A fit is well established that when a project owner issues a directive the contractor must comply, even if the contractor considers the directive an expansion or change in the scope of work. The contractor cannot stop work and insist on negotiating a price adjustment. The contractor must rely on the contractual dispute resolution procedures to seek eventual compensation. Some contract documents, however, take advantage of the contractor’s lack of leverage and skew the process in the owner’s favor.
In a recent case, the Changes clause in a public contract required the contractor to submit a detailed, itemized change order price proposal. The project owner then responded with a “settlement by determination” – a unilateral contract modification establishing a price adjustment at a level the owner considered adequate. There was no give-and-take, no negotiation and no opportunity for additional input from the contractor.
The contractor in this case was not left without redress. Even a “final” unilateral contract modification can be challenged. But it seems heavy-handed and unnecessarily litigious to deal with scope of work disputes in this manner. Just because changed work cannot be priced at the outset does not mean that it should ultimately be priced unilaterally.
I welcome your comments on this topic.
What are the best practices when dealing with work which cannot be priced in advance? Do project owners take advantage of the leverage they possess as a result of the contractor’s obligation to proceed with work directives?
Featured in Next Week's Construction Claims Advisor . . .
- Price Adjustment Clause Flawed Because Not Tied to Contractor’s Actual Costs
- Board Addresses Authority of Architect, Construction Manager and Contracting Officer
- Bid Timely Despite Absence at Opening
Bruce Jervis, Editor
Construction Claims Advisor