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Contractor's Guide to Change Orders

Contractor's Guide to Change Orders
CR-1557014272
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Contractor's Guide to Change Orders

By: Andrew M. Civitello Jr. with William D. Locher, J.D.

STOP PROFIT-ROBBING CONSTRUCTION CONTRACT DISPUTES BEFORE THEY START

With this expanded new edition of Contractor's Guide to Change Orders in hand, contractors working on projects of any size - from remodeling jobs to skyscrapers - will have all the ammunition needed to:

  • Keep hidden construction delays and expenses from draining profit. (Only a fraction of chargeable amounts are ever identified by the owner or architects involved.)
  • Identify trouble spots in the contract, plans, specifications and site that are likely to result in added costs or delays.
  • Find, document and negotiate payment for every added delay and expense that slips past your "early warning system."
  • Negotiate and resolve change order disputes at every level so you are always a step ahead.
  • Put all the facts on your side so that, if all else fails, you have ironclad evidence to support your claim during arbitration or litigation.

    THIS BOOK IS LIKE HAVING A LAWYER ON CALL TO HELP YOU OUT AT A FRACTION OF THE COST

    Well-known in construction circles, author Andy Civitello draws on well over two decades of experience and shares literally dozens of timesaving tools tailored to the needs of busy contractors like you who don't have time or desire to wade through some academic textbook.

    In Contractor's Guide to Change Orders, you'll find:
     

  • Detailed checklists that help you prevent costly oversights, support change order prices, record actions taken, and much more.
  • Sample forms and worksheets that are job-tested on projects of nearly every size and type. You can reproduce and use these forms right away to simplify your job and save hours of time.
  • Model letters that are professionally written and handle nearly any situation, from assigning job responsibilities to warning notices or corresponding with architects and engineers.
  • And much more!
  • Contents:

    Preface, vii

    What This Book Will Do for You, ix

    How to Use This Book, xiii

    Part One
    INDUSTRY AND CONTRACT ENVIRONMENTS

    1 The Contractor's Move to Power

    1.1 Introduction, 4
    1.2 The Changing Building Industry, 4
    1.2.1 The Contractor in Control, 4
    1.2.2 Claims Consciousness, 5

    2 Contract vs. Contact: Parlaying Subtle Differences into Dramatic Advantages

    2.1 Introduction, 7
    2.2 Ending the Confusion About Contract Structures, 7 2.2.1 (Traditional) General Contracting, 8
    2.2.2 Design-Build, 9
    2.2.3 Construction Management (Pure), 10
    2.2.4 Construction Management with a Guaranteed Maximum Price (GMP), 12
    2.3 Clarifying Contract Responsibilities to Garantee Accurate Assessments, 13
    2.3.1 The Owner: 12 Categories of Responsibility, 14
    2.3.2 The Architect: 10 Categories of Responsibility, 22
    2.3.3 The General Contractor: 15 Categories of Responsibility, 29
    2.3.4 A Final Note, 35

    3 Proven Strategies for Applying Construction Contracts

    3.1 Strategic Interpretation: Applying Contracts to Secure Power Positions, 37
    3.1.1 Contract Law Concepts, 37
    3.1.2 Construction Law Concepts, 38
    3.2 The Contract Documents: Simplified Descriptions to Prevent Oversight, 38
    3.2.1 Contract Components, 38
    3.2.2 The Four C's of Contracts, 40
    3.3 Rules of Contract Interpretation: The Cards Up Your Sleeve, 41
    3.3.1 Introduction, 41
    3.3.2 Standard of Interpretation: Reasonable Expectations, 41
    3.3.3 Ambiguities Resolved Against the Drafter, 42
    3.3.4 Right to Choose the Interpretation, 43
    3.3.5 Specific vs. General, 43
    3.3.6 Usage of Trade Custom, 43
    3.4 Applying Construction Contracts Without Resistance, 44
    3.4.1 Introduction, 44
    3.4.2 Change Clauses, 44
    3.4.3 The Pass-Through Clause, 46
    3.4.4 The Dispute Clause, 48
    3.4.5 Authority (Formal/Constructive), 49
    3.4.6 "General Scope" of Work, 50
    3.4.7 "Reasonable Review", 51
    3.4.8 "Intent" vs. "Indication", 51
    3.4.9 "Performance" and "Procedure" Specifications, 52
    3.4.10 Equitable Adjustment, 53
    Reference, 54

