Changes are a fact of life in the construction process. Contract documents give the project owner the right to expand, reduce or otherwise alter the scope of work. The contract documents also spell out a process whereby contractors propose, and project owners approve, change orders. Subcontracts include similar provisions. Failure to adhere to the stipulated process can be costly. A Michigan subcontractor recently learned this the hard way.
After the discovery of unanticipated subsurface conditions, the project owner consulted the prime contractor’s paving subcontractor regarding revisions to the parking lot drainage system and paving. The owner then invited the sub to submit a price proposal on the changed scope of work. The subcontractor did so without even copying the prime contractor on the proposal. The sub also offered to discount some of the work included in the original subcontract. A court later ruled that the subcontractor had abandoned the subcontract and could not enforce that agreement against the prime contractor.
There was obviously plenty of fault to go around in this situation. It was appropriate for the owner to solicit the input of the paving sub, if this had been done with the knowledge and participation of the owner’s prime contractor. It was improper for the owner to solicit a price proposal directly from the sub. It was also improper for the subcontractor to submit a proposal directly to the owner, bypassing the contractor with whom it had an agreement. And discounting the price of already subcontracted work clearly abandoned and rescinded the subcontract.
When dealing with proposed changes to the work, are you always careful to observe the contractual chain of authority and responsibility, as well as contractually stipulated change order procedures? What practices do you have in place to assure that these procedures are followed? I welcome your comments.
Featured in Next Week’s Construction Claims Advisor:
- Site Condition Claim Denied on Design-Build Contract
- Equitable Price Adjustment Not Thwarted by No-Damage-For-Delay Clause
- Owner Allowed to Assess Liquidated Damages after Default
