Construction Engineering 221 Contracts & Contractor Procurement Changes Standard practice (expect it – it’s a part of the process) Owner has the right.
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Transcript Construction Engineering 221 Contracts & Contractor Procurement Changes Standard practice (expect it – it’s a part of the process) Owner has the right.
Construction Engineering 221
Contracts & Contractor
Procurement
Changes
Standard practice (expect it – it’s a part of the
process)
Owner has the right (within original scope)
Change clauses – regulate how a change is suppose
to take place
Equitable adjustment of price and time
If not – claims and disputes procedures
Be careful – “changes” need to be changes
Who’s asking and are they in line w/ the scope of
work
Has the change clause been followed?
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Constructive Change
What is it?
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Constructive Change
A constructive change to the contract is the
result of an action, or lack of action, of the
owner or its agent that can be construed as
a change to the contract even though the
owner did not issue a formal, written change
order. When the contractor is orally
directed to do work different from, in
addition to, or in a different manner from
the mandated by the contract, a
constructive change has taken place and the
owner is responsible for additional cost or
time.
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EXAMPLES of CONSTRUCTIVE CHANGES
Owner gives verbal direction to change the
design of the project
Use wallpaper in lieu of paint on walls
Contractor usually is required to confirm
owner’s direction in writing with a request
for a formal contract change order for
additional costs
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Acceleration
What happens when the owner creates
expectations that the contractor must
complete the project at an earlier date?
Possible overtime costs to speed up work
OR
Add more work WITHOUT extending the
completion date (resulting overtime, etc…)
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Differing Site Conditions
Also known as “changed conditions” or
“concealed conditions”
No implied contractual right exists for the
contractor to collect for unforeseen
conditions -- it needs to be in the contract
Its called a “changed-condition clause”
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Changed Condition Clause
Why is a change-condition clause so
important?
the purpose of a change-conditions clause
is to reduce the contractor’s liability for
the unexpected and to mitigate the need
for including a large contingency
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Contingency
What is “contingency” and
what is its purpose in life?
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Contingency Definition
Contingency – something whose occurrence
depends on chance or uncertain conditions;
a possible, unforeseen, or accidental
occurrence.
In construction circles the “contingency” is
the sum of money that the contractor adds
to their bid that will cover any uncertainty
they forsee in the project.
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Owner-Caused Delays
Why are owner-caused delays a
concern to the contractor?
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Owner-Caused Delays
Three Reasons
1. Over all completion date – not usually a
problem (contractor gets extension)
2. “Ripple” effect – consequential damages or
impact cost from unchanged work that
resulted from project delays. (Can anyone
give an example?)
3. Work is deferred to another time period
where costs are higher. (wages & materials)
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Change Orders
Changes “scope of work”
Changes per what drawings & specifications
Itemized cost breakdown per trade
Contract time extensions (IF any)
Valid only when signed by BOTH owner &
contractor
Technically a new contract
Practically a revision to the original contract
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Value Engineering
What is Value Engineering?
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Value Engineering
Finding a better way to accomplish a
construction project at less cost
Can happen before and after the bid letting
Before – owner, designer and contractor
work together
After – value engineering incentive clause
Structure’s performance, safety, appearance
or maintenance
Contractor is able to share in cost savings
Planning, design and constructability
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What if……..
The contractor in his original estimate of the
project had planned to transport concrete
on site for a small pour with motorized
wheelbarrows. On the day of the pour the
contractor’s concrete pump is now available
and is able to switch projects and pump the
concrete rather than use wheelbarrows.
Is this value engineering?
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Is This Value Engineering?
NO
Any cost savings belongs to the contractor
This is not a design change
This is the contractor performing the work
more efficiently
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Examples of Value Engineering
Your turn
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Indemnification
Indemnification (hold-harmless clause)
Limited-Form
Intermediate-Form
Broad-Form
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Termination of the Contract
Material breach of contract
By owner – failure to make payments or causes
delays or owner is financially insolvent
By contractor – nonperformance, faulty
performance, not on schedule (not showing
reasonable progress)
Mutual agreement – both agree to end project
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Notice to Proceed
Formal notification by owner to contractor
to begin work
Establishes the first day “DAY 1” of the
schedule (within 10 days of N.T.P.)
A signed CONTRACT to build the project is
NOT a NOTICE TO PROCEED
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Subcontract Agreements
No contractual relationship between
subcontractor and owner
Retainage is usually the same as in the
prime contract – 10%
Approval by the owner – disapproval not
common
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Word to the Wise
“immediately in writing” (page 153)
“authorized in writing” (page 154)
“To proceed without written authorization
may make it impossible (page 154)
“promptly notify the owner in writing" (page
157)
Keep detailed and separate cost records of
the additional work involved. (page 157)
“contractor must keep careful and detailed
records” (page 158)
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Student Chapter – AGC
First meeting
Wednesday
Sept. 11
7:00 PM
Special membership deal
at first meeting only!
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