Understanding Change Orders in Construction Projects

Change orders in construction contracts allow for alterations to original agreements by adding or deleting work, adjusting costs, making substitutions, or changing specifications. They play a crucial role in project management by facilitating necessary modifications without invalidating the contract. Benefits include quick responses to issues, accommodating changes efficiently, and mitigating problems effectively.

• Construction
• Change Orders
• Project Management
• ODOT
• Contracting

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1. Change Order Process & Permission to Proceed 2024 Spring Construction Briefing Merka Flynn Mike DeWine, Ohio Governor Jack Marchbanks, ODOT Director

2. Change Orders - Definition What is a Change? A change is any alteration or amendment to the original construction contract. Change orders amend a construction contract by: Adding or deleting work, Establishing reimbursement for additional costs incurred, Making material substitutions, Changing specifications, or Revising completion dates. Only work necessary to complete the project as originally scoped, cleared environmentally, and provided for in the contract documents may be added by change order. Change Order Process & Permission to Proceed

3. Change Orders ODOT Definition C&MS 104.02 General Provisions The Department reserves the right to revise the Contract Documents at any time. Such revisions do not invalidate the Contract or release the Surety, and the Contractor agrees to do the Work as revised. Change Order Process & Permission to Proceed

4. Unacceptable Reasons For Change Orders Contractor Bid an Item too low Contractor damage Delay due to Contractor inefficiency Work not necessary to complete the project as intended Work that could be contracted on another project Insignificant change Change Order Process & Permission to Proceed

5. Benefits of Change Orders Allows ODOT to: Respond quickly. Accommodate modifications without having to renegotiate the entire contract with the Contractor. Capitalize upon opportunities, e.g., VECP. Mitigate problems, e.g., emergency repairs, design errors/omissions, subsurface obstructions, field conditions/interferences. Change Order Process & Permission to Proceed

6. ODOTs Change Order Procedure Work that is not necessary to complete a Project as originally intended shall not be added to a project by change order and shall be contracted through the Department s competitive bidding process or the Director s emergency contracting authority Change Order Process & Permission to Proceed

7. What to Consider 1. Why is the change necessary? 2. What will the impact be on the original scope of work? 3. Who is responsible for costs or delays? 4. Who should pay for the changes? Change Order Process & Permission to Proceed

8. ORC 127.16 Purchasing by Competitive Selection The competitive selection process is used to obtain goods and services at the lowest prices by stimulating competition and preventing supplier favoritism. In general, agencies are prohibited from purchasing supplies and services in excess of $50,000 from a singular supplier without engaging in a competitive selection process. Change Order Process & Permission to Proceed

9. ORC 5525.14 Written Change Orders Or Orders For Extra Work ODOT is exempt from this rule through ORC 5525.14 which says that the Director of Transportation can increase the quantities beyond the $50K threshold (either competitively bid or not). Most other State Departments do not have the authority to approve Contract Changes over contract limits. Change Order Process & Permission to Proceed

10. ORC 5525.14 Written Change Orders for Extra Work The Director can amend contracts for highway improvements by change order with some limitations: Any original bid item can be increased to the lesser of 5 percent of the total original contract amount or $100,000.00. A new item of work can be added to a contract to a value of the lesser of 5 percent of the original contract value or $100,000.00. Change Order Process & Permission to Proceed

11. Contract Limits Controlling Board Approval May Be Waived if Changes Are Due To: Final measurement Federally Mandated requirements not in place at time of bid Circumstances create a Life-, safety- or health-threatening situation (Emergency) Would unduly delay project AND increase project costs Change Order Process & Permission to Proceed

12. Approval Authority Controlling Board - authority to waive competitive bids. Central Office/Director - authority to approve change orders for work over Contract Limits (Final Measurement and Emergencies). District Engineers - authority to approve change orders for work under Contract Limits provided the work is within the original scope of the contract. Change Order Process & Permission to Proceed

13. Extra Work Change Order EWCO shall be used To: Increase quantities beyond contract limits for items originally in contract Add new Pay items of work Increase quantities established by a previous EWCO Change Order Process & Permission to Proceed

14. Definition: Emergency Declaration If Current Circumstances will create a life, safety or health hazard if work is not started within next 6 weeks OR If postponing the work up to 6 weeks will create a delay AND additional costs to the Project Change Order Process & Permission to Proceed

15. Definition: Final Measurement Legal Term from ORC 5525.14 An increase in an original bid item Required to Accomplish planned work Within original Project limits Not limited to Finalization phase can address at any time Change Order Process & Permission to Proceed

16. PTP Process For EW Explanation of Necessity What should be in the Explanation of Necessity? Reason Change Order is needed Discussion of agreed upon terms and conditions Basis of compensation If Force Account, why? Companion Change Orders including costs (if applicable) Whether the work will require additional time Alternative considered Justification of the Unit Price used for the amounts over contract limits NEGOTIATION! C&MS 109.05.B. Change Order Process & Permission to Proceed

17. Questions? Merka Flynn 614-752-9018 Change Order Process & Permission to Proceed