Making Changes on the Construction Project


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Slideshow discussing AIA, EJCDC, and ConsensusDoc form construction contracts

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Making Changes on the Construction Project

  1. 1. Making Changes and Resolving Disputes During The Construction Project       Melissa Dewey Brumback Ragsdale Liggett PLLC [email_address]      
  2. 2. 1.  Spells out rights & responsibilities 2.  Protects from others' performance 3.  Establishs procedure for changes 4.  Courts will apply and enforce     <ul><li>Importance of Contracts </li></ul>
  3. 3. Types of Contracts   <ul><li>1.  Oral contract    </li></ul><ul><li>      (&quot;handshake&quot;) </li></ul><ul><li>  </li></ul><ul><li>2.  Proposal or Estimate </li></ul><ul><li>  </li></ul><ul><li>3.  Written Contract </li></ul><ul><li>     a.  Form contract </li></ul><ul><li>     b.  Other contract   </li></ul><ul><li>  </li></ul>
  4. 4. Types of Change Contracts can address: <ul><ul><li>additional/reduced scope of work </li></ul></ul><ul><ul><li>material spec changes </li></ul></ul><ul><ul><li>defective plans/specs </li></ul></ul><ul><ul><li>poor performance by others </li></ul></ul><ul><ul><li>scheduling changes  </li></ul></ul><ul><ul><li>sequence of work changes </li></ul></ul><ul><ul><li>acceleration/suspension </li></ul></ul><ul><ul><li>unexpected site conditions  </li></ul></ul><ul><li>   </li></ul>
  5. 5. Changes Prior to Contract Execution <ul><li>  </li></ul><ul><li>1.  The Form Contract </li></ul><ul><li>  </li></ul><ul><li>2.  Scope of Services </li></ul>
  6. 6. Form Contracts <ul><ul><li>  American Institue of Architects (AIA) </li></ul></ul><ul><ul><li>Engineering Joint Contracts Doc. Comm. (EJCDC) </li></ul></ul><ul><ul><li>Consensus DOCS </li></ul></ul><ul><ul><li>Constr. Owners' Assoc. of America (COAA) </li></ul></ul><ul><ul><li>Assoc. General Contractors of America (AGC) </li></ul></ul><ul><ul><li>Design-Build Institute of America (DBIA)  </li></ul></ul><ul><li>   </li></ul>
  7. 7. Form Contracts <ul><ul><li>Terms well defined </li></ul></ul><ul><ul><li>Familiarity </li></ul></ul><ul><ul><li>Court Decisions </li></ul></ul><ul><ul><li>Not as flexible </li></ul></ul><ul><li>   </li></ul>
  8. 8. With Every Contract: <ul><ul><li>changes of scope?             </li></ul></ul><ul><ul><li>notification requirements? </li></ul></ul><ul><ul><li>dispute resolution if can't agree?    </li></ul></ul>
  9. 9. Scope of Services <ul><li>   </li></ul><ul><ul><li>Well-defined </li></ul></ul><ul><ul><li>Spell out assumptions </li></ul></ul><ul><ul><li>Excluded Services </li></ul></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>  </li></ul>
  10. 10. Changes During Construction   <ul><li>  </li></ul>
  11. 11. The Contract &quot;Change&quot; Clause <ul><ul><li>Mechanism to deal with change on construction project </li></ul></ul><ul><ul><li>Allows flexibility for site conditions & other unknowns </li></ul></ul><ul><ul><li>In all standard form contracts </li></ul></ul><ul><ul><li>Should include in any other contracts </li></ul></ul>
  12. 12. When terms are agreed to:   <ul><li>AIA A201 at 7.2.1:  </li></ul><ul><li>   </li></ul><ul><ul><li>Written change order signed by owner, contractor & architect </li></ul></ul><ul><ul><li>Specifies money and time adjustments </li></ul></ul>
  13. 13. When terms are agreed to:   <ul><li>Consensus DOCS 200 at 8.1.2: </li></ul><ul><li>   </li></ul><ul><ul><li>Written change order signed by owner & contractor only </li></ul></ul><ul><ul><li>Specifies money and time adjustments </li></ul></ul>
