Contract Modifications

 

5.0 Contract Modifications


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5.1 Time Extensions

5.1.1 Purpose and Definitions

Contract time extensions will be considered only for the reasons set forth under the terms of the contract. A time extension shall not be used to document a contract time reduction. A supplemental agreement or work order must be used for that purpose. Time extensions may be granted during the contract time period or authorized extensions of the contract time period.

A Claim for Delay can contain both a request for dollar compensation as well as a time extension.  A Time Extension can be due for delay, differing site conditions, breach of Contract, or any other cause other than for extra work, as fully outlined in General Specification Section 2.4.2.2. The Time Extension can only be for delays that impact an activity on the Critical Path of the Project Schedule or for activities that subsequently become critical because of the delay.

5.1.2 Time Adjustment for Extra Work

Additional Work can also extend Contract Time if the added work falls on the Critical Path of the Schedule.   This is not a time extension but is considered a time adjustment for additional work.   The additional contract time will be added on the Supplemental Agreement as part of the compensation for the added work. If the Contractor deems that additional time is due for Work not identified in the Contract or in a Supplemental Agreement, the Contractor will notify the Authority in writing of his intention to make a claim as explained in General Specifications Section 2.4.2.1.  The  ACPAM Section 4.13 on Claims and Dispute Resolution covers this procedure.

5.1.3 Time Extension for Delay

The process for evaluating, documenting and making decisions to approve or deny time extensions is as follows:

1)      Within ten calendar days after the start of a delay to the critical path, the Contractor shall notify the Authority that they intend to seek additional compensation and shall also submit a Time Impact Analysis in accordance with section 6.3.3.1 of the General Specifications. Failure to submit the required notice of time extension request in the time periods specified shall constitute an irrevocable waiver of any right to extension to the contract time for the subject delay.

 

2)  The Project Engineer shall provide written acknowledgment of each Contractor’s time extension request. If the information submitted is determined to be incomplete or fails to meet the requirements of the contract for consideration as a time extension request, the Project Engineer will reject it.

3)  The Project Engineer will review the request and make a recommendation to the Authority.  Upon the Authority’s approval, the Project Engineer will send a letter to the Contractor granting the additional time or denying the request. The denial or approval should include a concise response explaining the findings and decision for each issue raised by the Contractor’s request.

Each time extension approval letter shall include a standard disclaimer statement:

“By your acceptance of this time extension, you agree to pursue no further claim in connection with the above request. Please sign and return one copy of this letter, to acknowledge your agreement with these terms and conditions.”

Terms and Conditions Accepted (Contractor’s corporate name) By:                                      Date:

5.1.4 Appeals and Claim Process

In the event the Contractor appeals the Authority’s decision, the Authority will evaluate any new facts. All needed coordination will be accomplished with the Authority’s support staff and the CEI. The subsequent appeal process is described in the ACPAM Section 4.13.10 Dispute Resolution.


5.2 Supplemental Agreements and Unilateral Payments

5.2.1 Purpose and Definitions

To  provide  a  uniform  procedure  to  initiate,  document,  execute  and  distribute  construction  contract changes by Supplemental Agreements and Unilateral Payments. The following definitions are referenced in this section:

Dispute: A disagreement between the Authority and the Contractor on which the Contractor has submitted, in accordance with General Specification Section 2.4.2 a notice of intent to seek additional compensation but has not yet submitted a written claim in accordance with General Specification Section 2.4.3.

Engineer’s Estimate: The estimate of the actual cost and time impacts to the Contractor caused by a contract change without regard to whose fault the contract change is or the percentage of those cost and time impacts the Contractor may be entitled to recover. For each contract change issue, the Engineer’s Estimate will show the pay items involved along with quantities, unit prices, any time impacts, and the basis for the estimate.

Entitlement Analysis: A document, signed and dated by the Engineer, containing statements as to each issue of a contract change, stating the reasons why the Contractor is, or is not, entitled to recover some or all of the time and cost impacts calculated for that contract change issue in the Engineer’s Estimate. The Entitlement Analysis for each issue should also include a numeric percentage of those cost and time impacts for which the reasons previously stated justify the Contractor’s entitlement. Each contract change issue should include all the pay items associated with that issue.

