The governing board of a school district may authorize changes in plans and specifications and order extra work performed without competitive bidding provided the cost of the extra work to be performed does not exceed the limit of expenditures allowed without bids or does not exceed ten percent of the original contract price, whichever is greater.
Public Contract Code section 20118.4 provides as follows:
a) If any change or alteration of a contract governed by the provisions of Article 3 (commencing with Section 39643) of Chapter 4 of Part 23 of the Education Code is ordered by the governing board of the district, the change or alteration shall be specified in writing and the cost agreed upon between the governing board and the contractor. The board may authorize the contractor to proceed with performance of the change or alteration without the formality of securing bids, if the cost so agreed upon does not exceed the greater of:
(1) The amount specified in Section 20111 or 20114 whichever is applicable to the original contract; or
(2) Ten percent of the original contract price.
b) The governing board of any school district, or of two or more school districts governed by governing boards of identical personnel, having an average daily attendance of 400,000 or more as shown by the annual report of the county superintendent of schools for the preceding year, may also authorize any change or alteration of a contract for reconstruction or rehabilitation work other than for the construction of new buildings or other new structures, where the cost of the change or alteration is in excess of the limitations in subdivisions (a) and (b) but does not exceed 25 percent of the original contract price, without the formality of securing bids, when such change or alteration is a necessary or integral part of the work under the contract and the taking of bids would delay the completion of the contract. Changes exceeding 15 percent of the original contract price shall be approved by an affirmative vote of not less than 75 percent of the members of the governing board.
a) If any change or alteration of a contract governed by the provisions of this article is ordered by the governing board of the community college district, such change or alteration shall be specified in writing and the cost agreed upon between the governing board and the contractor. The board may authorize the contractor to proceed with performance of the change or alteration without the formality of securing bids, if the cost so agreed upon does not exceed the greater of:
(1) The amount specified in Section 20651 or 20655, whichever is applicable to the original contract; or
(2) Ten percent of the original contract price.
b) Where work not included in the original plans is being added to a project and where the resulting change in the contract price is in excess of ten percent of the original contract price, such change is subject to competitive bidding requirements unless the change is being made to meet an emergency or competitive bidding would be useless or disadvantageous.
Sections 20118.4 and 20659 are consistent with case law decided prior to their enactment. For example, in Clinton Constr. Co. v. Clay (1917) 34 Cal. App. 625, a city charter expressly permitted changes in the plans and specifications for a school building to be made after the contract for its construction had been let in accordance with a provision requiring contracts involving more than $500 to be let to the lowest bidder. It was held that the board of education could not, without again calling for bids, enter into a new or supplemental contract with the original contractor involving more than $500 for district work not even mentioned in the plans and specifications of the original contract.
To permit changes or alterations to contracts in excess of the ten percent limitation without advertising and letting to the lowest bidder would be in direct conflict with the statute and would present opportunities for favoritism and abuse. For example, if such changes were allowed, a contract might be lawfully made by a school district for one project and then by virtue of the ability to make changes, the lowest bidder could be placed in the advantageous position of performing work wholly different from that which was submitted to bidders. Such a practice would clearly be inconsistent with the requirement for competitive bidding.
Nevertheless, in unusual circumstances, project changes necessitated by unforeseen problems may allow changes to be made without competitive bidding even though the amount of the change would be in excess of ten percent of the original contract price. Under prior case law, it was held that where unseen emergencies arise after the letting of a contract and the beginning of work, additional work to address the emergency may be authorized without a new call for bids. Bent Bros., Inc. v. Campbell, (1929) 101 Cal. App. 456. In Los Angeles Dredging Co. v. Long Beach (1930) 210 Cal. 348, it was held that an emergency might properly be said to exist so as to dispense with the competitive bidding requirement where a contractor, having entered into a dredging contract with a city, was required to place mains in the streets for the conveyance of dredging materials. The city paid an additional sum over the contract price for the transportation of dredged materials because of the relocation of the mains, where it was found that the deposit of the dredged materials was polluting the water at a public bathing place when the dredge was running and the normal leakage and overflow of the mains in the streets was rendering them unsafe.
It should be noted that in the cases where changes have been necessitated by unforeseen emergencies, the courts have made a distinction between amendments or alterations in the plans and specifications which do not affect the material character of the work and those changes or alterations which constitute substantial modifications or changes in the character and quality of the work to be performed. Where changes are only incidental, the contract is held unaffected and further publication and letting of bids has not been required. Where changes are substantial, however, a different conclusion has been reached. Bent Bros., Inc. v. Campbell, supra, 101 Cal. App. at 456; Clinton Constr. Co. v. Clay, supra, 34 Cal. App. at 625. Where the work is entirely distinct, independent and apart from any and all work contemplated and provided for under the original contract, competitive bidding is required.
Circumstances also sometimes arise which make competitive proposals are unavailing in part because they are the result of unforeseen conditions and only the contractor on the site with forces fully engaged can reasonably be expected to handle the site conditions. Courts have determined that contractors may recover in a contract action for extra work or expenses necessitated by the conditions on the project being other than as represented. Souza & McCue Constr. Co. v. Superior Court of San Benito County (1962) 57 Cal. 2d 508, 510. Many attorneys believe this is an exception to the requirement that a change order not exceed ten percent of the contract price. Additionally, there is a more general common law rule that if there is no public benefit to bidding, bidding is not required. (See discussion of Graydon, and related cases in section I(C)(1) of this Guide.)
It has been said that this principle is mainly based on the theory that misleading plans and specifications are the responsibility of the public agency, not the contractor. In fact, Public Contract Code section 1104 states in part, “No public entity . . . shall require a bidder to assume responsibility for the completeness and accuracy of architectural or engineering plans and specifications on public works projects, except on clearly designed design build projects. . . . Nothing in this section shall be construed to prohibit a local public entity, charter city, or charter county from requiring a bidder to review architectural or engineering plans and specifications prior to submission of a bid, and report any errors and omissions noted by the contractor to the architect or owner. The review by the contractor shall be confined to the contractor's capacity as a contractor, and not as a licensed design professional.”
Government Code section 4215 also provides that the public entity take responsibility for problems which arise when specified utility facilities on the site of a construction project are not identified by the public agency in the plans and specifications. The public entity must compensate the contractor accordingly whether the changes are within or outside of the ten percent change order limitation. Furthermore, under section 4215, the contractor cannot be assessed liquidated damages when delays arise from such problems. (See also Pub. Cont. Code § 7104 regarding subsurface latent physical conditions involving excavations deeper than four feet and the requirement for a change order for such conditions; see Guide, Section I below.)
All of the circumstances and facts surrounding the consideration of a project change necessitated by unforeseen problems whether due to site conditions or problems with plans and specifications should be carefully considered and reviewed with legal counsel before determining that changes in excess of ten percent should be permitted. Part of the consideration process must take into account whether the contractor acted reasonably. The
rule in the Souza case was not intended to burden public entities with liability for the cost of changes where the contractor underbids due to lack of diligence in examining specifications and plans which are themselves accurate. Jasper Construction, Inc. v. Foothill Junior College Dist. (1979) 91 Cal. App. 3d 1, 10.