BEWARE OF UNPAID ACCELERATION
Most sub-contractors will be
familiar with the pressures from the client or main contractor as the project
nears its planned completion date.
Having been constantly delayed by lack of information and necessary access
to work faces, a “delayed bulge” of information and access is
made available. The sub-contractor is told that the
completion date must be met, and reminded of his duties under "best
endeavours". Threats of damages
for non-completion are received.
The sub-contractor is now in a
very difficult position. Very often,
the only measures open to him are to increase his labour force and/or work
weekends.
However, such strategies can prove very costly indeed. What is the true contractual position?
“Best endeavours" is an
important obligation which features in many contracts. It involves a proactive
willingness to rearrange activities, and to make all reasonable efforts to
prevent or reduce the delay. However,
most text books suggest that this should not involve substantial
expenditure.
If the delay is the fault of the
sub-contractor, he may well consider it
less costly to use “special measures” than to incur damages and set off
for failure to complete on time. If he
has been careless in submitting delay notices, or has signed up to a contract
with a “beck and call” clause, he may be in a weak position which leaves him
little option.
However, assuming that the project delays are not his
responsibility, and he has protected his position as to extension of time, he usually has no contractual obligation to
spend resources and money to overcome delays caused by others.
In practice, such cases usually
constitute "hidden acceleration".
Those contract forms which recognise acceleration usually provide for
prior agreement and/or formal instructions, with specific arrangements for
reimbursement. In other cases, (ie
JCT98 and DOM/1 etc) no provisions
exist and acceleration then stands to be discussed as "equal parties"
outside the contract.
In response to the usual
attempts at coercion, the sub-contractor should resist the temptation to “knee
jerk”. He should remain calm and
professional, and remind the main contractor
as to the origins of the delay, and the sub-contractor's entitlements to
extension of time. The nature and range of possible "special
measures" should be discussed, together with basis of payment. This may be
a "lump sum" or series of "milestone payments", perhaps a "formula" basis of
premium time with a percentage to cover overheads and profit, additional
supervision and labour costs. This may
well be the time to seek a “wrap up deal” to resolve all existing contractual
issues. It is essential to include a list of provisos, with precise
requirements in terms of necessary access, information and instructions.
It is
vital to achieve and record the precise terms of the agreement before embarking
on the expenditure. Terms such as "reimbursement of reasonable
costs" are virtually meaningless.
All too many sub-contractors have learned this the hard way.
A
common mistake is to expend the resources, and claim retrospectively for costs
of “constructive acceleration”, on the basis that the main contractor’s failure
to issue an extension of time left the sub-contractor no option but to accelerate. Such a strategy is fraught with difficulty,
and seldom succeeds. Once the sub-contractor has served his purpose, there will
be little sympathy from other parties.
The financial implications of
acceleration can be massive, and this needs to be fully considered before
commencement of any such measures. As
to overtime working, a seven day week involves premium payments, and results in
fatigue, reducing productivity by approximately
20%, worsening with each week it continues.
An increased labour force
involves importation and incentive costs.
As density
of labour increases, so does congestion of workfaces , particularly if other
trades are working under similar conditions.
Supervision, co-ordination and control become much harder.
The common tendency to increase labour without comparable increases in
supervision exacerbates the situation.
Use of weekend labour from other sites involves premium payments and
lack of job knowledge, also absence of project commitment.
Use of a "shift" system will often result in wasteful “hand over” time for both men and supervisors. Accelerated working may actually cause an
increase in absenteeism during the normal week, operatives having earned double
time at the weekend. Interruptions
lasting more than half an hour have been proved to cause a productivity loss
throughout the remainder of any disrupted day.
In conclusion, any sub-contractor who embarks upon any
form of acceleration, without a satisfactory written agreement, is unlikely to
recover his costs.
John RUSSELL BI-MONTHLY SERIES
ARTICLE NO 11
DATED 5/10/02
FOR END OF OCTOBER 2002 “TIMES”
FILE biet11
John
Russell
Contracts
and Training Consultant
Cheshire CW4 7DP
Tel:
07770 986444
Email: swsubbie@globalnet.co.uk