     

    Part Two
    CHANGE ORDERS EXPOSED

    4 Change Order Diagnosis
    4.1 A Normal Part of the Construction Process, 62
    4.2 Clarification or Change?, 62
    4.3 Reasons for Change Orders (Additions and Deductions), 63
    4.4 Change Order Categories, 63
    4.4.1 Owner-Acknowledged Changes, 64
    4.4.2 Constructive Changes, 64
    4.4.3 Consequential Changes, 66

    5 Understanding How Change Orders Arise

    5.1 Introduction, 68
    5.2 Defective Specifications, 68
    5.2.1 Cut-and-Paste, 68
    5.2.2 Silly Specifications, 69
    5.2.3 Old and Outdated Specifications, 70
    5.2.4 Inconsistencies, 70
    5.2.5 Impossibilities, 71
    5.3 Nondisclosure, 72
    5.4 Lack of Coordination Among Design Disciplines, 72
    5.5 Incomplete Design, 73
    5.6 Latent Conditions (Defects), 73
    5.7 Owner Changes, 74
    5.8 Improved Information, 75
    5.9 Improvements in Workmanship, Time, or Cost, 75
    5.10 Illegal Restrictions, 76
    5.11 Nonapplicable Boilerplate, 77
    5.12 "Intent" vs. "Included", 77

    6 Using the Change Order Process to Your Maximum Advantage

    6.1 The Six P's of Change Orders, 79
    6.2 Prospecting for Change Orders (Discovery), 79
    6.3 Preparing the Change Order, 80
    6.3.1 Establishing the Change Order File, 80
    6.3.2 Change Order Research, 81
    6.3.3 Change Order Research Checklist, 82
    6.3.4 Notification, 86
    6.3.5 Sample Notification Letter to the Owner on Changes, 87
    6.3.6 Notice Components, 89
    6.4 Pricing the Change Order, 89
    6.4.1 Now or Later, 89
    6.4.2 Pricing Methodology, 92
    6.4.3 Selecting the Proper Tone, 92
    6.5 Presenting the Change Order, 92
    6.5.1 Proposal Submission, 92
    6.6 Performing the Work, 93
    6.6.1 Tracking, Project Effects, 93
    6.7 Change Order Payment, 95
    6.7.1 Billing and Payment, 95
    6.7.2 Claims and Disputes, 96

     