Major Item of Work: Any item of work having an original contract value in excess of five (5) percent of the original total contract amount.

Minor Change: When the character of the work as altered is within the scope of the contract and such work is totally defined by existing items of work at previously established contract unit prices; and when no major item of work is increased in excess of one hundred twenty-five (125) percent or decreased below seventy-five (75) percent of the original total contract quantity.

Minor Overrun: Overrun in the quantity of one or more previously established pay items at contract unit price the sum of which totals five (5) percent or less of the original total contract amount.

Negotiated Settlement: The Authority recognizes that a contract change is not a claim if the most recently modified Entitlement Analysis and Engineer’s Estimate completely justify the amount of the contract change. In this case the contract change is defined as a Negotiated Settlement and the Authority does not dispute the amount owed. This contract change will not be called a claim even though there may have been some initial disagreement on entitlement time, unit prices and quantities.

Significant Change: When the character of the work as altered differs materially in kind or nature from that involved or included in the original proposed construction; or When a major item of work is increased in excess of one hundred twenty-five (125) percent or decreased below seventy-five (75) percent of the original contract quantity.

Supplemental Agreement (SA): A request made to the Authority to authorize the contractor to proceed  with  additional  work.    The  SA  will  contain  the  Engineer’s  Estimate,  Entitlement Analysis,  Contractor’s  request,  the  price  proposal  and  explanations  of    changes.Substantial

Overrun: Overrun in the quantity of one or more pay items which totals more than five (5) percent of the original total contract amount.

5.2.2 Identifying the need for a Supplemental Agreement or Unilateral Payment

Supplemental Agreements or Unilateral Payments shall be used to:

1)     Clarify the plans and specifications of a contract.

2)     Provide for quantity differences that result in the Contractor’s work effort that differ from the original total contract amount.

3)     Provide for unforeseen work, grade changes, or alterations in plans that could not reasonably have been contemplated or foreseen in the original plans and specifications.

4)     Change the limits of construction to meet field conditions.

5)     Settle contract claims (for Supplemental Agreements only).

6)     Make  the  project  functionally  operational  in  accordance  with  the  intent  of  the  original contract.

7)     Give effect to the negotiated settlement of a dispute.

Unilateral Payments will be used to pay the Contractor for work performed on a project when:

1)     The Contractor agrees to perform the work at an agreed upon cost but refuses to timely execute a Supplemental Agreement so as to allow timely payment for the work by the Authority or,

2)     The Authority and the Contractor cannot agree on the cost of the work, and the Contractor refuses to execute a Supplemental Agreement or,

3)     The Authority determines it is in its best interest to make a Unilateral Payment for work the Authority directed to be performed in lieu of pursuing a Supplemental Agreement.

5.2.3 Initiating Supplemental Agreements or Unilateral Payments

The Authority, the Contractor, or the CEI may initiate changes to the work.   Upon identification of a potential change, the CEI will prepare a Work Order, for small changes, or a Supplemental Agreement, for more significant changes, and research the quantity and cost information to prepare an Engineer’s Estimate.  A copy of all correspondence, estimates and documentation will be forwarded to the Authority for approval. Approval of a Work Order or Supplemental Agreement authorizes the Contractor to proceed with the work.

The CEI staff will ensure that the terms of all Supplemental Agreements and Unilateral Payments are in the best interest of the Authority and comply with procedures, specifications and statutory requirements governing the Authority’s projects.  The Supplemental Agreements or Unilateral Payments may combine previously approved Work Orders or they may be processed as a separate change.  All Supplemental Agreements and Unilateral Payments, including those initiated in response to contract claims, will be supported and documented by an Engineer’s Estimate and an Entitlement Analysis setting forth a detailed itemization of all items of work described therein, associated quantities and respective unit prices, a comparative review of the Contractor’s proposed costs, and the basis for the estimate of the cost of the contract change. Lump sum items shall not be used without detailed itemization stating the quantities and unit prices the lump sum item was based on.

