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Constructive Acceleration Claim Denied - Time Extensions Were Prompt Enough; No Undue Owner Pressure
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March 12, 2007
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By Akin Alcitepe
Howrey LLP
The Army Corps of Engineers was engaged in a flood control project on the South Fork Zumbro River in Rochester, Minnesota. The Corps hired a contractor to excavate material from the bottom of Silver Lake, a shallow reservoir located along the river. Before the project began and to facilitate excavation of the lake bottom, the water level in the lake was lowered by about 8 feet, leaving the lakebed dry except for a small stream running through it.
The contractor intended to divert the remaining stream flow into a trench along the edge of the lakebed and construct an earthen dike to confine the water to the trench. The dike was designed to withstand a water flow of 800 cubic feet a second, a substantially higher rate than the average flow rate for Silver Lake, although the flow rate varied considerably and occasionally would reach much higher levels. Water flow in excess of 800 cubic feet a second could destroy the dike and flood the lakebed.
Before the contractor's work began, the Corps pointed out that the contractor's diversion system would be susceptible to damage by flow rates expected to occur between May and August and that delays due to such flows would not justify a weather-related extension of the contract completion date.
Shortly after the project began, Silver Lake began to experience high water flows because of wet weather in the region. The flow rate reached 1,320 cubic feet a second before completion of the contractor's diversion dike, damaging the dike and flooding the work site. The contractor spent most of the following two weeks repairing the dike, work it asserted was made more difficult than anticipated because high water flows continued throughout that period rather than receding as the contractor had expected. High water flows occurred again throughout July and August.
After the initial flooding, the contractor requested a time extension from the Corps. The contractor took the position that up to that point, and assuming a 12-day time extension, it still was on schedule to complete the work on time under the contract. The Corps denied the time extension request but, over the following months, granted several time extensions totaling 1 month on a project that was intended to take 3˝ months.
After completion of the contract, the contractor submitted a claim for constructive acceleration to the contracting officer, contending that the denial of reasonable extensions for high water flow during the contract period entitled the contractor to an additional $659,760 on a contract for $744,588. The contractor argued that time extensions granted after the fact by the Corps were not sufficient because upon initial denial of the time extension request by the Corps, the contractor had been forced to continue its operations at an additional cost.
The contracting officer denied the contractor's claim, and the contractor sued in the Court of Federal Claims. The court ruled that the contractor did not establish the government's liability based on constructive acceleration. The contractor appealed to the U.S. Circuit Court of Appeals for the Federal Circuit.
In the Court of Appeals, the contractor argued that although the high water conditions it experienced were causally related to the repeated overtopping of its dike and although it was responsible for the direct, foreseeable consequences of such overtopping, it should not have been held responsible for the continued high water conditions that prevailed for days after each topping rather than receding. The contractor further asserted that many of the time extensions granted by the Corps were useless because they were not granted on a timely basis. Finally, the contractor argued that the Corps forced it to accelerate its performance by pressuring it to work on days it should have been given a time extension. The contractor cited to a letter from the Corps urging the contractor to adhere to its schedule and advising the contractor that a failure to prosecute the work diligently would result in termination of the contract. The contractor also pointed to oral statements by the Corps as additional evidence of pressure to complete the work within the performance period.
The Court of Appeals affirmed denial of the claim. Fraser Construction Co. v. United States, 384 F.3d 1354 (Fed. Cir. 2004). It began by defining construction acceleration and setting out the elements that must be proved to recover for construction acceleration:
A claim of acceleration is a claim for the increased costs that result when the government requires the contractor to complete its performance in less time than was permitted under the contract. The claim arises under the changes clause of a contract; the basis for the claim is that the government has modified the contract by shortening the time for performance, either expressly (in the case of actual acceleration) or implicitly through its conduct (in the case of constructive acceleration), and that under the changes clause the government is required to compensate the contractor for the additional costs incurred in effecting the change..
A claim of constructive acceleration ordinarily arises when the government requires the contractor to adhere to the original performance deadline set forth in the contract even though the contract provides the contractor with periods of excusable delay that entitle the contractor to a longer performance period. Although different formulations have been used in setting forth the elements of constructive acceleration, the requirements are generally described to include the following elements, each of which must be proved by the contractor: (1) that the contractor encountered a delay that is excusable under the contract; (2) that the contractor made a timely and sufficient request for an extension of the contract schedule; (3) that the government denied the contractor's request for an extension or failed to act on it within a reasonable time; (4) that the government insisted on completion of the contract within a period shorter than the period to which the contractor would be entitled by taking into account the period of excusable delay, after which the contractor notified the government that it regarded the alleged order to accelerate as a constructive change in the contract; and (5) that the contractor was required to expend extra resources to compensate for the lost time and remain on schedule.
The court found that the overtopping of the dikes as designed by the contractor was foreseeable, as was the time needed to repair the dike and deal with the inundation. The court concluded that the contractor had failed to prove that it was entitled to more time extensions than it was granted.
The court stated that grants of time extensions need not be immediate and that the government is entitled to an opportunity to consider a time extension request. The court cited a case in which a time extension was not granted until 2˝ months after the request. The court noted that it is not unusual for the government and contractor to negotiate time extensions after the fact. The court also noted that Corps representatives participated in daily discussions about the days to be granted and that the number of days of extensions agreed to by the parties were then incorporated into contract modifications within a reasonable period of time.
On the contractor's allegations that the Corps' written and oral statements pressured the contractor to constructively accelerate its work, the court again ruled against the contractor. While an expression of concern about progress, combined with a refusal of extensions could be the equivalent of an order to accelerate, such expressions did not always constitute an order to accelerate, particularly if they came before the time when the contractor raised a specific and valid claim to an extension. Here, the court affirmed the trial court's ruling because it found that the Corps had not engaged in conduct that constituted an order to accelerate the work in the face of valid and particularized claims for additional time extensions.
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For more information about the issues covered in this report, please contact Akin Alcitepe in our Washington D.C. office at 202-383-6970 or at alcitepea@howrey.com or contact your Howrey attorney. For more information about Howrey's Construction Practice Group, click here.
©2007 Howrey LLP
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