    Part Three
    PROSPECTING FOR CHANGE ORDERS AND THEIR COMPONENTS

    7 Where and Now to Find Potential Change Orders

    7.1 Introduction, 103
    7.2 Predesign, 103
    7.2.1 Adjacent Properties, 103
    7.2.2 Boring (Subsurface) Data, 104
    7.2.3 Building Code Compliance, 105
    7.2.4 Easements/Rights of Way, 106
    7.2.5 Special Agency Approvals, 107
    7.2.6 Interference from Utilities Not Properly Shown, 108
    7.2.7 Plan Approvals (Building Permit), 109
    7.2.8 Temporary Utilities-Availability Within the Contract Limit Lines, 110
    7.3 The Contract and Bid Documents, 111
    7.3.1 Award Date, 111
    7.3.2 Named Subcontracts, 113
    7.3.3 Sample Letter to the Owner Regarding Obligation to Determine Responsibility for Questionable Work, 115
    7.3.4 Sample Letter to Subcontractor Regarding Owner's Decision Directing Work, 117
    7.3.5 Price/Bid Allowances, 119
    7.3.6 Contract Time, 119
    7.4 Plans and Specifications, 121
    7.4.1 "As Indicated", 121
    7.4.2 Ceiling Spaces (Conflict), 123
    7.4.3 Sample Letter to Subcontractors Regarding Coordination of Work in Ceiling Spaces, 125
    7.4.4 Changed Existing Conditions, 127
    7.4.5 Column and Beam Locations, 128
    7.4.6 Design Change TeUtales, 130
    7.4.7 Design Discipline Interfaces, 131
    7.4.8 Duplication of Design, 132
    7.4.9 Sample Letters to the Owner Regarding Design Duplications, 135
    7.4.10 "Fat" Specifications, 139
    7.4.11 Finish Schedule vs. Specification index, 140
    7.4.12 Inadequate Level of Detail, 140
    7.4.13 Light Fixture Locations, 142
    7.4.14 Match Lines and Plan Orientations, 144
    7.4.15 Mechanical, Electrical, and N.I.C. Equipment, 145
    7.4.16 Sample Letter to Subcontractors Regarding Material and Equipment Coordination, 148
    7.4.17 Sample Letter to the Architect Regarding Contract Equipment Coordination, 150
    7.4.18 Sample Letter to the Owner Regarding N.I.C. Equipment Coordination, 152
    7.4.19 Numerous Details and Dimension Strings, 154
    7.4.20 Performance and Procedure Specifications, 155
    7.4.21 Proprietary Restrictions (Public), 156
    7.4.22 Sample Letter to the Owner Regarding Equal for Proprietary Item, 158
    7.4.23 Sample Letter to the Owner Regarding Rejection of Equal for Proprietary Item, 160
    7.4.24 Specification Section "Scopes", 162
    7.5 Site, 162
    7.5.1 Introduction, 162
    7.5.2 Grades, Elevations, and Contours, 163
    7.5.3 Sample Letters to the Owner Regarding Change Site Conditions, 165
    7.6 Change Order Discovery Checklist, 169
    7.6.1 Introduction, 169

     

    Part Four
    CHANGE ORDER PROPOSAL PREPARATION AND PRESENTATION

    8 Designing and Constructing Effective Change Order Proposals

    8.1 Change Order Components, 183
    8.1.1 Introduction: The Three Costs, 183
    8.1.2 Direct Costs, 184
    8.1.3 Indirect Costs, 184
    8.1.4 Transforming Indirect Costs into Direct Costs, 185
    8.1.5 Direct Project Management and Administrative Cost Form, 186
    8.1.6 Consequential Costs (Damages), 188
    8.1.7 Practical Management of the Three-Cost Approach, 189
    8.2 Developing the Change Order Proposal, 190
    8.2.1 Change Order Identification/Notification, 191
    8.2.2 Sample Letter to the Owner Regarding Pending Change Order, 193
    8.2.3 Assembling Component Prices, 195
    8.2.4 Sample Change Order General Conditions Checklist and Estimate Sheet, 196
    8.2.5 Assembling Subcontract Prices, 198
    8.2.6 Sample Letter to Subcontractor-Request for Change Order Quotation, 199
    8.2.7 Sample Letter to Subcontractor--Change Quotation, Second Request, 201
    8.2.8 Sample Letter to Subcontractor Regarding Change Order Price by Default, 203
    8.2.9 Sample Change Order Telephone Quotation Form, 205
    8.2.10 Sample Letter to Subcontractors Confirming Telephone Quote, 207
    8.2.11 Determining Schedule Impact, 209
    8.3 Finalizing the Proposal, 212
    8.3.1 Introduction, 212
    8.3.2 Proposal Format and Timing, 213
    8.3.3 Sample Change Order Proposal Cover Letter, 214
    8.3.4 Sample Letter to the Owner Regarding Change Order Cost Escalation Due to Untimely Action, 217
    8.3.5 Representing Change Order Components, 219
    8.3.6 Presenting the Total Change Order Price, 221
    8.3.7 Presenting the Effects on Contract Time, 221
    8.3.8 Requiring Approval Action, 222
    8.3.9 Additional Terms and Conditions, 223