  14. 14. When terms are agreed to:   <ul><li>   EJCDC C-700 at 10.03: </li></ul><ul><li>   </li></ul><ul><ul><li>Written change order signed by owner & contractor upon Engineer's recommendation </li></ul></ul><ul><ul><li>Specifies money and time adjustments </li></ul></ul><ul><ul><li>Also addresses changes where time/money are in dispute </li></ul></ul>
  15. 15. When terms cannot be agreed upon: <ul><li>  </li></ul><ul><li>AIA A201 at 7.3.3: </li></ul><ul><li>  </li></ul><ul><li>Construction Change Directive (CCD) </li></ul><ul><li>  </li></ul><ul><ul><li>mutual acceptance of lump sum </li></ul></ul><ul><ul><li>unit prices stated in contract </li></ul></ul><ul><ul><li>cost in &quot;a manner agreed upon&quot; </li></ul></ul>
  16. 16. When terms cannot be agreed upon  (Partial Payment): <ul><li>  </li></ul><ul><li>AIA A201 at 7.3.9: </li></ul><ul><li>  </li></ul><ul><ul><li>Architect makes interim determination for monthly certification </li></ul></ul><ul><ul><li>Claims can be asserted later </li></ul></ul>
  17. 17. When terms cannot be agreed upon: <ul><li>  </li></ul><ul><li>Consensus Docs 200 at 8.2.1 and 8.2.2:     Interim Directed Change </li></ul><ul><li>  </li></ul><ul><li>Concensus Docs 200 at 8.3.3:   </li></ul><ul><li>Owner pays 50% of Contractor's estimate pending final determination </li></ul><ul><li>  </li></ul>
  18. 18. When terms cannot be agreed upon: <ul><li>  </li></ul><ul><li>EJCDC C-700 at 12.01.C.2: </li></ul><ul><li>  </li></ul><ul><li>Directives dealt with in CO process </li></ul><ul><li>  </li></ul><ul><ul><li>Payroll and labor: 15% </li></ul></ul><ul><ul><li>Payment to subs:  5% </li></ul></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>  </li></ul>
  19. 19. Authority to Issue Contract Changes:   <ul><li>  </li></ul><ul><li>  </li></ul><ul><li>Reserved for Owner </li></ul><ul><li>  </li></ul><ul><li>Exception: minor changes    </li></ul><ul><li>  </li></ul>
  20. 20. What if there is no signed change order/directive?   <ul><li>  </li></ul><ul><li>May be out of luck  </li></ul><ul><li>  </li></ul><ul><li>Federal project: definitely out of luck </li></ul><ul><li>  </li></ul><ul><li>May qualify for equitable theories of relief (i.e., the court may save you from yourself) </li></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>  </li></ul>
  21. 21. Exceptions to Written Authorization Requirement:   <ul><li>  </li></ul><ul><li>Implied Authority (principal-agent) </li></ul><ul><li>  </li></ul><ul><li>Ratification (owner knowingly accepts) </li></ul><ul><li>  </li></ul><ul><li>Oral Modification to Contract </li></ul><ul><li>(not on Federal contracts)  </li></ul><ul><li>  </li></ul><ul><li>Do NOT rely upon!  </li></ul><ul><li>  </li></ul>
  22. 22. Types of Changes     <ul><li>  </li></ul>
  23. 23.     Ordered Change   v. Constructive Change     <ul><li>  </li></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>   </li></ul><ul><li>  </li></ul>
  24. 24. Issues with Constructive Changes:   <ul><li>  </li></ul><ul><li>Cannot be used where express provision applies to the extra work </li></ul><ul><li>  </li></ul><ul><li>Compensation: based on value to owner, not costs to contractor </li></ul><ul><li>  </li></ul><ul><li>Document costs to prove </li></ul><ul><li>  </li></ul><ul><li>  </li></ul>
  25. 25. Requirements for Making Compensable Contract  Changes     <ul><li>  </li></ul>
  26. 26. Notification <ul><li>  </li></ul><ul><li>  </li></ul><ul><li>In writing  (requirement may be waived) </li></ul><ul><li>  </li></ul><ul><li>As soon as aware! </li></ul><ul><li>  </li></ul>
  27. 27. Timlieness of Notice <ul><li>  </li></ul><ul><ul><li>14 days  (Consensus Docs) </li></ul></ul><ul><ul><li>  </li></ul></ul><ul><ul><li>21 days (AIA) </li></ul></ul><ul><ul><li>  </li></ul></ul><ul><ul><li>30 days (EJCDC)   </li></ul></ul><ul><li>  </li></ul><ul><li>  </li></ul>
