Change Orders

1. Change Orders

2. CO Proposals • Initiated by owner or GC • Owner requests estimate for work proposed • GC CO results from changed site condition or response to field question • F 19-2 go thru note fees and overhead

3. Pricing COs • Goal is to get paid • Need to be realistic about prices • Need to mark up items to recover indirect costs • Everyone marks up so the final price can be double direct cost

4. Documentation • Change Order • Owner and PM have agreed on $ and time • Construction Change Directive • Owner and PM have not agreed on $ and time • Or change must be implemented before PM has had time to evaluate $ and time

5. Claims and Disputes • Sources of Claims • Constructive acceleration – GC required to perform task at a faster rate than planned • Constructive Changes where scope is modified by owner • Cumulative impact of numerous change orders • Delay caused by owner • Site conditions differ from contract documents • Unresponsive contract admin • weather

6. Major issues: • What are issues • Who is responsible • What are $ and time impacts

7. Resolution techniques • Negotiation • First step in resolving a dispute • Both parties sit down and try to reach an agreement • Least costly and most efficient • No outside support • Works best if done as soon as possible

8. Resolution techniques • Mediation • Assisted negotiations • Facilitated by a neutral third party • Mediator helps parties reach a concensus • Parties meet together to give their position • Parties then separated and mediator meets with each party to discuss strength and weakness of position and attempts to craft agreement • Once agreement reached parties sign • Both parties must desire to reach a settlement

9. Resolution techniques • Arbitration • Formal alternative to mediation • Both parties present their case to a neutral third party who makes decision • Can be binding or non-binding • If litigated after arbitration – arbitration award is evidence admissible in trial • Arbitrators have more expertise than judges in construction matters

10. Resolution techniques • Minitrial • Private, non-binding, structured settlement process • Blends mediation, negotiation’ and litigation together • Only used when both parties agree to its use • Advisor chairs trial • 2 phases • 1) both sides make abbreviated presentation to senior executives of companies involved • 2) executives discuss settlement • If no settlement , advisor makes non binding advisory opinion

11. Resolution techniques • Minitrial • Flexible procedure – can be tailored by parties in dispute • Process: • Exchange key exhibits and evidence • Select neutral advisor • Select executives from each company • Informal hearing

12. Resolution techniques • Dispute Review Board • Organized before construction starts • 3 industry experts – one nominated by owner, GC, and third by other two members • Generally Owner decides to use DRB • Board members are given contract and specs and make site visits to see progress • Meet monthly or 1/4ly to resolve disputes • Board writes recommendation which is either accepted or not

13. Resolution techniques • Litigation • Court resolves matter • Time consuming and expensive