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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