ACCELERATION OF CONSTRUCTION PROJECTS
I. Introduction. II. Economic effects of acceleration on the construction budget. III. Acceleration in the construction contract. IV. Acceleration regulated by the Law. V. Parties Agreement to accelerate the construction work VI. Conclusions.
"Accelerating" the execution of construction works is a frequent occurrence in construction projects which refers to the actions taken by the contractor to advance the execution of one or more activities that were already scheduled, in order to complete the work in a shorter time than the originally agreed.
The actions described above may include one or more of the following: A. Materials, equipment, tools and/or labor increase B. Modification of the work program C. Changes in the executive project or design.
It is also important to specify that the "acceleration" acting corresponds exclusively to the contractor. However, this action can be proposed by either: A. Direct instruction of the contracting party or B. Proposal of the contractor.
II. Economic effects of acceleration on the construction budget.
When an "acceleration" event occurs, an economic impact is generally registered. Specifically, when increases in labor, materials, tools, etc. happen, they imply an investment of resources that alter the originally programmed flow. To understand this better, let's analyze a real case example involving the construction of a paper mill:
The parties agreed to demolish an old mill in order to build a new one. The contractor was responsible only for its construction, and the asset owner was responsible for design and financing.
During the construction phase, the owner had to change the original design given that the contractor found many concrete elements in the subsoil -which caused the suspension of the work-. To compensate this event’s derived delay, the contractor -following the owner’s request and without submitting a budget- accelerated the construction to complete the work within the originally agreed timeframe.
To achieve this, the contractor increased the labor force and the demolition machinery using her own financial resources, increasing consequently the materials and work tools in the activities after the demolition. In other words, the contractor used her own money to finance the construction acceleration, yet poorly documenting this entire process, which meant a disregard of the contract’s clear statement that all change orders needed to be written and signed by the owner's legal representative and the supervising company.
Even though the contractor did have records of the expenditures she made, there was insufficient precision to determine that these expenditures were applied specifically to the construction of the paper mill. In sum, due to the lack of an agreement and budget to "accelerate" the work, it was necessary to prove both the existence of the "acceleration" and its economic impact. The contractor was able to materially prove the economic impact -with the material proof of the expenditures- but there was no conclusive proof that such expenditures were applied to the work described. Finally, the matter went to a controversy in which the contractor only recovered a minimal part of what she invested.
III. Acceleration in the construction contract.
In Mexican public construction contracts, whether public or private, clauses related to "acceleration" are generally not agreed upon. The use of "model" contracts such as FIDIC, NEC, AIA, CONSENSUSDOCS, is not common. Usually, in public construction contracts, each contracting entity uses its own model -which complies with the provisions of the Public Works and Related Services Law and its regulations-. In private contracts, specifically designed models for the project are used. From the previously mentioned types of contracts, the NEC4 establishes that any of the contracting parties may propose the "acceleration" of the project through a quotation in three weeks, and the acceptance or rejection in three more weeks. The relevant aspect of this type of stipulations is that in this type of contract, the figure of "acceleration" is recognized as an event with economic effects which deviates from the originally agreed term but can be agreed by the parties before it happens.
IV. Acceleration regulated by law.
The Mexican laws governing public or private construction contracts do not specifically provide for "acceleration". Hence, neither party may invoke the application of any law, regulation or rule as an action or exception in construction claims for "acceleration. However, the laws do regulate damages for contract breach and changes to the originally agreed upon term and amount.
V. Parties Agreement to accelerate the construction work.
When neither the contract nor the law regulates the hypothesis of "acceleration" of the work, but during the execution of the project the need for it arises, the parties may agree to it by means of a written agreement that establishes: A. The need’s origin to accelerate the work. B. The effects on the agreed amount and execution period. C. The actions and measures to be implemented to "accelerate" the work. D. The new execution program. E. The budget with an "acceleration" cost breakdown F. The measures and penalties for delay in the execution of the "accelerated" program.
As observed, when the material needs to "accelerate" the work exists, the parties can reach an agreement that does not break the contractual equilibrium, and that allows them to achieve a common goal. If each one assumes their responsibility derived from a new agreement that modifies the original terms, the need of a dispute is minimized.
- “Acceleration” is a figure that implies a deviation from the originally agreed terms.
- Economic quantification has two perspectives: A. Forensic. When the event has already happened and in order to measure its impact, a method -which includes gathering all the evidence and proofs derived from it- must be used to quantify the economic impact it produced. B. Agreed. When the parties agree on the event beforehand, fixing in advance the impact on the time and cost of the pending execution work.
- “Acceleration” in Mexican laws and public contracts is not regulated, in Mexican private construction contracts it is generally not agreed either.
- To demonstrate the "acceleration" and its economic impact over an already implemented or uncompleted project i.e., forensically, a method of quantification and costing of existing material evidence must be used.
- If you need advice on how to demonstrate and quantify an "acceleration" event or to request a quote for acceleration, our team of Construction Law Engineers and Lawyers is available to assist you.
Construbufete Juridico S.C.