the excusable delays through a critical path schedule analysis and the costs incurred in accelerating performance.