Construction Change Orders March 2015 Facilities Directors Conference

Construction Change Orders March 2015 Facilities Directors Conference Hickory Knob State Park

By definition: A Change Order is a written amendment to a construction contract that all parties agree. A Change Order modifies one, or a combination of: the Scope of Work the contract Sum the contract Time

Change Orders, the basics: For projects within Agency certification, if the change order does not cause the construction amount to exceed the certification OSE is not notified. For projects within Agency certification, if the change order causes the construction amount to exceed the certification OSE must approve. Also, send the : A-1 funding document Last cost estimate SCBO announcement Bidding documents & addenda

Change Orders, the basics: For projects above Agency certification, if the “items of work” in the change order are below the Agency construction change order certification amount OSE is notified. For projects above Agency certification, if the “items of work” in the change order are above the Agency construction change order certification OSE must approve. Do you and your PM’s know the agency’s Construction Contract certification amount and Construction Change Order certification amount?

Change Orders, the basics: “Items of Work” Agency change order certification 100,000 Change Order #2 253,000 Install water fountain 95,000 Install chilled water to HVAC 98,000 Change lavatory fixtures to ivory 52,000 Does a change only for time need OSE approval? The Agency must send a change order for time to OSE for information (Manual Chapter 7.9.5) Enough with the basics!

Let’s focus on the tough questions: Are we resolved to Change Orders as a way of life? Can anything be done to minimize the number of Change Orders? What can/cannot be in a Change Order? Is it possible to approve a Change Order before the work is complete? Can a contractor “revisit” the amounts and terms? Adverse weather days? How long should it take to get the proposed Change Order from the Contractor? Can we stop asking questions and get some answers?

We’ll start with the Easy answers: Change Orders a way of life? A/E’s Users Contractors Change Orders How to minimize Change Orders? Or, can they be minimized? Ask the experts. What constitutes a Change Order? Time, cost, and/or scope of work Construction Change Directive Convert to a Change Order ASAP Not Liquidated Damages Not substitution of subcontractors

More easy answers: Is the Change Order approved before the work? Honestly? Once the Change Order is approved, can we or the contractor revisit? Agreement shall constitute final settlement on all matters (00811-OSE, para 7.2.5) Time to receive the Change Order From the date of receiving the request, the contractor should submit proposal in 15 days (00811-OSE, para 7.2.3)

Not so easy answer: Adverse weather days (00811-OSE, para 15.1.5.2) Based on actual weather conditions at the jobsite Five days per month anticipated by contract (not to included in a time extension) Days/conditions to be documented in Contractor’s jobsite log Days can be claimed above the five allotted: As it impacts the construction schedule If the Contractor was scheduled to work Contractor claims adverse condition days in monthly pay application for previous month. If they’re not claimed, they’re considered waived. No claims for adverse weather days after the Substantial Completion

What should we look out for? Overhead and Profit percentages (00811OSE, para 7.5.1) Includes all indirect costs: Field and office managers Supervisors and assistants Incidental job burdens Small tools, etc. Percentages Contractors forces perform work 17% Subcontractors forces perform work 17% Contractor is allowed 10% on work performed by subcontractor; BUT, only on the subcontractors actual cost (not on the subs direct cost with the 17%)

Example: Subcontractor labor 25,000 Subcontractor labor 25,000 Subcontractor materials 50,000 Subcontractor materials 50,000 Ovhd & profit (17%) 12,750 Ovhd & profit (17%) 12,750 Subtotal 87,750 Contractor labor 15,000 Subtotal 87,750 Contractor labor 15,000 Contractor materials 5,000 Contractor materials 5,000 Subtotal 107,750 GC 10% on subcontractor 8,775 Subtotal 116,525 Subtotal 107,750 GC 10% on subcontractor 7,500 GC 17% on 20,000 3,400 Subtotal 115,250 GC 17% on 20,000 3,400 Change Order Total 119,925 Change Order Total 118,650

From actual Contractor Proposal forms: Material & Equipment (Are these valid?) Misc. Material/Consumables Escalation Sales tax @ 8.5% Rental Equipment Small tool, 15% of line 12

From actual Contractor Proposal forms: Labor (Are these valid?) Skilled worker manhours Foreman manhours Superintendent manhours Correction Factor, Multi-story building, 8% Correction Factor, Stacking of trades, 20% Fringe Benefits, Insurance & Taxes Payment & Performance bonds

The Paperwork: Change order form SE-380 Submitting Backup Documentation is paramount Numbers on the backup to match numbers on the Summary Numbers on the Summary to match numbers on the SE-380 Check the math SE-380 is not complete without the signatures of the Contractor, the Architect/engineer, and the Agency

To Summarize: Change Orders are to be expected They change time, cost, or scope Minimizing change orders begins at the design phase Approval authority is dependent on agency Construction Contract certification and agency Construction Change Order certification Backup documentation is key Agency PM must understand the documentation and the validity of the documentation