Acceleration costs



Why accelerate?



Acceleration is an increase in the rate of progress of a contractor above that initially contemplated in the contract. In some cases a contractor may accelerate because it is directed to do so by the superintendent. In other cases, a contractor may make a commercial decision to accelerate. Examples of this might include where a contractor has not been entitled to an extension of time and it thinks that the costs of acceleration will be less than the liquidated damages it might have to pay if it does not complete the works by the date for practical completion.


Standard form contracts



Clause 10.15 of PC-1 (1998) provides that the contractor is required to accelerate if it is instructed to do so by the contract administrator in accordance with clause 10.13 to overcome the effect of delay. Where the contractor would have been entitled to an extension of time if the contract administrator had not required the contractor to accelerate, then the clause entitles the contractor to be paid for the extra costs reasonably incurred due to its acceleration.

The Australian Standard forms of contract do not deal with acceleration as directly as PC-1 (1998) does. Clause 33.1 of AS2124/AS4300 permits the superintendent to direct in what order and at what time the various parts of the work under the contract are to be performed. If the contractor can reasonably comply, it must do so. If this results in the contractor incurring more or less cost than it otherwise would have, the difference is valued as for a variation.


Constructive acceleration



It is often mistakenly assumed that if a contractor undertakes acceleration in circumstances where it should have been granted an extension of time, the contractor will automatically be entitled to recover its costs of acceleration from the principal. While this principle has long been established in US law, there is no such principle in Australian law. This can been seen, for example, in the case of Motherwell Bridge Construction Limited (t/as Motherwell Storage Tanks) v Micafil Vakuumtechnik and another (2002) 81 Con LR 44 in the Queens Bench Division (Technology and Construction Court) of England and Wales.


Damages for acceleration in mitigation of breach of contract



A contractor may be able to successfully recover its acceleration costs as general damages if the principal's refusal to grant an extension of time amounts to a breach of contract. See for example the following case study.

CASE STUDY



Perini Corporation v Commonwealth of Australia

[1969] 2 NSWR 530



Facts


  • The contractor, Perini, contracted to build the Redfern Mail Centre for the Commonwealth.
  • The Director of Works was in charge of the project and had the power to grant extensions of time.
  • The Director of Works refused many of the Perini's applications for extensions of time and in many cases the Director of Works took an excessive amount of time to make his decision in relation to Perini's applications.
  • Perini argued that this required extra men or equipment or modifications to the planning of the work.

Result


  • The court found that the contract contained an implied term that the Director of Works was to provide a response to the contractor's applications for extensions of time within a reasonable time.
  • The Director of Works' failure to do so amounted to a breach of the contract.
  • The court dealt only with the interpretation of the contract. It did not establish whether Perini proved its losses, including the extent of any acceleration costs Perini incurred, as the contract provided for arbitration of that aspect of the dispute.

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Reviewed 12 July 2013