You may have heard the saying "The best laid plans.. often go awry".
The highway construction industry recognizes that it is unrealistic to
expect that a construction project can be built without changes to the
original project plans.
Although designers and engineers prepare project plans with diligence and great
care, unforeseen conditions, utility conflicts or unknown geology
are items that often can't be anticipated and factored into project
design and specifications. It may also become apparent after a construction
project has begun
that design alterations are needed to make the constructed work a better fit
for the field conditions.
When this happens on your construction project, the project contract needs to be
modified to accommodate the required changes.
However,if contract changes need to be approved as part of the federal funding
procedures. Properly executing contract changes is critical to a project success.
A change is any alteration to the original construction contract.
Change orders are negotiated agreements with the contractor that affect the cost,
schedule, design details or specification requirements, or any combination of these.
Not every agency uses the same terminology for contract changes.
Other common terms used to refer to contract changes are:
Change Order, Contract Change Order,
Supplemental Agreement, Contract Modification, Work Order
and Time Adjustment or Time Extension.
A Claim is also processed as contract change.
A claim
is formal request for additional compensation that is a step beyond the
normal change order process.
Claims are usually the result of unresolved modifications to a contract
that have been previously denied in the change order process.
Generally, the reason change orders are needed
is to make contract adjustments, such as plan or specification corrections,
or changes to cost or time allowed to complete the work.
Regardless of the reason for the change,
initiated change request and follow the appropriate procedures to obtain
approval by your oversight agency.
The oversight agency is either the State Department of Transportation or the
Federal Highway Administration.
Changes to a contract require the same level of approval as the initial
contract.
Upon receipt of the request for approval of a contract change,
the oversight agency will assess your request
to determine whether the proposed changes are eligible for continued
Federal-aid participation.
Depending on the magnitude of the proposed changes, the level of detail of
information needed for analysis may increase.
When developing a change request, at a minimum, be sure to assess these four
issues for every proposed change:
Why is the change necessary?
What will the impact be on the original "scope of work"?
Who is responsible for costs or delays?
Who should pay for the changes?
To ensure that proposed changes are allowable and accepted for your
federally funded project,
there are three activities that must occur.
Prepare documents that justify the need for the contract modification and
the proposed cost changes.
Examples of documentation include:
Accurate records that show the time,
labor, equipment and materials;
Cost estimates prepared by the agency that can be compared to the costs in the
proposed change orders submitted by the contractor;
Evaluation of construction schedule modifications needed and incorporate it
into the change; and
Court orders or other legal agreements that are used to resolve a claim.
A change is normally negotiated with the contractor.
The change order will reflect the final agreements on: What work will be
completed;
Any specifications that are modified, deleted, or added;
Cost revisions and time adjustments.
Finally,
a change order must have the approval of the oversight agency for it to be
accepted as part of a revised contract.
At this stage the oversight agency makes a determination of allowable Federal-aid
participation.
The actual procedures for approval of contract changes by an oversight agency
vary based on the impact the changes may have on a contract.
Refer to the Stewardship and Oversight Agreement between the State
DOT and FHWA or detailed procedures for all change orders.
Agreements for project funding between your agency and the oversight agency
also may contain separate procedures.
Change happens!
How you handle contract changes for your Federal-aid project
can substantially impact the funding participation for those changes.
Just remember,
whether you have a change to the time allowed for completion or make a major
specification modification,
make sure to get oversight agency approval for all proposed changes to
your federal aid contracts.