All significant changes causing an increase or decrease in the unit cost of a pay item must be documented with a completely executed Supplemental Agreement or Unilateral Payment. Note that either of these types of contract changes will require an Entitlement Analysis stating the reason for and degree of the Contractor's entitlement (expressed as a percentage) to recover the reasonable quantity of additional compensation and contract time associated with the significant change.  These types of contract changes will also require an Engineer's Estimate stating total reasonable quantity of additional compensation and contract time associated with the significant change.

At the end of the project, the original pay items are brought to 100% of plan quantity and all quantity overruns and underruns must be documented with a fully executed Supplemental Agreement or Unilateral Payment. The pay items that were added by Supplemental Agreement will also be shown at 100%. Throughout the life of the project, it is essential that an immediate, comprehensive analysis of the impact on the final contract amount of a substantial overrun or underrun in one or more pay items be made as soon as the probability of such a substantial overrun or underrun becomes apparent.  Reasons for all overruns or underruns should be documented when those overruns or underruns occur or are anticipated. An accumulation of minor overruns could result in a substantial overrun requiring justification and documentation with a Supplemental Agreement or Unilateral Payment.

Note that any price adjustment for a significant change, as defined in the General Specifications as a “Major Item of Work”,  involving an increase in quantity will apply only to that portion of the work in excess of one hundred twenty-five (125) percent of the original contract quantity for that item. In case of a decrease in the original contract quantity below seventy-five (75) percent of the original contract quantity, the price adjustment will apply to the actual amount of work performed.

5.2.4 Establishing a Fair and Equitable Value for a Significant Change

Additional work of the type for which a contract unit price is provided shall be paid at such contract unit price unless the additional work constitutes a significant change.  Additional work of the type for which no contract unit price is provided will be paid at negotiated prices or pursuant to General Specification 2.3.2.

When the  cost is  negotiated,  the  Engineer  will  prepare an  Entitlement  Analysis  and  an  Engineer’s Estimate including the associated basis for that Engineer’s Estimate. The Engineer will typically attempt to negotiate with the Contractor, as outlined below, to resolve all outstanding issues, including time adjustments and attempt to reach an agreement on fair and equitable prices for a significant change. If an agreement on a fair and equitable price cannot be reached between the Engineer and the Contractor, the Engineer will determine the amount of a fair and equitable price for the work by the summation of entitlement for all outstanding issues. The amount paid for each outstanding issue is determined by multiplying the Entitlement Analysis percentage by the corresponding value calculated for that issue in the Engineer’s Estimate.

For any contract change involving monetary compensation:

 

1)     As soon as the potential need for additional work is established, the CEI should notify the Authority.

2)     If the contract change is for additional work, the CEI should investigate the possibility of having another contractor perform the additional work thru a separate contract.  This option should only be used if such work will not interfere with the contractor on the main project.

3)     The CEI should prepare an Entitlement analysis and an Engineer’s Estimate and then begin negotiations for the work. The CEI shall make an appropriate revision to the Entitlement Analysis percentage or the amount of the Engineer’s Estimate if new information is recognized, supported, and documented during negotiations.

4)     If negotiations result in agreement, the CEI should first determine if the work should be paid with a Work Order in accordance with Section 5.3 of this guide or a Supplemental Agreement.  The CEI should then request approval from the Authority to enter into a Supplemental Agreement as described herein or a Work Order as described in Section 5.3, then authorized the contractor to proceed.

5)     If the negotiations have not resulted in an agreement and the Authority may be liable for delays, the CEI should then immediately request approval from the Authority to issue a Unilateral Payment as described herein for the costs estimated to be due to the Contractor and then authorize the Contractor to perform the work.   The contractor may then file a claim in accordance with section 2.4 of the General Specifications.

5.2.5 Determining and Documenting the Basis for Contract Time Adjustments

When the value of a contract is increased or decreased due to work added, work deleted, or a significant change, a statement of adjustment of contract time shall be included in the negotiations between the

Authority and the Contractor, and included in the Supplemental Agreement or Unilateral Payment documentation.   Additional time should be commensurate with the estimated effects the changes will have on the controlling items of work shown on the approved work schedule in accordance with section 6.3 of the General Specifications.

