Uncover hidden cost items and receive full compensation for them. Each chapter of this great book contains step-by-step procedures, checklists, full-size forms, and word-for-word letters to help you increase your acceptance rate and get paid for all changes on the job -- without disputes or misunderstandings.
Shows how to find, document, and negotiate payment for every added delay and expense that slips past your "early warning system."
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- Contents
- Preface, vii
- What This Book Will Do for You, ix
- How to Use This Book, xiii
- Part One
INDUSTRY AND CONTRACT ENVIRONMENTS - 1
- The Contractor's Move to Power, 3
- 1.1 Introduction, 4
- 1.2 The Changing Building Industry, 4
- 1.2.1 The Contractor in Control, 4
- 1.2.2 Claims Consciousness, 5
- 2
- Contract vs. Contact: Parlaying Subtle Differences into Dramatic Advantages, 6
- 2.1 Introduction, 7
- 2.2 Ending the Confusion About Contract Structures, 7
- 2.2.1 (Traditional) General Contracting, 8
- 2.2.2 Design-Build, 9
- 2.2.3 Construction Management (Pure), 10
- 2.2.4 Construction Management with a Guaranteed Maximum Price (GMP), 12
- 2.3 Clarifying Contract Responsibilities to Garantee Accurate Assessments, 13
- 2.3.1 The Owner: 12 Categories of Responsibility, 14
- 2.3.2 The Architect: 10 Categories of Responsibility, 22
- 2.3.3 The General Contractor: 15 Categories of Responsibility, 29
- 2.3.4 A Final Note, 35
- 3
- Proven Strategies for Applying Construction Contracts, 36
- 3.1 Strategic Interpretation: Applying Contracts to Secure Power Positions, 37
- 3.1.1 Contract Law Concepts, 37
- 3.1.2 Construction Law Concepts, 38
- 3.2 The Contract Documents: Simplified Descriptions to Prevent Oversight, 38
- 3.2.1 Contract Components, 38
- 3.2.2 The Four C's of Contracts, 40
- 3.3 Rules of Contract Interpretation: The Cards Up Your Sleeve, 41
- 3.3.1 Introduction, 41
- 3.3.2 Standard of Interpretation: Reasonable Expectations, 41
- 3.3.3 Ambiguities Resolved Against the Drafter, 42
- 3.3.4 Right to Choose the Interpretation, 43
- 3.3.5 Specific vs. General, 43
- 3.3.6 Usage of Trade Custom, 43
- 3.4 Applying Construction Contracts Without Resistance, 44
- 3.4.1 Introduction, 44
- 3.4.2 Change Clauses, 44
- 3.4.3 The Pass-Through Clause, 46
- 3.4.4 The Dispute Clause, 48
- 3.4.5 Authority (Formal/Constructive), 49
- 3.4.6 "General Scope" of Work, 50
- 3.4.7 "Reasonable Review", 51
- 3.4.8 "Intent" vs. "Indication", 51
- 3.4.9 "Performance" and "Procedure" Specifications, 52
- 3.4.10 Equitable Adjustment, 53
- Reference, 54
- Part Two
CHANGE ORDERS EXPOSED - 4
- Change Order Diagnosis, 61
- 4.1 A Normal Part of the Construction Process, 62
- 4.2 Clarification or Change?, 62
- 4.3 Reasons for Change Orders (Additions and Deductions), 63
- 4.4 Change Order Categories, 63
- 4.4.1 Owner-Acknowledged Changes, 64
- 4.4.2 Constructive Changes, 64
- 4.4.3 Consequential Changes, 66
- 5
- Understanding How Change Orders Arise, 67
- 5.1 Introduction, 68
- 5.2 Defective Specifications, 68
- 5.2.1 Cut-and-Paste, 68
- 5.2.2 Silly Specifications, 69
- 5.2.3 Old and Outdated Specifications, 70
- 5.2.4 Inconsistencies, 70
- 5.2.5 Impossibilities, 71
- 5.3 Nondisclosure, 72
- 5.4 Lack of Coordination Among Design Disciplines, 72
- 5.5 Incomplete Design, 73
- 5.6 Latent Conditions (Defects), 73
- 5.7 Owner Changes, 74
- 5.8 Improved Information, 75
- 5.9 Improvements in Workmanship, Time, or Cost, 75
- 5.10 Illegal Restrictions, 76
