CONTRACT DOCUMENTS
THAT CONSISTENTLY PRODUCE CHANGE ORDERS
INTRODUCTION:
As discussed in our article
Change
Orders-Methods to Avoid Turmoil, change orders are
responsible for the bulk of the problems and the bulk of the litigation
surrounding construction disputes. Few, if any, jobs conclude without
significant change orders and most construction contracts devote pages
to describing the appropriate procedure for authorizing, performing and
paying for change orders.
But while change orders may be inevitable due to the nature of
construction, there is no question they can be minimized if appropriate
precautions are taken in the planning for the project and the creation
of the construction documents. This article shall list several areas
that construction professionals should concentrate upon if they wish to
limit the problems that change orders can cause even the best run
project.
THE USUAL CULPRITS
-
Illegal
Restrictions;
-
Improvements in
Time;
-
Incomplete
Design;
-
Intention of the
Contract Documents;
-
Lack of Design
Discipline Coordination;
-
Latent
Conditions;
-
Owner Changes;
and
-
Updated
Information
1. Illegal Restrictions
Illegal restrictions arise when the designer either includes
requirements or deletes some option contrary to procedure outlined by
law. Errors and omissions of this type can force a contractor to
complete a portion of the work more expensively than otherwise would be
allowed.
A
common example of this type of interference is the use of a proprietary
specification on a public project to unreasonably restrict the
contractor's sources of supply. In such circumstances, the law may
provide that several sources of supply be permitted, and also mandate
the flexibility to allow a contractor to propose additional items as
equal to those listed. If a single product is listed on a public
project, it can be an indication that the specification has been
unlawfully restricted.
2. Improvements in Time
Change orders related to improvements in, or changes to, the time of
performance are relatively rare, and are more likely to be initiated by
the owner than by the contractor. Such change orders sometimes result
from the owner's need for an earlier certificate of occupancy or product
production date, and are sometimes related to the need to accelerate the
work to overcome delays. Even where associated with owner-caused delays,
if the proposed change order results in additional costs, it may be
difficult to get the owner to accept responsibility in the absence of a
schedule analysis.
Impact and acceleration can become major problems for the
contractor that greatly increase costs of construction.
3. Incomplete Design
Incomplete design occurs when a designer fails to identify the project
scope to the level sufficient to allow the contractor to adequately
price and execute the work. Deficiencies of this type are very common
and can appear anywhere in the contract documents; for example, failing
to provide a complete finish schedule or steel connection details, or
much more commonly, failing to provide the clear construction or
installation details necessary to perform the work.
The architect's failure to adequately define and represent the scope of
work in the contract documents is usually unintentional. However, it can
also be intentional, most obviously and commonly when the contract is
awarded based on schematic or design development designs. Cost-plus and
guaranteed maximum price contracts, rather than fixed price contracts,
are often used in these circumstances.
4. Intention of the Contract Documents
General and supplementary conditions often include provisions that refer
to the owner's intention to have, and/or the contractor's obligation to
provide, a ''complete project.'' Technical specifications will often
include clauses stating a similar objective, such as: ''It is the intent
to have a complete and operating system in every respect.''
Language that can be interpreted to unilaterally place design
responsibility on the contractor can cause problems. It may be the
owner's ''intent'' to have a complete and operating system, but it
becomes unreasonable when this kind of wording is intentionally used in
an attempt to make up for design flaws or incomplete design.
On the other hand, certain statements regarding the intent of the
documents can be legitimate. For example, a notation that the piping and
instrumentation diagrams are symbolic and diagrammatic in nature and are
only intended to be a general plant schematic, showing equipment, pipe
sizes, and flow would be consistent with industry custom and practice.
Owners and architects should clearly define the intention of the
contract documents, and contractors should endeavor to understand the
documents prior to contract execution.
5. Lack of Design Discipline Coordination
The architect typically manages and coordinates the individual designs
necessary to complete the facility. Problems often arise because
separate plans and details are developed independently, by separate and,
perhaps, unmanaged consultants. Designs are often completed without full
consideration for the other disciplines and with false assumptions.
Examples include:
-
The civil
engineer assumed that the architect would provide the finish floor
elevations and ADA access grades and routes. The architect assumed
the civil engineer would make these same provisions.
-
Even though the
sanitary line appeared to conflict with the column, the architect
left the drawings unchanged, assuming that it would get resolved in
the field or would be caught during shop drawing reviews.
-
The HVAC
drawings were issued without adequate regard for structural steel
locations.
-
Because the
engineer was under contract with the owner, rather than the
architect, the structural engineer's calculations and final roof
design did not account for the fact that the air handling units were
being relocated to the roof.
Such problems arise when the job of coordinating the respective designs
is performed improperly; either complete information is not given to the
design consultants or the individual designs were combined as a package,
without the benefit of proper design coordination.
6. Latent Conditions
Latent conditions, or latent defects, are hidden or unknown to the
contractor at bid time, such as:
-
Subsurface site
conditions that remained undetected due to inadequate soils testing;
and
-
Hidden
conditions in an existing facility, such as broken in-wall piping in
a renovation project.
The contractor should try to determine how contract language deals with
latent conditions, because provisions vary from form to form.
7. Owner Changes
Virtually every construction contract contains language that authorizes
the owner to make changes in the work. In many respects, owner-initiated
changes are easier to deal with because they are obvious, as compared to
hidden design defects. Owner changes may be prompted by the desire for
additional space, more luxurious finishes, an upgraded facility, or by
negative circumstances, such as project funding limitations or reduced
need that requires a reduction in the scope of work.
8. Updated Information
Changes resulting from new or updated technical information may provide
advantages for construction, depending on the timing of updated
information in relation to construction and the contractor's ability to
accommodate the changes. Improved information may include new or
improved methods to achieve a function. These types of positive
information will often result in contract scope changes that are easily
approved and processed by the owner. Often changes in availability or
price of materials can result in this type of required alteration in the
project.
PREDICTING THE UNPREDICTABLE
A veteran of
hundreds of projects once told the writer that the difference between a
professional contractor and a simple builder was the ability to adjust
to changing circumstances. “Construction jobs are 50% planning and 50%
adjusting to changes in plans…planning for the lack of planning….” He
would confront jobs much as a general would confront a battle, keeping
reserve resources ready to handle the surprises that would arise and to
meet unexpected challenges.
When new to
construction, the builder will expect that if just planned properly,
change orders will not occur and that a carefully prepared job will be
finished according to plan. Most experts known to this writer now insist
that flexibility and readiness to “go with the flow” mark the truly
effective builder and that the builder who does not factor change into
the job schedule, costing, and planning is courting real problems.
Again, war has its
appropriate motifs. An old saying of the generals is “No plan survives
contact with the enemy.” Perhaps the construction equivalent is, “No
job survives contact with reality.”
Which means that the
smart builder will do his or her best to look for likely areas of change
orders, take preemptive steps to limit them-but be prepared to
cheerfully adjust to them when they do arise and not put themselves in a
position in which a change order is simply impossible to implement.
And….as discussed
elsewhere in this web site…just make sure you do all the right paperwork
so that the change order you are adjusting to results in an appropriate
adjustment in your compensation.
And the first place
to look for the likely changes are in the contract documents described
above… |
