When a project owner and a contractor agree to the terms of a contract modification, the document typically contains “accord and satisfaction” and “waiver and release” language. The contractor acknowledges that this is a complete settlement of the entire matter and waives the right to any subsequent claim arising out of the change. But what happens if the project owner keeps issuing more and more change orders?
Multiple change orders have a cumulative impact on the cost of performing the work. The increased costs are primarily in the form of reduced labor and equipment efficiency. The costs are not directly tied to one particular change order, but they are real. How can the contractor claim these costs when the contractor has repeatedly “signed off” on each and every contract modification?
Contractors can expressly reserve the right to subsequent claims for cumulative impact costs. But this raises flags for owners who understandably want a change order firmly quantified. Owners do not want to commit to the marked-up direct costs of a change, while leaving the door open to additional claims for lost productivity or reduced efficiency.
How do you handle this situation? I welcome comments from both the project owner and contractor perspectives.
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