- 5.11 Nonapplicable Boilerplate, 77
- 5.12 "Intent" vs. "Included", 77
- 6
- Using the Change Order Process to Your Maximum Advantage, 78
- 6.1 The Six P's of Change Orders, 79
- 6.2 Prospecting for Change Orders (Discovery), 79
- 6.3 Preparing the Change Order, 80
- 6.3.1 Establishing the Change Order File, 80
- 6.3.2 Change Order Research, 81
- 6.3.3 Change Order Research Checklist, 82
- 6.3.4 Notification, 86
- 6.3.5 Sample Notification Letter to the Owner on Changes, 87
- 6.3.6 Notice Components, 89
- 6.4 Pricing the Change Order, 89
- 6.4.1 Now or Later, 89
- 6.4.2 Pricing Methodology, 92
- 6.4.3 Selecting the Proper Tone, 92
- 6.5 Presenting the Change Order, 92
- 6.5.1 Proposal Submission, 92
- 6.6 Performing the Work, 93
- 6.6.1 Tracking, Project Effects, 93
- 6.7 Change Order Payment, 95
- 6.7.1 Billing and Payment, 95
- 6.7.2 Claims and Disputes, 96
- Part Three
PROSPECTING FOR CHANGE ORDERS AND THEIR COMPONENTS - 7
- Where and Now to Find Potential Change Orders, 101
- 7.1 Introduction, 103
- 7.2 Predesign, 103
- 7.2.1 Adjacent Properties, 103
- 7.2.2 Boring (Subsurface) Data, 104
- 7.2.3 Building Code Compliance, 105
- 7.2.4 Easements/Rights of Way, 106
- 7.2.5 Special Agency Approvals, 107
- 7.2.6 Interference from Utilities Not Properly Shown, 108
- 7.2.7 Plan Approvals (Building Permit), 109
- 7.2.8 Temporary Utilities-Availability Within the Contract Limit Lines, 110
- 7.3 The Contract and Bid Documents, 111
- 7.3.1 Award Date, 111
- 7.3.2 Named Subcontracts, 113
- 7.3.3 Sample Letter to the Owner Regarding Obligation to Determine Responsibility for Questionable Work, 115
- 7.3.4 Sample Letter to Subcontractor Regarding Owner's Decision Directing Work, 117
- 7.3.5 Price/Bid Allowances, 119
- 7.3.6 Contract Time, 119
- 7.4 Plans and Specifications, 121
- 7.4.1 "As Indicated", 121
- 7.4.2 Ceiling Spaces (Conflict), 123
- 7.4.3 Sample Letter to Subcontractors Regarding Coordination of Work in Ceiling Spaces, 125
- 7.4.4 Changed Existing Conditions, 127
- 7.4.5 Column and Beam Locations, 128
- 7.4.6 Design Change TeUtales, 130
- 7.4.7 Design Discipline Interfaces, 131
- 7.4.8 Duplication of Design, 132
- 7.4.9 Sample Letters to the Owner Regarding Design Duplications, 135
- 7.4.10 "Fat" Specifications, 139
- 7.4.11 Finish Schedule vs. Specification index, 140
- 7.4.12 Inadequate Level of Detail, 140
- 7.4.13 Light Fixture Locations, 142
- 7.4.14 Match Lines and Plan Orientations, 144
- 7.4.15 Mechanical, Electrical, and N.I.C. Equipment, 145
- 7.4.16 Sample Letter to Subcontractors Regarding Material and Equipment Coordination, 148
- 7.4.17 Sample Letter to the Architect Regarding Contract Equipment Coordination, 150
- 7.4.18 Sample Letter to the Owner Regarding N.I.C. Equipment Coordination, 152
- 7.4.19 Numerous Details and Dimension Strings, 154
- 7.4.20 Performance and Procedure Specifications, 155
- 7.4.21 Proprietary Restrictions (Public), 156
- 7.4.22 Sample Letter to the Owner Regarding Equal for Proprietary Item, 158
- 7.4.23 Sample Letter to the Owner Regarding Rejection of Equal for Proprietary Item, 160
- 7.4.24 Specification Section "Scopes", 162
- 7.5 Site, 162
- 7.5.1 Introduction, 162
- 7.5.2 Grades, Elevations, and Contours, 163
- 7.5.3 Sample Letters to the Owner Regarding Change Site Conditions, 165
- 7.6 Change Order Discovery Checklist, 169
- 7.6.1 Introduction, 169
- Part Four
CHANGE ORDER PROPOSAL PREPARATION AND PRESENTATION - 8
- Designing and Constructing Effective Change Order Proposals, 181
