The Change Orders - Book Report/Review Example

Definition and Meaning of Change Order Chapter 11, ‘The Change Orders’ is about the change order clause and the ways in which the change orders are processed and approved. The term apparent authority is used for the representative who can lead the owner’s negotiations as the contractor doesn’t always know powers of the owner’s hired representatives. For example, it is apparent authority when the contractor knows that the owner has hired the architect, designer, engineer, and construction manager to carry out the specific tasks mentioned in the contract. An owner directs the acceleration of a contract when it is not to be finished in due time. The owner pays a certain amount for the extension of the work. However, when the owner fails to provide directed acceleration, a term used to describe the change in cost and time schedules for the extension, constructive acceleration takes place. This term is used to describe the documentation of all the costs that have been incurred due to the acceleration in work without the direction of the owner. These changes are made by the contractor but they are documented thoroughly into the contract and assessed by the owner before the completion of the project. The term constructive change is used for the changes made during the construction that don’t tend to affect the cost or the time schedule. These changes aren’t mentioned in the contract as they may be agreed upon on a phone call, a meeting, or a walk-through of the project. An example is the adjustment of a window on the full wall except only on the right side of the wall. The term construed against the drafter is used for any ambiguity or flaw in a contract for which the drafter is held responsible. This is so that the drafter is more knowledgeable and aware about the contract and the intent of both the parties. The ambiguity in a contract may be of two types; latent ambiguity, which is when the words and language is clear but the meaning brings ambiguity in certain circumstances, this ambiguity is not initially pointed out until it is interpreted according to the situation. The other type is patent ambiguity which is the term for the ambiguity which should have been brought into notice when the contract was drafted because it was an obvious and easily recognizable phase. The critical path of the contract is the smooth running of the project and the schedule of the project. Every change to be bought into the contract must be analyzed with its affect on the critical path of the project. The critical path suggests many important aspects such as the excusable delays and compensable delays in schedules. Measured mile is a technique in which the units of production in which the cost and schedule wasn’t affected adversely are out in place of those units that have affected the production process in the start or the finish. This helps in comparing the productivity of the unaffected units to the adversely affected units. The Eichleay formula is a mathematical formula to calculate and set off the costs that have incurred due to a delay in the off-site nature of work such as a government caused delay or an administrative issue for delay. The courts allow this formula to accept changes caused in the contract due to off-site delays. Fast tracking is a method which limits the chances of changes and replaces as it allows the construction to begin on the basis while the other parts of the design are still being planned. This option removes the opportunity for flexible planning and designing. Implied authority is similar to apparent authority in which there is implied authority given by the owner to his representatives to carry out certain tasks. An estoppel is the way through which a claim for payment can be demanded if the implied authority makes changes in the payment schedules. Chapter 12 is about the ‘Differing site conditions’ and how these are assessed and administered. There are two types of differing site conditions; Type I Differing Site Conditions and Type II Differing Site Conditions. The type I differing site conditions are those which are evidently different than what was stated in the contract. In this, the condition of the site is actually very different from what was indicated. The type II differing site conditions are those which aren’t very obvious or evident. These conditions are not traced in the contracts, they are unexpected and they occur during the events of construction. Differing conditions are not force majeure which are uncontrollable, natural conditions such as earthquake, storms, or natural disasters which are not in the hands of the contractor. At times, responsibility is still given to the contractor through the exculpatory clause in which the owner and designers are excluded on the basis of the reasonably foreseeable nature of the natural condition. The eichleay formula determines the costs that are the additional field costs due to the differing site conditions. These additional costs are due to the other factors such as the contractor’s home office overheads which are not to be covered under the contract. Exculpatory clauses are those in the contract that waive off all the responsibility of the contract from the owner’s head and shifts it to the contractor. Contractors sign these clauses in most of the contracts. All the errors or ambiguous statements of the contract are not under the owner’s responsibility as they would hold the contract only for information purposes. This clause is the response to the spearin doctrine in which all the responsibility goes to the owner who has provided the documents. The exculpatory clauses can be overturned by the courts on the basis of conscionability which is the concept that the owner couldn’t reasonably foresee the hidden site condition and he was honest and moral from his side. However, this stance is tough to prove in court and it takes a lot of time and money to be proved and applied. In certain cases there is an unintentional misrepresentation where a mistake is detected and there was no ill-intention involved. In such cases, contracts could be terminated or there could be a cardinal change where the contract administrator talks to the bonded company for a change in the contract. In order to waive off the responsibility through the spearin doctrine, it is also important to have the contract backed up by a precedence clause. This is a clause which adds to the reasonable explanation of the contract in accordance to a precedence clause which is interpreted to clarify the situation. The conflicts between various documents are thus interpreted through the precedence clause. In the type I differing site condition, the contract administrator must apply the exculpatory clause off the owner and designer by proving that the differing site condition was in regard to the contract, it was significantly different than what actually existed on the site, and that the differing condition now requires significant time and cost to be impacted. If it is proved that the contractor could reasonably foresee the differing condition of the site or recognized it before putting forward the original contract, he could be accused of patent ambiguity or patent flaw in which additional cost and time must be justified. Chapters 