Chapter 13 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
The Australian Standard forms of contract deal with acceleration in clause 33.1 of AS 2124/AS 4300 and clause 32 of AS 4000/AS 4902, which each permit 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, Australian courts have not definitively held that such a principle exists within the Australian context.
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 and the contract has expended additional costs in meeting an unextended date for completion in order to avoid liability for liquidated damages. 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 on the basis of Departmental policy 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 contractor was therefore successful in claiming acceleration costs to meet the completion date and avoid liquidated damages as a result of a breach of the implied term
- 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.