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Getting paid for changes before construction
is over
Question: We are an electrical
subcontractor who is providing rough and finish electrical
to a newly constructed large anufacturing/warehousing facility.
There were changes in the power needs for the building, which
required us to increase the rating of the main switchgear
from 3,000 amps to 5,000 amps.
This was a significant change because the switchgear was a
maintie- main configuration, meaning it uses three (instead
of only one) “main” type breakers — one
for normal power, one for emergency power and the tiebreaker
to isolate the normal from the emergency source of power.
Many of the transformers and panel boards also increased in
size, not to mention the electrical cable and wire itself.
These changes were requested after the first round of submittals
had already been done. So, the manufacturer had to redesign
the switchgear and do an entirely new set of submittal drawings
reflecting all the changes. We then had to wait for the engineer
to approve on the new set of submittals and for the general
contractor to give us notice to release the redesigned switchgear
for manufacturing.
All of this delayed the electrical portion of the project
schedule, and we incurred extra costs for the increase in
task labor and other costs such as
volatile copper market, driving up to cost of wire. We also
had additional rental on our jobsite trailer, as well as other
general conditions. Also, the 5,000-amp switchgear took more
time to manufacture than the 3,000 amps, so that caused more
delays.
We finished setting the switchgear, panels and transformers,
and pulled the wire about three months ago. All we really
have left to do is terminate the wiring to the loads and install
all the light fixtures. The lighting fixtures have not yet
been released for manufacturing because other changes in the
project have delayed the finish work. We are probably looking
at another six to nine months before we are let back in to
finish our work, and we have had to demobilize.
We have received our progress payments (minus retention) to-date
based on the price for our original bid for the 3000 amp switchgear
package,
but we have had to pay our suppliers for the redesigned and
more expensive equipment, plus the increased cost of the wire.
We made sure we submitted our change order requests for increases
in materials costs, as well as increases in our general conditions
and the extra demobilization costs within the time limits
of our subcontract.
We never received anything in writing as to whether our change
order requests were accepted by the owner and now are being
told by the general that the owner “prefers” to
wait to the very end of the project to process all the change
orders. Our subcontract is an AIA A401
(the old version) and I know that the general contractor’s
contract with the owner uses the AIA A201 General Conditions
(the old version), although I have never seen their actual
contract.
We can’t finance these changes for what will realistically
be close to another year. Is there any way we can force our
change orders to be addressed even if we haven’t finished
all the work under our subcontract?
Answer: I am assuming that you properly served
a preliminary notice and that by “old version”
on the AIA contracts, you mean the 1997 version
as opposed to the 2007 version. I am relieved to hear that
you properly submitted your change order requests and you
are aware of at least
the general conditions between the owner and contractor. That
is half the battle.
It also seems that you have enough written documentation to
support the argument that you received construction change
directives in lieu of signed change orders. However, as is
with most cases, the parties don’t seem to be strictly
following the entire changes in work procedure
as is set out in Article 7 in the AIA A201 (1997). This causes
difficulties in providing a completely legal analysis of your
situation because the conduct of the parties factors into
any situation where change order procedures and claims procedure
on not being followed to the letter of the contract. Thus,
the information I am providing here should not be followed
blindly without a more detailed analysis of your entire situation
by qualified legal counsel. Plus, my steps here will be for
a “soft” approach if you have a good relationship
with the general contractor and you expect to do a significant
amount of work together in the future. In general, you should
recognize that, because an amount was not agreed to prior
to performing the work, under section 7.3.6, you are obligated
to keep an itemized accounting with supporting documents.
Then, under section 7.3.8, you should have been paid any amounts
not in dispute. At this point, it would be wise to confirm
that it is the owner who is holding up the change order approvals
and payments. This is not to say that your general contractor
is not being truthful, but you need to know the exact reason
you’re not being paid. If it is the owner who is holding
everything up, I would ask for an immediate meeting with the
owner and general contractor and explain the financial burden
on your company.
Perhaps the owner is not aware of the impact
this is having. Bring copies of the change order requests
with you, and directly if there are any issues with your work
and whether the owner or general plan to asserting any offsets
to your change orders. Also, ask whether the owner currently
lacks enough funding for the changes, if so, then that is
an entirely different set of problems that will not be addressed
here. If the owner will not meet, then still have the meeting
with the principals of the general contractor to get a clear indication of any
problems with the change orders. If a meeting does not work,
or they refuse to meet, then you may consider making a formal
claim under Article 4.
In my next article, I will address the claims
procedure under the AIA documents and other avenues you can
take to force your change orders to be addressed.
If you have a construction question, submit
it to: info@construction-laws. com.
Disclaimer The information in this article is
based upon California law and is for general information only.
Any information or analysis presented here is intended solely
to inform and educate the reader on general issues. Nothing
presented or referenced to, regarding facts, documents or
applicable laws, constitutes legal advice. Before acting or
relying on any information, including any information presented
here, consult with a qualified attorney for your specific
situation.
Scholefield holds an active PE license in Colorado, an undergraduate
engineering degree from the University of Florida, and received
her JD from the University of San Diego.
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