Article by Delay Expert Andrew McKenna, Director of Delay and Planning.
In this article we are going to consider the differences between mitigation, acceleration, and constructive acceleration. The recent case of V601 v Probuild[1] is of interest, as it demonstrates that a constructive acceleration claim can be successful in certain circumstances.
Mitigation
First, let’s understand the consensus regarding mitigation. Generally, the contractor is required, as far as reasonably practicable, to minimize the effect of a delaying event without spending additional money or resources.
Similarly, where the Contractor was able to reduce the impact of the Employer related delaying event, but did not, the Contractor will not be able to recover costs incurred from the effects of the events that it could have reasonably avoided.
This is reinforced by several standard forms of contract clauses regarding mitigation:
AS4300 1995:
"In determining a reasonable extension of time for an event causing delay, the Superintendent shall have regard to whether the Contractor has taken all reasonable steps to preclude the occurrence of the cause and minimise the consequences of the delay."
AS2124 1992:
“The Contractor shall take all reasonable steps to limit, reduce and otherwise mitigate any loss or damage and the Contractor shall, unless the Superintendent otherwise directs, take such emergency action as may be required to mitigate the loss or damage.”
FIDIC 2017:
"All reasonable endeavors to minimise any delay in the performance of the Contract."
To paraphrase, to claim an extension of time (EOT), it is a condition precedent of the Contract that reasonable steps are taken to mitigate the potential impact of the alleged delaying event.
Acceleration
Acceleration is the execution of the planned scope of work in a shorter time than the originally planned duration.
Acceleration usually incurs extra-over cost to the Contractor, whereas mitigation does not. Generally, prior to any acceleration measures being undertaken, the Employer and Contractor must agree to the proposed acceleration measures and their (likely) cost, as reinforced by the following excerpt from The SCL Protocol[2]:
“Where the contract provides for acceleration, payment for the acceleration should be based on the terms of the contract. Where the contract does not provide for acceleration but the Contractor and the Employer agree that accelerative measures should be undertaken, the basis of payment should be agreed before the acceleration is commenced.”
Mitigation necessitates for an actual delay event to occur that impacts progress and the Date(s) for Completion, whereas acceleration does not. The Employer can instruct the Contractor to accelerate, regardless of whether the project was likely to be delayed (or not).
For example, the Employer may require the use of the completed project earlier than contractually defined i.e., an earlier date than the contractual Date for Completion, requiring the Contractor to accelerate.
However, if the Contractor is in delay, the Employer may direct the Contractor to accelerate (at its own cost) to meet the contractually agreed Date(s) for Completion.
Before agreeing on the acceleration strategy (and cost), an entitlement to an EOT will have been determined in line with the relevant conditions of contract.
Constructive Acceleration
The SCL Protocol defines constructive acceleration as:
“Acceleration following failure by the Employer to recognize that the Contractor has encountered Employer Delay for which it is entitled to an extension of time and which failure required the Contractor to accelerate its progress in order to complete the works by the prevailing contract completion date.”
What if the Contractor and Employer do not agree on an EOT?
In the case of Motherwell Bridge v Micafil[3], Motherwell accelerated its scope of work to accommodate the earlier delays of Micafil so the Date for Completion could be maintained.
Motherwell notified Micafil of the 3-week critical path delay and provided an acceleration strategy. Motherwell were not instructed to accelerate, nor where they given an extension of time. Rather, Motherwell, at its own cost, accelerated its program.
His Honour Judge Toulmin awarded Motherwell an EOT to the Date for Completion, had it not been for the accelerated program i.e., after the actual Date of Completion. Motherwell were also entitled to claim the associated prolongation costs between the Date of, and for Completion. Interestingly, Motherwell were not entitled to recover the associated acceleration costs.
The Motherwell Bridge v Micafil case highlights that, although Motherwell were entitled to an extension of time, they were not entitled to acceleration costs; even though Micafil agreed to the proposed acceleration strategy, they did not issue an instruction to accelerate.
In the case of Perini Corporation v Commonwealth of Australia[4] Perini submitted several EOT claims that were subsequently rejected by the Director of Works. Moreover, the Director of Works took an excessive amount of time to make his decisions regarding the EOT claims.
Perini accelerated their works to meet the Date for Completion and to avoid liquidated damages. Justice Macfarlan found that the failure of the Director of Works to respond to Perini’s EOT claims in a reasonable time was a breach of contract.
Perini effectively constructively accelerated their works and they were successful in claiming the associated acceleration costs.
The case of V601 Developments Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2021] VSC 849is similar to Perini v Commonwealth of Australia in that it was the Principal’s breach of contract that resulted in the successful constructive acceleration claim.
Key Takeaways
Failure by the Employer to grant an EOT, where it should have, does not necessarily give rise to a constructive acceleration claim.
Similarly, when a Contractor does accelerate, it is not entitled to claim the associated costs unless explicitly directed to accelerate as a result of an Employer delay event(s).
The ‘wait and see’ approach is not the best way to manage EOT claims. EOT claims should be assessed as close to the time that the delaying event(s) occurred.
Prior to implementing any acceleration measures to expedite an Employer related delay, the Contractor should seek the approval of the relevant EOT claim. As per the SCL Protocol recommendation that[5]:
“Where the Contractor is considering implementing acceleration measures to avoid the risk of liquidated damages as a result of not receiving an EOT that it considers is due to it, and then pursuing a constructive acceleration claim, the Contractor should first take steps to have the dispute or difference about entitlement to EOT resolved in accordance with the contract dispute resolution provisions. Otherwise, there is the risk that it will not be entitled to compensation for those acceleration measures. In any event, before pursuing any such acceleration measures, the Contractor should provide notice with particulars of the intended acceleration measures to the CA. The Contractor should then include such measures in a revised programme.”
[1] V601 Developments Pty Ltd v Probuild Constructions (Australia) Pty Ltd (2021) VSC 849
[2] Society of Construction Law, Delay and Disruption Protocol, 2017, pg. 41
[3] Motherwell Bridge Construction Ltd v Micafil Vakuumtechnik (2002) CILL 1913
[4] Perini Corporation v Commonwealth of Australia (1969) 2 NSWR 530