When a Unilateral Payment is executed in lieu of a Supplemental Agreement additional contract time will be determined by the Engineer based on the impact to controlling items of work shown on the approved work schedule except when the approved work schedule is clearly not representative of actual project performance. Any additional contract time due the Contractor for work paid by Unilateral Payment will be granted on the Unilateral Payment document. The Unilateral Payment document will include the reasons for all time adjustments.

Note that in case of a Supplemental Agreement, the Contractor will receive a fully executed copy only at the conclusion of the process. Occasionally, a Contractor will amend the terms of a Supplemental Agreement on the copies that the Contractor signs. This unilateral alteration of the Supplemental Agreement amounts to a counter offer that seeks to change the terms previously offered by the Authority. Such changes to a Supplemental Agreement will be rejected and a unilateral payment will be processed.

5.2.6 Executing and Processing Supplemental Agreements and Unilateral Payments

The steps for the CEI to obtain approval for a Supplemental Agreement are as follows:

1)     Prepare the Engineer’s Estimate and Entitlement Analysis

2)     Prepare a draft copy of the Supplemental Agreement

3)     Prepare language   for   Consent   Agenda   requesting Board   Approval to enter into a Supplemental Agreement with the Contractor.

4)     Once the  Board  has  approved  the  Supplemental  Agreement,  forward four copies to the Contractor for his signatures and then to the Authority for their signatures.

5)     Two original signed copies of the Supplemental Agreement are returned to the Contractor, one original is maintained in the CEI’s project files, and one original is kept by the Authority.

When the Authority and the Contractor agree on a signed Supplemental Agreement, then the Contractor can begin performing the work. If the Authority and the Contractor cannot agree on the terms of a Supplemental Agreement, or the Contractor fails to timely execute Supplemental Agreement, the Authority has unilateral authority to pay the Contractor the sums the Authority determines to be due the Contractor for work performed on a project. The Authority shall make a Unilateral Payment considered fair and equitable by the Authority for work ordered and documented by the Authority on the Entitlement Analysis and Engineer’s Estimate. Such payment shall be made by executing the Notification of Unilateral Payment form in lieu of the Supplemental Agreement document. The steps for the CEI to obtain approval for a Unilateral Payment Notification (UPN) are as follows:

1)     Prepare the Engineer’s Estimate and Entitlement Analysis

2)     Prepare a draft copy of the Unilateral Payment Notification

3)     Prepare language for Consent Agenda requesting Board Approval to enter into a Unilateral Payment Notification with the Contractor.

4)     Return one copy of the UPN to the Contractor

If the Authority and the Contractor cannot agree on the cost of the work, and the Contractor has stated his refusal to execute any Supplemental Agreement for the issue, then a Supplemental Agreement need not be prepared. The Engineer will document the Contractor’s refusal to execute a Supplemental Agreement. A Unilateral Payment may be used to resolve the issue.  Such unilateral authority for the Authority to pay the Contractor does not preclude or limit the rights of the Authority or the Contractor to negotiate and agree on the cost of the work. By acceptance of any such Unilateral Payment, the Contractor does not waive any rights for payment by the Authority for additional sums that the Contractor claims are due for the work. A notice to proceed, with work to be documented with a Supplemental Agreement or Unilateral Payment, may be issued by the Resident Engineer that is tentatively approved by the Authority. After issuing the notice to proceed, the Engineer shall ensure timely preparation of the Supplemental Agreement.

A Unilateral Payment document shall be timely prepared and executed by the Authority and presented to the Contractor when required. Payment will be made based on a Unilateral Payment document only after completion of the work described therein to the satisfaction of the Engineer.

A Supplemental Agreement or Unilateral Payment must not be dated prior to the date of Board Approval. No Unilateral Payment shall have the same number as a Supplemental Agreement to that contract.  Only the Authority can delegate Supplemental Agreement approval and execution and Unilateral Payment approval and execution.