- 8.1 Change Order Components, 183
- 8.1.1 Introduction: The Three Costs, 183
- 8.1.2 Direct Costs, 184
- 8.1.3 Indirect Costs, 184
- 8.1.4 Transforming Indirect Costs into Direct Costs, 185
- 8.1.5 Direct Project Management and Administrative Cost Form, 186
- 8.1.6 Consequential Costs (Damages), 188
- 8.1.7 Practical Management of the Three-Cost Approach, 189
- 8.2 Developing the Change Order Proposal, 190
- 8.2.1 Change Order Identification/Notification, 191
- 8.2.2 Sample Letter to the Owner Regarding Pending Change Order, 193
- 8.2.3 Assembling Component Prices, 195
- 8.2.4 Sample Change Order General Conditions Checklist and Estimate Sheet, 196
- 8.2.5 Assembling Subcontract Prices, 198
- 8.2.6 Sample Letter to Subcontractor-Request for Change Order Quotation, 199
- 8.2.7 Sample Letter to Subcontractor--Change Quotation, Second Request, 201
- 8.2.8 Sample Letter to Subcontractor Regarding Change Order Price by Default, 203
- 8.2.9 Sample Change Order Telephone Quotation Form, 205
- 8.2.10 Sample Letter to Subcontractors Confirming Telephone Quote, 207
- 8.2.11 Determining Schedule Impact, 209
- 8.3 Finalizing the Proposal, 212
- 8.3.1 Introduction, 212
- 8.3.2 Proposal Format and Timing, 213
- 8.3.3 Sample Change Order Proposal Cover Letter, 214
- 8.3.4 Sample Letter to the Owner Regarding Change Order Cost Escalation Due to Untimely Action, 217
- 8.3.5 Representing Change Order Components, 219
- 8.3.6 Presenting the Total Change Order Price, 221
- 8.3.7 Presenting the Effects on Contract Time, 221
- 8.3.8 Requiring Approval Action, 222
- 8.3.9 Additional Terms and Conditions, 223
- 9
- Substantiating Change Order Prices: Settling Arguments Before They Begin, 224
- 9.1 Introduction, 225
- 9.2 Lump-Sum Prices, 227
- 9.2.1 Sample Letter to Subcontractor Regarding Improper Proposal Submission, 228
- 9.3 Detailed Cost Breakdowns, 231
- 9.4 Time and Material, 233
- 9.4.1 Sample Letter to Subcontractors Regarding T & M Submission Requirements, 235
- 9.5 Unit Prices, 237
- 9.6 Historical Cost Records, 238
- 9.7 Industry Sources, 239
- 9.8 Invoices-Records of Direct Payment, 239
- 9.9 The Schedule of Values, 240
- 10
- Using Project Records to Discover, Define, Support,and Track Change Orders and Claims, 241
- 10.1 Introduction, 243
- 10.1.1 Active Working Files, 243
- 10.1.2 Item Completion and Close-Out, 244
- 10.1.3 Archives, 244
- 10.2 Establishing Dates in the Correspondence, 244
- 10.3 Daily Field Reports, 245
- 10.3.1 Sample Daily Field Report Form, 247
- 10.4 Payroll Records, 251
- 10.4.1 Sample Field Payroll Report Form, 251
- 10.4.2 Sample Monthly Administrative Tune Sheet, 252
- 10.5 Photographs--What, When, and How, 255
- 10.5.1 Introduction, 255
- 10.5.2 Photograph Layout Requirements, 256
- 10.5.3 Sample Photograph Layout Form, 256
- 10.6 Construction Schedules, 258
- 10.6.1 As-Planned, As-Built, and Adjusted Schedules, 258
- 10.6.2 Six Requirements for Presentable Evidence, 259
- 10.7 Using Job Meetings to Establish Dates, Scopes, and Responsibilities, 261
- 10.7.1 Introduction, 261
- 10.7.2 Job Meeting and Minutes Guidelines, 262
- 10.7.3 Sample Letter to Subcontractors Regarding Mandatory Job Meeting Attendance, 264
- 10.7.4 Sample Letter to Subcontractors Regarding Lack of Job Meeting Attendance, 266
- 10.7.5 Sample Job Meeting Form, 268
- 10.8 Shop Drawings and Approval Submittals, 271
- 10.8.1 Approval Responsibility, 271
- 10.8.2 Approval Response Tune, 273
- 10.8.3 Treatment of Differing Conditions, 273
