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Acceleration In Construction Contracts and Engineering Contracts

If you have an urgent  problem regarding acceleration in a construction or engineering project and you need advice please call us now on 01773 712116.

At Streetwise we are always looking to solve Specialist Sub-Contractor's problems. That includes subcontractors problems relating to acceleration in construction and engineering projects and the valuation and payment for acceleration in accordance with construction and engineering contracts and sub-contracts.

Specialist Sub-Contracting in construction and engineering can be a tough business and it's no surprise that at some point you are going to face problems getting paid for acceleration.

In all probability the Contractor is blaming you for delay and demanding that you accelerate the progress of the works!

Getting paid for acceleration as a subcontractor is one of the biggest problems you might have to face when sub-contracting in the construction and engineering industries!

Time and time again our Buddies here at Streetwisesubbie tell us that "The Contractor is demanding that I accelerate my work" or "The Contractor doesn't want to pay me for acceleration."

Specialist Sub-Contracting is all about entering into legally binding commercial contracts (with Contractors or Clients) that require you to complete your work by a fixed end date. Unfortunately as a subcontractor in construction or engineering, you are likely to be delayed and disrupted!

What happens when the subcontract has been delayed and disrupted and you aren't going to complete on time? The Contractor blames the subcontractor!

If you need assistance relating to acceleration or payment for acceleration and you can't find what you are looking for, then why not use the Ask Streetwiseor Streetwise Confidentialfeature on this site to ask our virtual team of experts for help?

Acceleration Agreement

If you are going to agree to accelerate your works and be paid the additional costs, you should ensure that a binding agreement is entered into that deals with all the of the relevant matters. These include inter alia:-

Delays To Date

Most acceleration agreements occur because progress on site has fallen behind the contract programme and extra measures must be taken in order to maintain the original completion date.

As a Specialist Sub-Contractor it is in your interest to ensure that the acceleration agreement contains a clear statement by the Contractor and/or the Employer that they will reimburse your  future extra costs, irrespective of any liability the Contractor or the Employer may consider you have in relation to the delays that have caused programme slippage.

If this matter is left open-ended, the Contractor and/or the Employer may seek to reopen the question of liability for delay at some time in the future and attempt to have you pick up some of your own acceleration costs as a result of you having failed to regularly and diligently progress your works.

It is something of an understatement to say that; this can be a rather difficult position for the Contractor and/or the Employer to accept.

Revised Programme

A detailed construction programme is usually an optional document in most construction and engineering subcontracts.

However, when you are entering into an agrrement to accelearte it is definitely in your best interests for you to draw up a revised programme of work to show how the accelerated completion date can be achieved, and to have this programme firmly bound into the agreement.

This programme can be used to show the necessary resources and workface availability  you require at each stage and any constraints that apply to your works. This programme can then be used to monitor progress.

Inevitably co-ordination becomes even more complex during periods of acceleration and you may need to work with the Contractor and/or the Employer to prepare detailed programmes that show how his other subcontractors are going to fulfil their role in the revised arrangements.

It may be that the design team will also be involved and they will need to know when they must provide information to enable the acceleration to be achieved.

Any Further Delays

The existing contractual relationship between the Employer and Contractor and the Contractor and you the Sub-Contractor will usually deal with the rights and obligations of the parties when events and circumstances lead to delay.

For example, where exceptionally adverse weather causes delay, the Contractor and his Sub-Contractors would be entitled to an extension of time but would not be entitled to additional monies.

The existing contractual machinery for extensions of time may need to be applied to the acceleration agreement.

However, it is normal for the Employer, having agreed to pay extra monies to the Contractor and his subcontractors for acceleration, to try to further limit the Contractor's entitlement to extensions of time. For example, he may insist that the completion date may only be extended in the case of substantial extra works being instructed or other major problems being encountered.

It would seem reasonable to expect this to apply to say the payment of a bonus but not the Contractor's right to additional time for delays outside his control.

Best Efforts or Definite Date

The parties must decide whether the agreement to finish by a specific date is to be a firm contractual obligation on the Sub-Contractor or a target date that the Sub-Contractor will use his best efforts to achieve.

This can be a particularly difficult point to negotiate and one which you need to very wary of. You do not want to incur substantial additional costs that you are prevented from recovering because you didn't hit the agreed date.

Similarly, the Employer and the Contractor will not be too keen on paying you to simply "do your best".

Practical Completion

Since the reason for acceleration is to achieve an earlier completion date and that some financial incentive or liability may flow from this, it may be wise to re-state or revise the requirements for achieving completion.

There may well be  more of a likelihood of minor defects arising in the rush to complete your works during the acceleration period and it would be unfortunate if you were penalised financially because the Employer or the Contractor adopted a strict interpretation of the contract with regard to practical completion.

The Employer may only be concerned with certain areas being completed. For example, the retail areas of a shopping development and that other less important areas, could proceed after the official opening. It may also be that completion of the physical works is important to the Employer, but detailed commissioning and final testing operations would not hinder his own occupation.

It would therefore be appropriate for you to work with the Contractor and the Employer to determine their minimum requirements and draft the acceleration agreement around these.

Costs

Costs can be agreed on either a negotiated lump sum or a cost reimbursable basis.