5.2.7 Obtaining a Revised Baseline Schedule

A Revised Baseline Schedule should be obtained at the time the Contractor executes a Supplemental Agreement or the CEI grants additional contract time by Unilateral Payment, unless the amount of time granted therein will have no appreciable effect upon the items controlling completion of the project, and no appreciable impact upon the project’s scheduled completion date.

Generally, when a contract has a scheduled duration of ninety (90) days or more, and the time granted is fifteen (15) days or more, a revision to the Baseline Schedule should be requested. The contract duration, the amount of time granted, the status of work progress, and any special circumstances that may exist will also indicate the appropriateness of requesting a revised Baseline Schedule. When additional time is granted and a Revised Baseline Schedule is not included, the basis for that decision must be documented in the project files by the CEI.


5.3 Work Orders

5.3.1 Purpose and Definitions

To establish a uniform procedure for the initiation and execution of a Work Order and Contingency Work Order Allowance.

5.3.2 Identifying the Need for a Work Order

A Work Order may be used to document additional work or contract changes with the following restrictions/comments:

1)     Work Orders shall not be written to include normal overruns of existing contract items for work at established contract unit prices shown in the contract documents.

2)     Work  Orders  may  be  used,  along  with  the  appropriate  approvals  from  the  Authority,  as documentation to effect a specification change.

3)     The terms of the Work Order shall provide for full and complete settlement of all issues described therein.

5.3.3 Work Order Allowance

Work Orders are funded through a Contingency Work Order Allowance.  A Contingency Work Order Allowance authorizing commitment of funds will be included in the original contract amount as a non bid item.  As the Work Orders are written and deplete the Allowance, a Supplemental Agreement may be executed to replenish  the  Contingency  Work  Order  Allowance. Unused Contingency Work Order

Allowance funds shall be included in the final Supplemental Agreement after final acceptance of all contract work.

All terms specified on the Work Order Form shall apply; no additional terms or disclaimers concerning costs of additional work shall be accepted. The terms of the Work Order shall not be modified. IF AN AGREEMENT FOR PERFORMANCE OF ADDITIONAL WORK OR A CONTRACT CHANGE CANNOT BE OBTAINED BETWEEN THE AUTHORITY AND THE CONTRACTOR WITHIN THE TERMS OF THE CONTINGENCY WORK ORDER ALLOWANCE, THE STANDARD SUPPLEMENTAL  AGREEMENT  OR  THE  UNILATERAL  PAYMENT  SHALL  BE  EXECUTED (Refer to Section 5.2).

5.3.4 Work Order Documentation and Execution

A Work Order for additional work shall be completely executed prior to allowing the Contractor to begin the additional work. A Work Order shall not be executed without sufficient funds remaining in the Contingency Work Order Allowance.   The intent of this procedure is to allow unforeseen or minor changes to the work to be authorized by the Authority.

When additional work or a contract change is identified, a Work Order shall be executed with a complete DESCRIPTION of the additional work to be performed and the REASON why this work is necessary with references to the contract for entitlement. A complete and informative Finding of Facts (link form) must be provided with the Work Order.    The Work Order should identify the applicable category (see Section 5.3.5.)

The first Work Order authorizing additional work to be performed, or a contract change shall be Work Order No. 01; the second Work Order authorizing additional work to be performed, or a contract change shall be Work Order No. 02; etc. This numbering sequence shall be repeated for all Work Orders. A Work Order Summary Sheet (link form) shall be maintained by the CEI and shall be attached to the monthly pay estimate.

Work Order documents and their attachments shall address the following in sufficient detail to adequately explain the additional work to anyone not familiar with details of the project. The questions listed below should be answered fully in the Finding of Facts provided with the Work Order.

1)     What work was done?

2)     Why was the work necessary?

3)     Is the Contractor due any entitlement? Cite references to the contract for entitlement.

4)     What are the costs and why are they considered reasonable?

