Wednesday, January 14, 2015

Do Your Change Orders Require Contractors to Waive Future Claim Rights?

When a public agency executes a change order, does the change order have language in which the contractor waives their rights to seek additional compensation or time for the changed work?  In other words, is the dollar amount of the change order really the final amount of the change order?

Change order should be final:  The purpose of a change order is for the owner and contractor to agree upon an increased cost and any additional days that may be associated with the change. 

Open ended change orders:  However, some change orders open the door for the contractor to seek additional compensation for the same work.  Here's an example of language that can be problematic for a public agency with a contractor reserving the right to seek additional compensation for the change beyond what is negotiated in the change order:  
"Contractor reserves the right to a future contract sum and schedule adjustment should changes be discovered which are not identified as such in the referenced documents and to submit for additional compensation related to the impact of this change on unchanged work or the effect of this change in combination with other changes."
Rights waived in change orders:   Instead of the above language, public agency change orders should include language in which the contractor waives their rights to seek additional compensation or time based on the change.  Here is some language that addresses this:
"The Contractor agrees that any change in the Contract Amount or Contract Time provided in this Change Order are full and complete compensation to the Contractor for the change(s) to the work, deleted work, modified work, direct or indirect impact on the Contractor's schedule, and for any equitable adjustment or time extension to which the Contractor may be entitled for this Change Order, pursuant to the Contract between the Owner and Contractor."
Language for contract and change orders:  Public agencies should include in both the contract and change order, language stating that the amount and time for change orders are final and that no additional payment will be made unless conditions change beyond what is agreed upon in the change order.  Work with your attorneys on developing these safeguards.
Mike Purdy's Public Contracting Blog
© 2015 by Michael E. Purdy Associates, LLC

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