Change Orders
and Disputes regarding the Scope of Work
Scope of work in contract
Disputes regarding scope of work are often
the reason for construction claims. Scope of work is defined
as the extent of a contractor's responsibility to perform
certain contract work. To determine the scope of work, the
contractor may have to look to other contract documents --
specifications, contracts with others -- and to industry standards
(building codes, etc.).
Questions regarding scope of work should be
resolved in the written contract. Scope of work references
should be detailed in contract. If detailed specifications
are available, refer to the specifications in designating
scope of work.
Changed or extra work contract procedure
The changed work provision is a mechanism
to allow the owner to demand changes without requiring negotiated
agreement with contractor. Unilateral changes may entitle
the contractor to additional money and time to complete. Reasons
for changes may be to correct errors and/or omissions in plans
and specifications, to satisfy regulatory agencies, to effect
minor design changes, to address quantities of materials used,
and to extend time for completion of the contract.
The changes clause should address the scope
of the changed work, the contract adjustment in price, and
the procedure to be followed. Under the typical changed work
provision, the owner may direct changes and the contractor
must perform changes even if there is no agreement as to price.
Extra work is work not contemplated by contract
-- changed work is work contemplated by contract but where
the scope of the work has changed.
Preserving claims for failure to pay for extra work
- Invoicing/waivers
Application for payment includes (a) value
of work in place, (b) value of materials stored on site, (c)
retainage, (d) amounts previously paid, and (e) amount due
for present request. The invoice form should specifically
refer to the project, the contract, and the contract sum.
1. Determining value of work in place
A properly and carefully prepared schedule
of values, and good record keeping by the contractor, assist
the determination of the value of work in place. The contractor
should keep meticulous records of payroll, supplies, equipment,
materials, and overhead to present in the event of a dispute.
The contractor may be required to submit breakdown
of hours, position, and wage rates of employees on project.
Overtime hours and the reason for overtime should also be
tracked. The contractor should be able to show the cost of
labor incurred for each component of work completed.
The cost of supplies should be separately
tracked. Supplies are not incorporated in project, as materials
are. Equipment rental and/or maintenance should be tracked
along with supplies.
Materials used must also be tracked as part
of the value of the work in place. Materials are those that
have been incorporated into the project.
Overhead and profit should also be part of
the value of work in place. Appropriate amount should be added
to value.
2.. Determining cost of material stored
on site
This component of application for payment
is the material stored on site, but not yet incorporated into
the project. This allows the contractor to purchase materials
before they are needed, so as to allow construction to proceed
without delay.
3. Retainage
Usually spelled out in contract. If it is
not, retainage is not an automatic right.
- Schedule of values
A schedule of values is typically required
by contract documents. The schedule should be prepared carefully,
with specific and accurate values attached to each component
of the work. The schedule should be submitted prior to the
first application for payment, and should be reviewed carefully
by architect to prevent "front end loading" by contractor.
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Fortney
& Klingshirn
4040 Embassy Parkway, Suite
280
Akron, Ohio 44333
telephone 330-665-5445 - fax 665-5446
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