To accelerate or not? That is the contractor’s question

As discussed in Chris Larkin's recent article ‘Constructive acceleration demands clear intentions' (Issue 162) the issue of whether delay to a project can be reduced or even eliminated altogether by taking accelerative measures and if so, who should bear the cost, is becoming more common here in Dubai. In this article, I will consider the question of acceleration and liability for acceleration costs from a contractual and legal perspective.

By acceleration, I am referring to taking steps to complete the works more quickly than would otherwise have been the case. Acceleration costs, therefore, are the costs incurred by the contractor as a result of increasing its resources substantially in order to complete the works in a shorter time. Taking accelerative measures inevitably involves incurring additional costs in ‘speeding up' the process, be it bringing in additional resources, 24-hour working, overtime payments, additional manpower, plant and machinery.

The question of who pays for such acceleration measures is an important one and it is crucial that a contractor faced with any such request is fully aware of his rights and obligations.

First, it is important to distinguish acceleration from a contractor's general duty to mitigate the effect of employer delay. In essence, while a contractor has a general duty to mitigate the effects of employer delay, such a duty does not extend to bringing in extra resources or working outside planned working hours. As such, a contractor will not be obliged to incur such additional costs when it is not responsible for the delay. Of course, when the contractor is itself responsible for the delay, it will have a choice whether to accelerate at its own cost in order to try to hit the completion date or accept the penalty of liquidated damages. This decision may, in simple terms, come down to a question of mathematics - which is the cheaper option?

Assuming that the contractor is not in culpable delay, how can it ensure that it is entitled to recover the costs of taking accelerative measures? Since acceleration requires a contractor to take measures which are over and above its obligations under the contract, there must either be an agreement between the employer and the contractor, or an instruction to accelerate, under the terms of the contract. The reason: given that such measures are likely to result in the contractor incurring significant costs it will be necessary for the employer to expressly agree to pay for those costs - either by a supplemental agreement or through the mechanics of the contract. The rationale for this is clear - the employer may prefer to have his project completed late than have to pay acceleration costs and as such he should be able to make that choice without the contractor unilaterally imposing liability for substantial additional costs upon him.

An agreement to accelerate normally takes the form of a supplemental agreement between the employer and the contractor. Such an agreement should set out clearly its full terms including the level of liability for acceleration costs and how and when they will be paid.

The other option is an instruction to accelerate under the terms of the contract. It is generally accepted that it is necessary to have a specific clause dealing with acceleration as the common view is that an engineer does not have the power to instruct a contractor to accelerate under the general provisions of Clause 51 of the FIDIC 4th Edition Standard Conditions, which governs variations.

As such, in the absence of a separate provision expressly allowing the engineer to instruct the contractor to accelerate, the contractor will generally have no obligation to do so in the absence of an agreement between himself and the employer to that effect.

The issue which often arises, however, is where a contractor believes that he has a right to an extension of time but such an extension is not granted and the employer and/or the engineer continues to insist that the contractor completes the works in accordance with the original completion date. Such a situation sometimes occurs when the engineer seeks to issue an instruction requiring the contractor to expedite progress in accordance with, for example, Clause 46.1 of the FIDIC 4th Edition Conditions, or where the employer or engineer otherwise puts pressure on the contractor to take such measures. In such circumstances, the contractor effectively has a choice whether to take such measures to complete in time for completion or sit tight in the belief that he has a right to an extension of time and will therefore ultimately not be exposed to liquidated damages.

Faced with such a choice, many contractors choose to take such accelerative measures as are necessary and then hope they can recover them from the employer in due course. However, such an option is risky and contractors are often led to argue that it is entitled to claim the costs of doing so on the basis of "constructive acceleration" which was discussed in more detail by Chris Larkin.

Constructive acceleration is where a contractor seeks to argue that in the absence of the engineer granting an extension of time, he had no alternative but to take the acceleration measures in question and thereafter recover them from the employer. However, such a claim is not readily recognised and is extremely difficult to establish.

Claims for constructive acceleration are not generally favoured under English Law. But it is not known how such claims would be construed as a matter of UAE Law. It is likely that a court or tribunal applying UAE Law would adopt similar considerations in reviewing such a claim. Our advice in such circumstances is that a contractor being asked to take accelerative measures should always ensure that there is either an agreement or an express instruction with an acknowledgement to an entitlement to pay such costs in place - otherwise it takes such measures at its own risk and may end up bearing such costs, irrespective of the success or attempts at finishing on time.

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