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Agenda
z Tools to Prevent Change Orders
z 4 Elements of Change Orders
z Authorization of Change Orders
z Reasons for Change Orders
z Appropriate Uses of Change Orders
z Cardinal Changes
z Review and Approval Process
z Evaluation of Change Order Requests
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Tools to Prevent Change Orders
z Clear Plans and Specs z Pre-bid site inspections z Addenda
z Claims of Error z Partnering
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4 Elements of Change Orders
z
Scope of Work
z
Price
z
Time
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Authorization of Change Orders
z Authorize before work is performed z Field Authorizations (Field Orders) z Unilateral Change Orders
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Advantages of Work by Change Order
z Speeds up the process
z Dealing with known contractor
z Separate plans and specs not needed
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Reasons for Change Orders
Additional Work
Additional Work consists of work that must be undertaken to meet the contract requirements and without which the work requested in the original contract could not be completed.
Extra Work
Extra Work consists of work that is outside and entirely independent of the contract. Essentially, it is work that need not be performed in order to satisfy the terms of the original drawings and specifications.
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Appropriate Uses of Change Orders
z Unforeseen conditions
z Design errors, deficiencies, or defects z Design changes requested by Owner z Increased quantities
z Upgrading materials
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Appropriate Uses of Change Orders
z Force majeure
z Regulatory changes
z Safety or environmental issues z Emergency work
z Additive, Deductive, or Alternate work z Negotiated claim settlement
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Appropriate Uses of Change Orders
z Additional work of the same type
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Cardinal Changes
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Problems with Cardinal Changes
z
Non-competitive pricing
z
Violates intent of competitive bidding law
zContractor may refuse to perform
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Examples of Cardinal Changes
z Planned as a separate project z Project at different location
z Different nature of work
z Work not reasonably anticipated z Changes basic character of project z Could be bid as a separate project
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Other Problematic Change Orders
z
Additive, deductive, alternate work
impacting the bidding process
z
Deductive Change Order immediately
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Review and Approval Process
z
Proposal
z
Owner response
z
Claim
z
Alternate dispute resolution
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Evaluation of Change Order Requests
z Risk allocation
z Standards for pricing Change Orders z Owner’s dual responsibility
z What do contract documents require?
z What could the contractor have reasonably anticipated?
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3 Methods for Establishing Price
z
Lump Sum (Fixed Price)
z
Unit Price
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Lump Sum (Fixed Price)
z Labor
z Materials z Equipment
z Small tools and consumables z Overhead
z Profit
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Labor
z
Based on:
–
Basic wage and benefits
–
Worker’s Comp premiums
–
FICA
–
Travel allowance (if applicable)
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Materials
z
Based on:
–
Actual known costs
–
Supplier quotations
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Equipment
z Based on:
– Actual invoice cost
– Industry standards such as
z AGC/WSDOT Equipment Rental Agreement
z Utilities and Transportation Commission for trucks used on highways
z National Electrical Contractors Association for equipment on electrical work
z Mechanical Contractors Association for equipment used on mechanical work
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Allowances
z
Small tools
– (percentage of direct labor costs)
z
Expendables and consumable supplies
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Overhead
z Costs attributable to direct and indirect delay, acceleration, or impact
z Non-craft labor
z Temporary construction facilities
z Field engineering
z Schedule updating
z As-built drawings
z Home office cost
z B&O taxes
z Office engineering
z Estimating costs
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Profit
z
Negotiate reasonable amount
acceptable to contractor and owner, or
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Insurance and Bond
z
Cost of additional premiums due to the
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Unit Prices
z
Obtained through either
–
Bidding process
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Unit Prices – Bidding Process
z
Competition for unit prices
– Unit price contract
– Lump Sum contract with unit prices requested
– Additives and deductives
z
No competition for unit prices
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Unit Prices - Negotiated
z
Based on formulas for determining
pricing for Lump Sum (Fixed Price)
change orders
z
Owner must measure quantities to
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Time and Material (Force Account)
z When work can’t be easily estimated
z When there is a disagreement over cost z Establish maximum amount
z Contractor and owner keep records
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Mike Purdy has more than 27 years of experience as a manager in public contracting and procurement. He is currently the Contracts Manager for the University of Washington’s Capital Projects Office and is responsible for managing design and construction contracts for more than $1 billion worth of projects at the University. Before joining the UW in 2005, he spent five years at the Seattle Housing Authority where he served as Contracting and Procurement Manager, overseeing all of the contracting and purchasing (construction, design consultants, other consultants, goods, supplies, and services) for the largest residential landlord in the state. Prior to that he worked for the City of Seattle for more than 21 years, where he administered the city’s construction and consultant contracts as the city’s Contracting Manager.
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Michael E. Purdy
Contracts Manager
University of Washington
Capital Projects Office
(206) 221-4235