    9 Substantiating Change Order Prices: Settling Arguments Before They Begin

    9.1 Introduction, 225
    9.2 Lump-Sum Prices, 227
    9.2.1 Sample Letter to Subcontractor Regarding Improper Proposal Submission, 228
    9.3 Detailed Cost Breakdowns, 231
    9.4 Time and Material, 233
    9.4.1 Sample Letter to Subcontractors Regarding T & M Submission Requirements, 235
    9.5 Unit Prices, 237
    9.6 Historical Cost Records, 238
    9.7 Industry Sources, 239
    9.8 Invoices-Records of Direct Payment, 239
    9.9 The Schedule of Values, 240

    10 Using Project Records to Discover, Define, Support,and Track Change Orders and Claims

    10.1 Introduction, 243
    10.1.1 Active Working Files, 243
    10.1.2 Item Completion and Close-Out, 244
    10.1.3 Archives, 244
    10.2 Establishing Dates in the Correspondence, 244
    10.3 Daily Field Reports, 245
    10.3.1 Sample Daily Field Report Form, 247
    10.4 Payroll Records, 251
    10.4.1 Sample Field Payroll Report Form, 251
    10.4.2 Sample Monthly Administrative Tune Sheet, 252
    10.5 Photographs--What, When, and How, 255
    10.5.1 Introduction, 255
    10.5.2 Photograph Layout Requirements, 256
    10.5.3 Sample Photograph Layout Form, 256
    10.6 Construction Schedules, 258
    10.6.1 As-Planned, As-Built, and Adjusted Schedules, 258
    10.6.2 Six Requirements for Presentable Evidence, 259
    10.7 Using Job Meetings to Establish Dates, Scopes, and Responsibilities, 261
    10.7.1 Introduction, 261
    10.7.2 Job Meeting and Minutes Guidelines, 262
    10.7.3 Sample Letter to Subcontractors Regarding Mandatory Job Meeting Attendance, 264
    10.7.4 Sample Letter to Subcontractors Regarding Lack of Job Meeting Attendance, 266
    10.7.5 Sample Job Meeting Form, 268
    10.8 Shop Drawings and Approval Submittals, 271
    10.8.1 Approval Responsibility, 271
    10.8.2 Approval Response Tune, 273
    10.8.3 Treatment of Differing Conditions, 273
    10.8.4 Absolute Contractor Responsibility, 273
    10.9 Time and Material Tickets, 274
    10.9.1 Introduction, 274
    10.9.2 Sample Letter to the Owner Regarding Acknowledgment of Actual Work Performed, 275
    10.9.3 Sample T & M Form, 277
     
    Part Five
    CHANGE ORDER AND FILE PRESENTATION

    11 Keeping Change Orders Under Control: How to Save Time and Improve Records with Administrative Housekeeping

    11.1 Introduction, 282
    11.2 Establishing Easy-to-Research Change Order Files, 282
    11.3 File Content, 284
    11.4 Correspondence File, 287
    11.5 Tracking Change Order Trends, 288
    11.5.1 Introduction, 288
    11.5.2 Evaluating the Change Order Summary Sheet, 289
    11.5.3 The Change Order Summary Sheet Procedures, 290
    11.5.4 Sample Change Order Summary Sheet Form and Sample Completed Form, 291
    11.6 Approval Submissions, 294
    11.6.1 Introduction, 294
    11.6.2 Shop Drawing Review and Coordination, 294
    11.6.3 Shop Drawing Submission Requirements, 295
    11.6.4 Sample Form Letter to Subcontractors Regarding Shop Drawing Submission Requirements, 296
    11.6.5 Submittal Review, Distribution, and Follow-Up, 299
    11.6.6 Sample Form Letter to Subcontractors Regarding Shop Drawing Resubmission Requirements, 301
    11.7 Sample Letter of Transmittal, 309
    11.7.1 Sample Form Letter of Transmittal, 309
     
