Thursday, June 23, 2011

Who Can Authorize Change Orders?

Change orders on public construction projects are a fact of life.  There are always unforeseen conditions that require an adjustment in the contract amount and scope of work.

Authority Levels and Roles:  In managing the administration of change orders, it is important for public agencies to have clear internal procedures about who is authorized to execute change orders, and when approval from higher level management or a governing body such as a city council is required.

Tacoma City Council Not Informed of Change Orders:  Project management staff for the City of Tacoma, Washington have recently been criticized by members of the Tacoma City Council for not keeping the Council informed of change orders totaling $821,000 on a $26.5 million Design-Build contract for renovation of the city's Cheney Stadium.  Click here to read a news article from the Tacoma News Tribune about the change orders on the project.

Practical Tips:  In managing change orders, public agencies should have clear policies, procedures, and practices related to the following issues:
  1. What individual(s) have authority to approve change orders for the owner?
  2. What are the dollar thresholds of change orders that public agency employees may approve?
  3. When do contingency amounts spent on change orders need approval from higher level management or a governing body?
  4. At what dollar amounts does the governing body need to be notified of change orders or approve change orders?
  5. Is the governing body being kept informed on a regular basis on the progress of the project, and potential or actual change orders for the project?
  6. Is the public agency ensuring that the contractor is paid only after execution of a change order?
  7. Is the scope of work of the change order generally consistent with the scope of work for the project, or could it be bid as a separate project?
  8. Is the public agency conducting an independent cost estimate of the change order?
  9. Are the dollar amounts of the change order being appropriately negotiated by the public agency?
  10. Are there appropriate internal controls in place to ensure that the public agency's change order approval process is being implemented consistent with the approved policies and procedures?
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC

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