On the face of it an agreed lump sum may seem to be the simplest method since all parties know from day one what the costs are going to be. However, it may well be that this is also the most difficult to negotiate since the parties may well have opposing views; you will (rightly) take the most pessimistic approach, whereas the Contractor and/or the Employer the most optimistic.

If you are going to agree to a lump sum you will have to make certain assumptions with regard to the extra resources you will require and endeavour to assess the extra costs. You may also look to build in some contingency. Something which the Contractor and/or the Employer may try to persuade you that you don't need!

If a lump sum price is agreed, the agreement should make it clear that it is a lump sum price for achieving certain criteria. The Contractor and/or the Employer should not then be allowed to monitor your expenditure and expect credits if, for example, you haven't needed to work the amount of overtime you anticipated. Likewise, you will not be entitled to extra payments should you find that you require more resources or are going to incur more costs than uou expected.

An alternative approach is to identify the heads of cost and agree how to calculate extra resources and evaluate their individual expense. For example, you may be able to submit  daily labour returns to identify the overtime hours worked and the Contractor and/or Employer can check the premium time and costs from the relevant records. Similarly, you may agree to demonstrate additional staff costs by way of your payroll records.

It can be argued that the cost re-imbursable method creates the least incentive for you to achieve the agreed targets since you will be paid all that you expend, and can therefore operate in an uneconomic manner.

The Contractor and/or the Employer may also consider that this type of agreement puts them in a vulnerable position since they do not know their financial liability until completion.

Premium Time

Non-productive overtime payments will be incurred in accordance with the relevant working rule agreement.

Some of the on-costs associated with labour (NHI, etc) may also increase in proportion to the additional cost of the non productive overtime cost element. although many are fixed, irrespective of worked hours.

You must be careful to ensure that you know exactly what additional costs you incur. For instance if you are using labour only subcontractors the rate that they are prepared to work overtime at may well be more than you expect. You do not want to find yourself in a situation where you have agreed premium time costs with the Contractor and/or the Employer, only to find that your labour force actually wants more!

Productivity

If the works are to be carried out in a shorter time scale, for example, by increasing the labour force, by working longer hours and by changing the method of working and programme sequence, the productive output of site labour may well be reduced significantly.

This will obviously increase labour costs by a substantial amount. If you maintain a system for monitoring labour output, it should be possible to provide contemporaneous records to demonstrate how productivity has been effected during a period of acceleration.

It may be that you do not keep such records and again this could leave you in a vunerable position in respect of cost recovery.

Be very wary of of attempts to negotiate predetermined productivity levels. During periods of acceleration the negative effect on labour productivity can be both dramatic and erratic.

Supervision

The level of supervision obviously needs to vary according to the number of operatives and the complexities of your work. However, it is normally expected that the level of supervision should be more than proportionally increased during periods of acceleration.

Bonus Incentives

Although the market is currently in recession you may think that plenty of labour is avaialable, however you may need need to pay a bonus to maintain a site labour force for any number of reasons. Also, acceleration may involve working through holiday periods and it may be necessary to pay above the standard rates to encourage operatives to work.

You must thoroughly plan out how you are going to deal with all these matters and how the costs will be recovered.

Preliminaries

You must identify the extra resources you will require.

Existing staff may well already be stretched.

What if overtime is needed and additional costs are going to be incurred?

Is it fair that the Contractor and the Employer benefit from unpaid overtime worked by you and/or your staff?

Cabin and associated office costs need reviewing.

Plant and Tools

A larger labour force may well require more equipment and lead to the inefficient use of plant and equipment.

Sub-Sub-Contractors and Suppliers

If there are going to be any additional costs payable to Sub-Sub-Contractors or Suppliers these will require individual consideration, and incorporation into the acceleration agreement.

Overheads and Profit

Substantial  acceleration measures will mean that key resources including head office staff will be involved. You need to be properly re-imbursed for all of these costs either as definite cost heads within the agreement or via an adequate margin.

Payment

It is essential that the parties consider and agree the method of payment.  For instance an agreed fixed price can be divided by the planned period of acceleration to give an average monthly cost.

A cost reimbursement method may take time to produce accurate figures. In these cases, it would be preferable for you to agree a series of monthly budget payments and substitute actual costs when these have been finalised.

You should also consider asking for advanced payments since the greater part of expense is labour related and most of these will be paid weekly, well before monthly interim certificates are paid.

As you can see an acceleration agreement requires some very detailed thought, covering both the contractual implications of the deal and the possible effects of the execution of the works and its practical and financial repercussions.

If you need assistance relating to acceleration or payment for acceleration and you can't find what you are looking for, then why not use the Ask Streetwiseor Streetwise Confidentialfeature on this site to ask our virtual team of experts for help?

Please also see our pages on delay and disruption.

When you are delayed you will probably get coerced into accelerating the progress of your works for free. You will be pleased to know that you can access a wealth of information on Streetwisesubbie.com about getting paid for acceleration.

Please click here to go to the Contractual section.

If you already have a problem with a Contractor or Client and are not getting properly paid for acceleration and you need help to find a solution please check out the Dispute Resolution Section for information that may help you to resolve the situation.

Please click here to go to the Dispute Resolution section.

If you simply haven't got time to look or have any other problem whatsoever relating to acceleration or payment for acceleration and you can't find what you are looking for, then why not use the Ask Streetwiseor Streetwise Confidential feature on this site to ask our virtual team of experts for help?

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