by Brian Morrow
| September 09, 2013 |
Contractor’s acceleration claim granted in embassy construction
“Acceleration” in construction means to speed up the pace of work resulting from a directive, refusal to extend the contract time or voluntary effort. Acceleration disrupts the contractor because it results in less time to complete the contract work. A court described acceleration as follows:
“Acceleration is the process by which the natural or ordinary progress of events is quickened. In the case of a contract, acceleration occurs when the contractor speeds up his work so that he is performing the job at a faster rate than prescribed in the original contract. Commonly, acceleration is achieved by working overtime or working double shifts. Acceleration costs, as claimed by [the contractor], are costs incurred by virtue of acceleration.”
“Constructive” acceleration involves situations where the contractor requests a time extension that is denied and completes his work within the contract period, and it is later determined the contractor was entitled to an extension. The contractor accelerates his work to avoid the possibility of breaching the contract by late completion and the assessment of liquidated damages. The denial of the time extension is seen as a breach of contract, resulting in liability to pay for the accelerated work.
In the recent matter of Fluor Intercontinental d/b/a J.A. Jones International v. Department of State (May 24, 2013), the Civilian Board of Contract Appeals (Board) awarded Fluor $1,253,710 for constructive acceleration costs incurred in constructing a new embassy in Haiti.
On Jan. 14, 2005, Fluor and the Department of State (Agency) entered a firm, fixed-price, design-build contract with a total price of $74,408,634 to construct a new embassy compound on 10 acres in Port-au-Prince, Haiti. The contract included a performance period of 851 days from the notice to proceed, thus requiring substantial completion on July 3, 2007. Later, the Agency extended the performance period by 210 days, resulting in a revised date for substantial completion of Jan. 29, 2008. Ultimately, substantial completion was achieved on March 31, 2008.
Although the parties entered a design-build contract that placed most of the risk for delays on Fluor, the contract contained an excusable delays clause that allowed time, but not money, for excusable delays as defined in the Federal Acquisition Regulations (FAR). Excusable delays included acts of God or the public enemy, acts of the United States (government), acts of the host country government and unusually severe weather. In addition, the contractor had to establish any delays were without his fault, unforeseeable, could not be overcome by re-scheduling and affected the final completion of the project.
During the project, the security situation in Haiti significantly deteriorated, due to the departure of President Jean-Bertrand Aristide in February 2004, about one year before the contract was entered. While preparing its proposal, Fluor was aware of the tenuous and unpredictable nature of the security situation in Haiti and made its own assessments and conclusions. Nonetheless, during its contract performance, Fluor sought time extensions for excusable delays due to the security situation and actions of the government.
In May 2005, a few months after the contract was entered, the government ordered the departure of non-emergency personnel from the embassy. In response, Fluor followed the government’s order. The departure of personnel resulted in Fluor being unable to perform work on the critical path. On June 1, 2005, Fluor departed the site and ceased work on the critical path. Later, Fluor returned in stages at the Agency’s urging. On Sept. 21, 2005, excavation work on the critical path resumed.
After completing the project, Fluor made a claim for $38,026,410 plus interest for differing site conditions, failure to disclose superior knowledge, breach of the duty of good faith and fair dealing and constructive acceleration. The Board denied Fluor’s claims for differing site conditions, failure to disclose superior knowledge and breach of the duty of good faith and fair dealing but found Fluor was entitled to excusable delays due to government acts. This resulted in a valid claim for constructive acceleration.
Fluor claimed 111 days of excusable delays relating to the security situation (this roughly coincided with Fluor’s departure from June 1 to Sept. 21) and 26 days relating to alleged differing site conditions. In response, on June 29, 2007, the Contracting Officer granted 143 days of excusable delay. This additional time was granted only four days before Fluor’s initial contract completion date of July 3.
The Board determined Fluor was entitled to excusable delays totaling 111 days, which was adequately compensated by the 143 additional days that were already granted. Nonetheless, the Board found the Agency’s late recognition of excusable delay – only a few days before the scheduled completion date while liquidated damages loomed – caused Fluor to accelerate its performance.
After analyzing all the issues, the Board found 5 percent of Fluor’s acceleration costs arose from excusable delays, and therefore, awarded Fluor $1,253,710 plus interest for man camp costs; craft labor and small tool costs; additional equipment, fuel, oil and grease costs; staff labor costs; local labor lunches caused by acceleration; overtime due to acceleration; general and administrative costs; and profit.
The Fluor matter highlights the importance of carefully tracking and documenting the project schedule and all relevant delays and costs, as a finding of excusable delay is the first step in proving a constructive acceleration claim. Here, although the parties entered a firm, fixed-price, design-build contract – which the government argued was the end of the story – Fluor was able to recover for constructive acceleration based on the contract, actions by the government and its detailed tracking of the schedule, excusable delays and acceleration costs.
Attorney Brian Morrow is a partner in Newmeyer & Dillion LLP and a licensed civil engineer specializing in construction law, incl. road and heavy email@example.com