0. Delay, Disruption and Acceleration
Contract Management in International Construction
Delay, Disruption and Acceleration
Michael J.R. Kremer
Beijing, April 28, 2009

1. 1. Introduction
Time is of essence in basically every construction project
Yet, delays of some sort are general rule, rather than the exception
Consequence: claims for extension of time, issue of acceleration
Therefore, closer look to:
What are the obligations as to time in general?
When and how does acceleration become relevant?
Delay, Disruption and Acceleration · April 2009

2. 2. Contractor‘s obligations as to time
Modern construction contracts typically foresee three separate, but inter-related express obligations:
First obligation: Contractor to complete works by certain date or within specified period; possibly with stage or sectional completion obligation
Second obligation: Contractor to progress the works regularly and diligently
Third obligation: Contractor to prepare and work to an accepted program (work schedule)
Delay, Disruption and Acceleration · April 2009

3. 2.1 First obligation: specific date/period
In case of “period for completion”, identification of “commencement date” as well as periods crucial
e.g.: x months from the “Commencement Date”
clarification of “days” and “weeks”
If no date or period foreseen: obligation to complete “by a reasonable time”
Standard form contracts regularly provide for express obligation
Delay, Disruption and Acceleration · April 2009

4. 2.1 First obligation: specific date/period (cont’d)
Effect of specific date of completion
typically no qualification as of the essence
clauses for extension of time or liquidated damages prevent such interpretation
Specific date of completion of little assistance in management of the project
Employer wants to take action early to avoid late completion
stage or sectional completion obligations and liquidated damages give only limited recourse
Delay, Disruption and Acceleration · April 2009

5. 2.2 Second obligation: “progress regularly”
If specific date for completion agreed, no “implied” second obligation
Contractor has right to plan, execute and progress the works
severe evidential difficulties for Employer
Therefore: express obligation (regularly included in standard form contracts)
Delay, Disruption and Acceleration · April 2009

6. 2.2 Second obligation: “progress regularly” (cont’d)
Effect of express obligation to proceed regularly and diligently
“Proceed continuously, industriously and efficiently with appropriate resources so as to progress steadily towards completion substantially in accordance with the contract.”
Contractor may not slow down even if ahead in time schedule
Employer may have remedy of damages, even if completed in time, if Employer can show “loss”
Delay, Disruption and Acceleration · April 2009

7. 2.3 Third obligation: program
“program/work schedule” no legal term
Requires basic information of activities or operation with a list of dates for commencement and completion of respective activities
Types of programs:
Bar Chart Network Program Line of Balance
Delay, Disruption and Acceleration · April 2009

8. 2.3 Third obligation: program (cont’d)
Potential roles of the program:
Monitor role:
milestone program
progress program
prediction program
Dynamic role
management program
compensation program
Delay, Disruption and Acceleration · April 2009

9. 3. Employer‘s obligations as to time
Completion of obligations specified in the contract
e.g. supply information, provide material, execution of certain pre-condition works, permits, appointment of engineer etc.
at times specified in program
or reasonable times with regard to execution of works
Typically no obligation to comply with approved program, rather obligation not to hinder Contractor
implied obligation not to hinder
implied obligation to cooperate
Delay, Disruption and Acceleration · April 2009

10. 4. Acceleration What does the term mean? What is the benchmark?
Basically, tow situations relating to the overall works:
Contractor is required to finish earlier than the contractual date
variation of the contract, i.e. constructive order/change order
constructive acceleration
Contractor is likely to complete later than the contractual completion date
acceleration to reduce delays
Delay, Disruption and Acceleration · April 2009

11. 4.1 Constructive acceleration
typical example for constructive acceleration claim:
Equipment procured by Employer from a third-party is delivered late. Contractor’s words are delayed. Contractor applies for Extension of Time (EOT). Interim assessment of the Engineer denies EOT; final review still pending. Employer presses Contractor to increase resources to make up for the delay.
Delay, Disruption and Acceleration · April 2009

12. 4.1 Constructive acceleration (cont’d)
Contractor‘s stark choice:
Continue in hope to prove EOT or “accept” to be in default temporarily and take steps to mitigate
Nature of problem: contract’s EOT procedures and contractor’s “temporary default”
Conclusion: Constructive acceleration claim presents significant legal difficulties; claim for disruption may be possible with fewer legal difficulties
Delay, Disruption and Acceleration · April 2009

13. 4.2 Acceleration to reduce delays
The issue of right or obligation to reduce the effect of qualifying delays may arise in three ways:
Contractor’s may have right to choose how to deal with a qualifying delay and whether to accelerate or not and to recovery on the basis of this right;
Contractor may be entitled to EOT and any associated loss only to the extent that he has mitigated the effect of the delays;
Contractor may be under an obligation to progress the works including an express obligation to mitigate delays and the failure to do so prevents remedies of EOT/associated losses.
Delay, Disruption and Acceleration · April 2009

14. 4.2 Acceleration to reduce delays (cont’d)
Mitigation of delay by acceleration?
Contractor reacts to the qualifying delay
most contracts provide for EOT provisions and express terms for agreement for acceleration
generally no right of contractor to accelerate and recover costs (except if “constructive order”)
“reasonabless”-argument
Contractor does not react to the qualifying delay
Generally no obligation where EOT provisions apply
Mitigation by managing delay?
obligation to re-plan recourses and activities
obligation to progress “regularly & diligently” includes managing of effects of delay
Delay, Disruption and Acceleration · April 2009

15. 4.3 Obligation to accelerate?
Differentiation by reason for delay:
Delay not caused by Contractor, i.e. entitled to EOT
no obligation; only by means of separate agreement
Delay caused by Contractor:
in principle no obligation (discretion of contractor in regard of his own culpable delay)
contract may provide power to order Contractor to adopt acceleration measures
“Indirect” obligation
Contractor must weigh costs of acceleration, chance of recovery against liquidated damages potentially levied against him
Delay, Disruption and Acceleration · April 2009

16. 4.4 Entitlement to acceleration
Contractor may perceive commercial advantage to accelerate; generally only bound by completion date
Generally no obligation of the Employer to co-operate
Exception: entitlement of acceleration provided in the contract and bound to program
Delay, Disruption and Acceleration · April 2009

17. 5. Conclusion Time is of the essence in construction projects
The effort of planning, negotiating and drafting does not end at providing sophisticated terms for the event of delays by
finding a realistic completion date,
incorporating EOT provisions and delay related liquidated damages
Instead, the same though and sophistication should be put in addressing delays in terms of acceleration, rather than only dealing with them in terms of EOT and liquidated damages.
Delay, Disruption and Acceleration · April 2009

18. Delay, Disruption and Acceleration
Contract Management in International Construction
Beijing, April 28, 2009
Delay, Disruption and Acceleration
Clifford Chance, Königsallee 59, Düsseldorf, Germany
© Clifford Chance 2009
Clifford Chance Partnerschaftsgesellschaft von Rechtsanwälten, Wirtschaftsprüfern, Steuerberatern und Solicitors · Sitz: Frankfurt am Main · AG Frankfurt am Main PR 1000
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