    Part Six
    DISPUTE RESOLUTION

    12 Winning in Change Order Negotiation

    12.1 Introduction, 317
    12.2 Acceptance Time, 317
    12.3 Agenda, 317
    12.4 Gentleman's Agreement, 318
    12.5 Agreement vs. Understanding, 318
    12.6 Allowances, 318
    12.7 Alternatives, 319
    12.8 Arbitration and mediation, 320
    12.9 Aspiration Level, 321
    12.10 Assumptions, 321
    12.11 Authority, 321
    12.12 Averages, 322
    12.13 Boilerplate, 322
    12.14 Catch-22, 323
    12.15 Change Clauses, 323
    12.16 Change the Negotiator, 323
    12.17 General Contractor as a Conduit, 324
    12.18 Contingency, 325
    12.19 "Convenience" Specifications, 325
    12.20 Concessions, 325
    12.21 Constructive Clauses, 326
    12.22 Correlation of Contract Documents, 327
    12.23 Cost Perceptions, 328
    12.24 Credits-Turning Them Around, 328
    12.25 Deadlines, 329
    12.26 Deadlock, 329
    12.27 Deliberate Errors, 329
    12.28 Level of Detail, 330
    12.29 Discipline, 330
    12.30 The Eighty-Twenty Rule, 331
    12.31 Elaboration, 331
    12.32 Empathy, 331
    12.33 Designer's Estimates, 331
    12.34 Equitably Adjustment, 332
    12.35 Exceptions, 333
    12.36 Excusable Delays, 333
    12.37 Use of Experts, 334
    12.38 Face-Saving, 335
    12.39 Job Meetings, 335
    12.40 The Power of Legitimacy, 335
    12.41 Letter Wars, 336
    12.42 Lost Notes, 337
    12.43 "Nonnegotiable" Demands, 337
    12.44 Objections, 338
    12.45 Off-the-Record Discussions, 338
    12.46 Patience, 339
    12.48 Presentations, 339
    12.49 Proceed Orders, 340
    12.50 Promises, 341
    12.51 Questions, 341
    12.52 Quick Deals, 342
    12.53 Reasonable Review, 342
    12.54 Reopening Change Proposals, 342
    12.55 Split the Difference, 343
    12.56 Statistics, 343
    12.57 Telephone Negotiations, 343
    12.58 Plain Hard Work, 344
    12.59 Unit Prices, 344
    12.60 Value of Work Performed, 345
    12.61 Conclusion, 345

    13 Preparing for Winning When Changes Become Claims

    13.1 Introduction, 347

    13.2 Turning Around Change Order Rejections

    13.2.1 Introduction, 348
    13.2.2 "Good" or "Bad" Faith Rejections, 349
    13.2.3 The "Nothing to Lose" Attitude, 350
    13.2.4 Change Amount vs. Litigation Expense, 351
    13.2.5 Meetings at the Highest Levels, 351
    13.2.6 Checklist for Meetings at the Highest Levels, 352
    13.2.7 Sample Letter to the Owner Confirming a Special Meeting, 353
     

    13.3 Arbitration/Litigation/Mediation-What Is the Difference?

    13.3.1 Introduction, 355
    13.3.2 Arbitration, 355
    13.3.3 Litigation, 358
    13.3.4 Mediation, 360
    13.3.5 Conclusions, 362
     

    13.4 Finding an Attorney

    13.4.1 Introduction, 362
    13.4.2 Characteristics of the Lion, 363
    13.4.3 Characteristics of the Pussycat, 363
    13.4.4 How to Find Your Lion, 363

    13.5 Selecting Consultants

    13.6 Construction Claims Checklist

    Appendix: Sample Contract Change Order

    Index

     

    382 pages
    8-1/2 x 11 in.

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