- 10.8.4 Absolute Contractor Responsibility, 273
- 10.9 Time and Material Tickets, 274
- 10.9.1 Introduction, 274
- 10.9.2 Sample Letter to the Owner Regarding Acknowledgment of Actual Work Performed, 275
- 10.9.3 Sample T & M Form, 277
- Part Five
CHANGE ORDER AND FILE PRESENTATION - 11
- Keeping Change Orders Under Control: How to Save Time and Improve Records with Administrative Housekeeping, 281
- 11.1 Introduction, 282
- 11.2 Establishing Easy-to-Research Change Order Files, 282
- 11.3 File Content, 284
- 11.4 Correspondence File, 287
- 11.5 Tracking Change Order Trends, 288
- 11.5.1 Introduction, 288
- 11.5.2 Evaluating the Change Order Summary Sheet, 289
- 11.5.3 The Change Order Summary Sheet Procedures, 290
- 11.5.4 Sample Change Order Summary Sheet Form and Sample Completed Form, 291
- 11.6 Approval Submissions, 294
- 11.6.1 Introduction, 294
- 11.6.2 Shop Drawing Review and Coordination, 294
- 11.6.3 Shop Drawing Submission Requirements, 295
- 11.6.4 Sample Form Letter to Subcontractors Regarding Shop Drawing Submission Requirements, 296
- 11.6.5 Submittal Review, Distribution, and Follow-Up, 299
- 11.6.6 Sample Form Letter to Subcontractors Regarding Shop Drawing Resubmission Requirements, 301
- 11.7 Sample Letter of Transmittal, 309
- 11.7.1 Sample Form Letter of Transmittal, 309
- Part Six
DISPUTE RESOLUTION - 12
- Winning in Change Order Negotiation, 315
- 12.1 Introduction, 317
- 12.2 Acceptance Time, 317
- 12.3 Agenda, 317
- 12.4 Gentleman's Agreement, 318
- 12.5 Agreement vs. Understanding, 318
- 12.6 Allowances, 318
- 12.7 Alternatives, 319
- 12.8 Arbitration and mediation, 320
- 12.9 Aspiration Level, 321
- 12.10 Assumptions, 321
- 12.11 Authority, 321
- 12.12 Averages, 322
- 12.13 Boilerplate, 322
- 12.14 Catch-22, 323
- 12.15 Change Clauses, 323
- 12.16 Change the Negotiator, 323
- 12.17 General Contractor as a Conduit, 324
- 12.18 Contingency, 325
- 12.19 "Convenience" Specifications, 325
- 12.20 Concessions, 325
- 12.21 Constructive Clauses, 326
- 12.22 Correlation of Contract Documents, 327
- 12.23 Cost Perceptions, 328
- 12.24 Credits-Turning Them Around, 328
- 12.25 Deadlines, 329
- 12.26 Deadlock, 329
- 12.27 Deliberate Errors, 329
- 12.28 Level of Detail, 330
- 12.29 Discipline, 330
- 12.30 The Eighty-Twenty Rule, 331
- 12.31 Elaboration, 331
- 12.32 Empathy, 331
- 12.33 Designer's Estimates, 331
- 12.34 Equitably Adjustment, 332
- 12.35 Exceptions, 333
- 12.36 Excusable Delays, 333
- 12.37 Use of Experts, 334
- 12.38 Face-Saving, 335
- 12.39 Job Meetings, 335
- 12.40 The Power of Legitimacy, 335
- 12.41 Letter Wars, 336
- 12.42 Lost Notes, 337
- 12.43 "Nonnegotiable" Demands, 337
- 12.44 Objections, 338
- 12.45 Off-the-Record Discussions, 338
- 12.46 Patience, 339
- 12.48 Presentations, 339
- 12.49 Proceed Orders, 340
- 12.50 Promises, 341
- 12.51 Questions, 341
- 12.52 Quick Deals, 342
- 12.53 Reasonable Review, 342
- 12.54 Reopening Change Proposals, 342
- 12.55 Split the Difference, 343
- 12.56 Statistics, 343
- 12.57 Telephone Negotiations, 343
- 12.58 Plain Hard Work, 344
- 12.59 Unit Prices, 344
- 12.60 Value of Work Performed, 345
- 12.61 Conclusion, 345
- 13
- Preparing for Winning When Changes Become Claims, 346
- 13.1 Introduction, 347
- 13.2 Turning Around Change Order Rejections, 348
- 13.2.1 Introduction, 348
- 13.2.2 "Good" or "Bad" Faith Rejections, 349
- 13.2.3 The "Nothing to Lose" Attitude, 350
- 13.2.4 Change Amount vs. Litigation Expense, 351