All costs for additional work shall be:

1)     Negotiated and documented on the Work Order and attachments thereto, including the basis for all negotiated costs, or;

2)     Based on material invoice costs and labor payroll costs including mark-ups shown in sub-article 4-3.2.3 of the Specifications. Work Sheets itemizing the costs will be attached. No disclaimers or clauses allowing the Contractor to reserve his rights to request other costs shall be accepted.

The total cost documented in any Work Order shall not exceed the limits defined above. More than one Work Order can document additional work associated with any incident.  When the work associated with one incident is to be performed in phases, a separate Work Order may be executed to document the description, reason, and costs of each phase of the work, respectively.

Each Work Order shall contain the same total work description, reason, and total negotiated cost for the work described, and the portion of the total cost to be funded by the Contingency Work Order Allowance.

Adjustments may be necessary when the Authority and the Contractor agree to pay for the cost of the work associated with a Work Order based on agreed upon unit prices and estimated quantities and must then execute a lump sum Work Order before the work is performed. When this occurs, the agreed upon unit prices and estimated quantities should be stated in the description of work in the Work Order.  When the net cost for the actual quantities of additional work exceeds the estimated amount shown in the Work Order, another Work Order may be drafted and executed to pay for that portion of the actual quantities exceeding the original estimated amounts from the first work order. The description of work in this adjustment  Work  Order  should  reference  the  original  Work  Order  and  should  state  the  additional quantities and agreed on unit prices upon which it is based.

When the net cost for the actual quantities of additional work are less than the estimated amount shown in the Work Order, another Work Order should be executed in a negative amount to reduce the Contractor's final pay for that portion of the actual quantities under running the estimated amounts. The description of work in this adjustment Work Order should reference the original Work Order and should state the reduction in the original quantities and unit prices agreed on, upon which it is based.

The work order should pay only for the portion of extra work which cannot be paid for using overruns/underruns of existing pay items.  For instance, if there is an increase in work which includes quantity overruns of an existing pay item, the work order should be only the remaining amount, as shown below:

Work Order Pay Item:                          $5,000

Overrun of existing Pay Item:        $15,000

Total increase in work:                      $20,000

The amount of the overrun of existing items should be noted on the Work Order with the total cost of the change also noted.

Note:  When making progress payments on monthly estimates, negative work orders must be balanced with positive progress estimates to avoid any adverse impacts to the Contractor’s cash flow.

5.3.4.1 Vehicle Impact Attenuator Repair Work Orders

When the Work Order is being written for impact attenuators, specific requirements must be met for consideration of payment. Pursuant to Technical Specification 102-3.2.2 the Contractor must provide before and after photographs of the attenuator to depict what has been repaired. These photographs must be included with the documentation for the Work Order for consideration of payment. Police reports must be provided as well when available.  Also pursuant to this specification no additional mark-up will be allowed on the manufactures price for the parts. The CEI must verify that the damaged attenuator was installed at a location depicted in the project plans, and that it was not an additional attenuator that was installed for the Contractor’s convenience. Attenuators that are damaged, and are not required per the plans are not to be compensated by the Authority. The documentation must include adequate invoicing regarding the new parts supplied. No compensation will be made for recycled or used parts included in the repair. If these parts are used they must be clearly identified on the manufacturer provided invoicing.

5.3.5 Replenishing the Contingency Work Order Allowance

A Supplemental Agreement will be executed to document the Work Orders previously written and to replenish the Work Order Allowance fund.  The Supplemental Agreement need not provide all the details of the individual Work Orders, as the Work Orders provide sufficient documentation on their own. However each Work Order should be included in one of the following categories with totals listed for each category.  A short description of the work and the Work Order number will help identify each Work Order.

1)     Expenses and Reimbursement According to the Specifications – Examples of items in this category are payment for DRB Expenses or Partnering.

2)     Owner Requested Alterations of Work – This category includes payment for extra work items that have no change in scope of the original contract, but a pay item does not exist in the original contract.  An example for this category may be changes to milling depth.

3)     Unforeseen Additional Work – This category is for extra work not requested by the owner but required in order to make the project functionally operational.

4)     Owner Requested Added Work – this category includes payment for extra work requested by the owner for work that was not contemplated by the original contract, a change in scope.

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