13 and 14 Chapter 13 is about the schedule which is the major concern of the owner once the contract is signed. Schedules include the on time completion of the contract and the provisions for delays and types of delay claims. ‘Time is the essence’ clause is the clause which is mentioned in almost all the contracts which allow the owner to stress upon the importance of the schedule and the completion of the project on time. This clause has become a standard clause which is mentioned in the pre-bid meeting. The directive and constructive acceleration is also decided in the pre-bid meeting where the parties reveal likelihood of any unexpected delay that would require a directed acceleration from the owner or if there is no acceleration directed, the constructor has to document all the costs and delays incurred in that acceleration. Liquidated damages are those which are incorporated into the contract when the contract is formed. These damages allow the owner to collect compensation from the contractor for each day the project is delayed. It is the compensation of each additional day from schedule on which the owner cannot possess the space for its specified purpose. There are many ways through which liquidated damages are avoided and one of them is look-ahead schedules. Contractors must update their schedules and plan look-ahead schedules where the contractors plan the schedule for two three weeks ahead. It offers short-term goals for the workers and day-to-day meetings to manage schedules. The concept of float focuses on the time period between the time the contractor plans to finish an activity and the time when he is required to finish the activity. The float is planned in the beginning of the project and is for those activities that do not affect the completion of the project. For example, if a contractor is required to fulfil a task by the 20th of July and he plans to finish it off by 10th of July, the float will be 10 days. Any delay that takes place in events containing float are known as non-critical delays. A critical delay is the one in which the delay has the effect on the critical path and it could lead to new milestones and events. In every construction contract, the schedules can have two types of delays; excusable delays and non-excusable delays. These types of delays actually decide whether there will be a compensation for the delay or not. However, even an excusable delay will have a certain amount of compensation. Non-excusable delays are those which happen from the contractor’s end due to a negligence or failure to carry out the required task on time. For example, if a contractor simply forgot to discuss one part of the building with the engineer, which caused delay in the construction process, there will be no excuse and it will compensable. However, excusable delays are those which can be compensable and non-compensable. Some excusable delays are non-compensable such as Acts of God or force majeure. Acts of God or force majeure are the events that are of superior force, that act naturally, and are out of everyone’s control. These events may include earthquakes, storms, floods, or other natural disasters which cause delay in schedule but these are non-compensable. A compensable delay which is excusable is the one in which the contractor is not at fault. Such delays may cause compensation as well as an extension of life. There is another type of delay which is known as concurrent delays. These delays are those when there are two events that have caused the delay. In order to analyze which delay is excusable and compensable, the one that occurred the first is checked and resolved. If one of the delays is compensable and the other excusable, the time period of the delay will be judged and the one which prevails will be considered for example if a hurricane had occurred and after that the constructor irresponsibly failed to coordinate with the engineer that caused hindrance in work schedule but the hurricane prevails even longer. This means the constructor’s fault will be excused. Acceleration is applied by the contractor when the owner is not extending the completion date. This is applied by the contractor and the payment of the delay is made by the person responsible for the delay in schedule. The term directed acceleration is used when the owner is ready to pay the price for the acceleration. At the end of the projects, with or without acceleration, the work load usually becomes tough and constructors often crowd some parts of the project to get it completed on time. Hence, different trades start working for their positions and interfering in one another’s work. This is known as trade stacking. The total cost method is a method which is used to calculate the cost that would be compensated to the contractor for the damages caused to the owner. Some damages that result from delay may affect the owner but if the nature and extent of the delay is unknown, this method is used to calculate the difference between actual costs and estimated costs. There can be a problem with this method which is that the estimated cost of the original project may be incorrect. Thus, the modified total cost method is used to demonstrate the good faith of the contractor. This method gives assurance from the contractor’s behalf that there have been differences between the actual costs and the estimated costs of the project and they are responsibility of the contractor. An example of this is the low production of the costly items. The fairness and honesty of the contractor to give back a part of the cost of the contract back to the owner is considered in court. Chapter 14 is about liens which is used in construction contracts to ensure that the owner is not lacking of payment. Most of the contractors and sub-contractors are working only for money and if they aren’t paid by the owner, the liens help them. It is a term used for a security which is given by the owner that he will be paying in full. The lien properties are when owner’s properties are held by the contractors and can’t be returned unless the payment is completely made. Such properties cannot be sold or enhanced until the payment isn’t made. Every state has its own lien laws hence if a party decides to file a lien; they must go to the state office and file it there from where the owner will be planning a defence. If the claim for the lien is successful, the property goes away from the owner to a public auction. This auction and sale is handled by the Sheriff, hence called Sheriff’s Sale. The property is sold and then funds are distributed by the Sheriff. The problems with liens started when the government realised that they cannot put liens on pulic buildings as if they start going on auction, it will create a problem. Hence, the Miller Act was introduced in 1935 that requires that all Federal construction contracts that have a value of more than $100,000 must be secured by a payment bond. The laws depend according to the states. A stop notice is another way to secure the payments from the Federal government contracts used by contractors. A stop notice provides monetary security instead of government property. A proper stop notice must be filed under which the sufficient funds would be paid to the contractor by the government. Read More