How to Prepare a Change Order for Federal Construction Projects
Nearly every construction project will require changes to the contract at some point. However, most of the work required to collect on change orders must take place while work continues on the project. Properly preparing a change order for your next federal construction project makes your life easier and your business more profitable.
What is a change order?
The Federal Acquisition Regulation (“FAR”) explains that a “change order” is “a written order, signed by the contracting officer, directing the contractor to make a change that the Changes clause authorizes the contracting officer to order without the contractor’s consent.” FAR 2.101
While the FAR does not allow for every part of the contract to be changed, those changes that are permitted should be submitted following a specific process.
This process allows your PMs, superintendents, and QCMs to collect and store project documentation and update it daily. As the job progresses, the contractor will generate and submit daily reports to the contracting officer according to the contract schedule.
“The Contractor shall prepare and submit to the Contracting Officer the production progress reports specified in the contract Schedule.” FAR 52.242-2 (a)
At a minimum, the following information is required to successfully collect:
Written Notice – FAR 52.243-7
Daily Job Progress Reports
Weekly Progress Meetings
RFIs / Responses
Time impact Analysis
Preparing the Change Order
How your change order is prepared directly impacts your chances of getting the amount you deserve. Requirements made by the FAR as well as best practices can make a measurable difference in your profits.
Giving written notice is required, and failure to do so will lessen your chances of getting paid the amount you deserve.
FAR 52.243-4 (June 2007)
(a) The Contracting Officer may, at any time, without notice to the sureties, if any, by written order designated or indicated to be a change order, make changes in the work within the general scope of the contract, including changes:
(1) In the specifications (including drawings and designs);
(2) In the method or manner of performance of the work;
(3) In the Government-furnished property or services; or
(4) Directing acceleration in the performance of the work.
(b) Any other written or oral order (which, as used in this paragraph (b), includes direction, instruction, interpretation, or determination) from the Contracting Officer that causes a change shall be treated as a change order under this clause; Provided, that the Contractor gives the Contracting Officer written notice stating --
(1) The date, circumstances, and source of the order; and
(2) That the Contractor regards the order as a change order.
(c) Except as provided in this clause, no order, statement, or conduct of the Contracting Officer shall be treated as a change under this clause or entitle the Contractor to an equitable adjustment.
(d) If any change under this clause causes an increase or decrease in the Contractor’s cost of, or the time required for, the performance of any part of the work under this contract, whether or not changed by any such order, the Contracting Officer shall make an equitable adjustment and modify the contract in writing. However, except for an adjustment based on defective specifications, no adjustment for any change under paragraph (b) of this clause shall be made for any costs incurred more than 20 days before the Contractor gives written notice as required. In the case of defective specifications for which the Government is responsible, the equitable adjustment shall include any increased cost reasonably incurred by the Contractor in attempting to comply with the defective specifications.
(e) The Contractor must assert its right to an adjustment under this clause within 30 days after (1) receipt of a written change order under paragraph (a) of this clause or (2) the furnishing of a written notice under paragraph (b) of this clause, by submitting to the Contracting Officer a written statement describing the general nature and amount of the proposal, unless this period is extended by the Government. The statement of proposal for adjustment may be included in the notice under paragraph (b) of this clause.
(f) No proposal by the Contractor for an equitable adjustment shall be allowed if asserted after final payment under this contract.
FAR 52.243-7 (b) (Jan 2017):
(b) Notice. The primary purpose of this clause is to obtain prompt reporting of Government conduct that the Contractor considers to constitute a change to this contract. Except for changes identified as such in writing and signed by the Contracting Officer, the Contractor shall notify the Administrative Contracting Officer in writing promptly, within ______ (to be negotiated) calendar days from the date that the Contractor identifies any Government conduct (including actions, inactions, and written or oral communications) that the Contractor regards as a change to the contract terms and conditions. On the basis of the most accurate information available to the Contractor, the notice shall state-
The date, nature, and circumstances of the conduct regarded as a change;
The name, function, and activity of each Government individual and Contractor official or employee involved in or knowledgeable about such conduct;
The identification of any documents and the substance of any oral communication involved in such conduct;
In the instance of alleged acceleration of scheduled performance or delivery, the basis upon which it arose;
The particular elements of contract performance for which the Contractor may seek an equitable adjustment under this clause, including-
(i) What line items have been or may be affected by the alleged change;
(ii) What labor or materials or both have been or may be added, deleted, or wasted by the alleged change;
(iii) To the extent practicable, what delay and disruption in the manner and sequence of performance and effect on continued performance have been or may be caused by the alleged change;
(iv) What adjustments to contract price, delivery schedule, and other provisions affected by the alleged change are estimated; and
(6) The Contractor’s estimate of the time by which the Government must respond to the Contractor’s notice to minimize cost, delay or disruption of performance.
When created correctly, the information required for your written notice, a. through e.(iii), should be easily obtained from your daily reports.
However, it is often difficult to determine the actual cost and time impact at the same time as you’re providing written notice.
In those cases, provide all the information you have available, and reserve your rights to an equitable adjustment once the total impact is known.
FAR 52.242-17 (b) 1
(b) A claim under this clause shall not be allowed-
(1) For any costs incurred more than 20 days before the Contractor shall have notified the Contracting Officer in writing of the act or failure to act involved; and
(2) Unless the claim, in an amount stated, is asserted in writing as soon as practicable after the termination of the delay or interruption, but not later than the day of final payment under the contract.
If the change event (the event that initiates the need for a change order to be prepared) creates a delay or causes you to accelerate to meet the approved schedule, then it is important to include a Time Impact Analysis.
This proves the validity of the additional time to be added to your contract as part of your Request for Equitable Adjustment.
I have seen contractors of all sizes fail to certify their costs as part of their change order. As a result, they send in change orders that sit on the desk of the contracting officer for months (usually near the end of the project) before being addressed.
41 U.S.C. § 7103(f)
Time for Issuance of Decision. —
(1) Claim of $100,000 or less. A Contracting Officer shall issue a decision on any submitted claim of $100,000 or less within 60 days from the contracting officer's receipt of a written request from the contractor that a decision be rendered within that period.
(2) Claim of more than $100,000. —A contracting officer shall, within 60 days of receipt of a submitted certified claim over $100,000—
(A) issue a decision; or
(B) notify the contractor of the time within which a decision will be issued.
Address all notices and send to the Contracting Officer by both email and Certified US Mail.
Send written notice as soon as is practicable. Although some contracts allow a longer period to notify, it only makes sense to make this a priority and send it out within 20 days of discovery of an unforeseen condition, a late submittal review, or other potential change order event.
Include a Time Impact Analysis with your change order.
Certify your costs if the value is less than $100,000. Ask for a decision by 60 days from the date of the notice/request.
Reserve your Rights if you do not know the total impact of the change.