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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