- 13.2.5 Meetings at the Highest Levels, 351
- 13.2.6 Checklist for Meetings at the Highest Levels, 352
- 13.2.7 Sample Letter to the Owner Confirming a Special Meeting, 353
- 13.3 Arbitration/Litigation/Mediation-What Is the Difference?, 355
- 13.3.1 Introduction, 355
- 13.3.2 Arbitration, 355
- 13.3.3 Litigation, 358
- 13.3.4 Mediation, 360
- 13.3.5 Conclusions, 362
- 13.4 Finding an Attorney, 362
- 13.4.1 Introduction, 362
- 13.4.2 Characteristics of the Lion, 363
- 13.4.3 Characteristics of the Pussycat, 363
- 13.4.4 How to Find Your Lion, 363
- 13.5 Selecting Consultants, 364
- 13.6 Construction Claims Checklist, 366
- Appendix: Sample Contract Change Order, 369
- Index, 375
1.2 THE CHANGING BUILDING INDUSTRY
1.2.1 The Contractor in Control
1.2.2 Claims Consciousness
CONTRACT DISPUTES BEFORE THEY START
With this expanded new edition of Contractor's Guide to Change Orders in hand, contractors working on projects of any size - from remodeling jobs to skyscrapers - will have all the ammunition needed to:
- Keep hidden construction delays and expenses from draining profit. (Only a fraction of chargeable amounts are ever identified by the owner or architects involved.)
- Identify trouble spots in the contract, plans, specifications and site that are likely to result in added costs or delays.
- Find, document and negotiate payment for every added delay and expense that slips past your "early warning system."
- Negotiate and resolve change order disputes at every level so you are always a step ahead.
- Put all the facts on your side so that, if all else fails, you have ironclad evidence to support your claim during arbitration or ligitation.
THIS BOOK IS LIKE HAVING A LAWYER ON CALL TO HELP YOU OUT AT A FRACTION OF THE COST
- Detailed checklists that help you prevent costly oversights, support change order prices, record actions taken, and much more.
- Sample forms and worksheets that are job-tested on projects of nearly every size and type. You can reproduce and use these forms right away to simplify your job and save hours of time.
- Model letters that are professionally written and handle nearly any situation, from assigning job responsibilities to warning notices or corresponding with architects and engineers.
- And much more!
Well-known in construction circles, author Andy Civitello draws on well over two decades of experience and shares literally dozens of timesaving tools tailored to the needs of busy contractors like you who don't have time or desire to wade through some academic textbook. In Contractor's Guide to Change Orders, you'll find:
ABOUT THE AUTHORS
Andy Civitello has managed construction projects of all types and sizes, for a wide variety of clients. He is a nationally recognized project management specialist and construction claims consultant skilled in contract management, claims entitlement and valuation. A "shirt-sleeve" veteran, clients include owners, contractors, design professionals, and attorneys on a wide variety of public, institutional and private projects. He is an active panelist for the American Arbitration Association and author of bestselling construction books.
William D. Locher, J.D., is senior partner with Gibbs, Giden, Locher & Turner, a Los Angeles law firm. He has represented owners, contractors and material suppliers in construction and related matters and disputes for over 20 years. He lectures regularly on contract law issues including administration, change orders and construction contract claims.