  28. 28. Documentation of Change <ul><ul><li>description of the changed work </li></ul></ul><ul><ul><li>number of days the work is extended </li></ul></ul><ul><ul><li>amount to be compensated </li></ul></ul><ul><ul><li>signature and date of owner, architect, and contractor </li></ul></ul><ul><ul><li>back-up proposals, invoices, tickets, logs, etc. </li></ul></ul>
  29. 29. Liability Issues     <ul><li>  </li></ul>
  30. 30.   <ul><li>Waiver </li></ul><ul><li>  </li></ul><ul><li>  </li></ul>
  31. 31. Standard of Care <ul><li>In acceptance with standard of others employed in same profession-- &quot;reasonableness&quot; </li></ul><ul><li>  </li></ul><ul><li>Indemnity Issues   </li></ul><ul><li>  </li></ul>
  32. 32. Oral Modifications <ul><li>By conduct or practice </li></ul><ul><li>  </li></ul><ul><li>Where owner aware and architect orders work  (estoppel)   </li></ul><ul><li>  </li></ul><ul><li>Again:  Do NOT rely upon! </li></ul>
  34. 34. Site Conditions <ul><li>   </li></ul><ul><ul><li>Constructive change  </li></ul></ul><ul><ul><li>Mutual mistake </li></ul></ul><ul><ul><li>Cardinal change </li></ul></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>  </li></ul>
  35. 35. Site Conditions <ul><li>   </li></ul><ul><li>  </li></ul><ul><li>Removal of &quot;changed condition&quot; clause </li></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>  </li></ul>
  36. 36. Disruption <ul><li>    </li></ul><ul><li>Suspension of Work by Owner </li></ul><ul><li>  </li></ul><ul><li>Discretionary </li></ul><ul><li>Contract amount and time adjusted </li></ul>
  37. 37. Delay on the Project     <ul><li>  </li></ul>
  38. 38. Excusable Delay <ul><ul><li>Not foreseeable </li></ul></ul><ul><ul><li>  </li></ul></ul><ul><ul><li>Not controlable (&quot;act of God&quot;) </li></ul></ul><ul><ul><li>  </li></ul></ul><ul><ul><li>Time extension only  </li></ul></ul>
  39. 39. Compensable Delay <ul><li>Caused by Fault </li></ul><ul><li>  </li></ul><ul><li>Time extension & money </li></ul><ul><li>  </li></ul><ul><li>Actual damages must be proven </li></ul><ul><li>   </li></ul><ul><li>&quot;No damage for delay&quot; provision limits recovery to time only </li></ul>
  40. 40. Compensable Delay:  Indirect Damages <ul><li>Overhead, interest, profits, rents, equipment idle time, mobilization, increased material costs, etc. </li></ul><ul><li>  </li></ul><ul><li>Reoverable if not speculative </li></ul><ul><li>  </li></ul><ul><li>May be limited/waived by contract </li></ul><ul><li>(Form contracts waive or limit)  </li></ul>
  41. 41. Concurrent Delay <ul><li>Caused by Fault of more than one party </li></ul><ul><li>  </li></ul><ul><li>Time extension & money only if allowed by contract </li></ul><ul><li>  </li></ul><ul><li>Actual damages must be proven </li></ul><ul><li>   </li></ul><ul><li>  </li></ul>
  42. 42. Delay by other Primes <ul><li>All contractors owe duty to not delay/hinder any other party </li></ul><ul><li>  </li></ul><ul><li>Includes design team </li></ul><ul><li>  </li></ul><ul><li>No need for contractual privity on state multi-prime contracts </li></ul>
  43. 43. Acceleration <ul><li>Expediting work </li></ul><ul><li>  </li></ul><ul><li>Trade stacking </li></ul>
  44. 44. Avoiding contract provisions <ul><ul><ul><ul><li>Impossibility </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Mutual Mistake </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Duty to Disclose </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Breach of Warranty (Spearin doctrine)   </li></ul></ul></ul></ul>
  45. 45.     <ul><ul><li>Melissa Dewey Brumback </li></ul></ul><ul><ul><li>Ragsdale Liggett PLLC </li></ul></ul><ul><ul><li>Raleigh, North Carolina </li></ul></ul><ul><ul><li>  </li></ul></ul><ul><ul><li>919-881-2214 (direct) </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>  </li></ul></ul><ul><ul><li>www. constructionlawnc .com </li></ul></ul><ul><ul><li>  </li></ul></ul>