Wednesday, December 15, 2010

When Not to Approve a Change Order

Change orders to construction projects are a fact of life.  However, not all change orders are appropriate.

Expiration of Subcontractor Bids:  If a public agency is delayed in awarding a contract, but the contractor signs the contract for the amount of their bid, the public agency should not execute a change order to compensate the contractor for increased subcontractor prices due to the subcontractor bids having expired.  This amounts to bid negotiation, something typically not permitted in public works contracting.

Obtain Bid Price Extension:  Public agencies should make sure the contractor's bid price does not expire by requesting an extension of their commitment to their bid price prior to expiration.  Many agencies require that the contractor commit in their bid to hold their bid prices for 30 or 60 days.  Even if a contractor's bid price expires, if the contractor signs the contract at the bid price, they have then committed to the project at the cost of their bid, and no additional compensation should be due to them based on changed subcontractor prices.
Mike Purdy's Public Contracting Blog 
© 2010 by Michael E. Purdy Associates, LLC

No comments: