By: Larry Caudle
Nearly all contracts in both private and public sectors contain provisions reserving for the owner the right to make changes in the work.
Absent such a provision, an owner who attempts to alter the scope of work would be in material breach of the contract. The typical Changes clause provides as follows: The Engineer reserves the right to make, in writing, at any time during the work, such changes in quantities and such alterations in the work as are necessary to satisfactorily complete the project. Such changes in quantities and alterations shall not invalidate the contract nor release the surety, and the Contractor agrees to perform the work as altered.
The Changes clause is intended to provide flexibility in the event alterations in the work are necessary to ensure the finished project functions as the owner originally intended. But does this clause give the owner unfettered authority to add or delete work as it sees fit? As an appeals court in Georgia decided, the answer is “no.”
In Savannah Airport Commission v. Higgerson-Buchanan, Inc., 519 S.E.2d 475 (Ga.App. 1999), the prime contractor entered into a unit price contract for expansion of an airport. The prime hired a subcontractor to perform clearing and grubbing of over 500 acres. In its bid, the prime simply took the subcontractor’s unit price per acre and added its markups for overhead and profit.
The subcontractor’s bid price per acre was a weighted average of several individually estimated prices, because approximately 28% of the clearing area was heavily wooded; 41% was lightly wooded; 13% involved swampland; and 18% constituted grassy areas. The problem occurred when nearly all clearing except the least-costly grassy area was complete.
The owner apparently did not realize that its engineer had included the grassy areas in the acreage applicable to the “clearing and grubbing” bid item. Accordingly, when viewed in isolation, the price the owner was paying for grubbing the grassy areas appeared excessive. To avoid paying the clearing and grubbing unit price for the grassy areas, the owner relied upon the Changes clause to delete the remaining clearing work from the contract and insisted that the grubbing necessary to remove the grass was incidental to excavation work.
The court disagreed with the owner’s position and determined that the Changes clause applies only to those changes within the general scope of the original plans and specifications necessary to complete the work originally contemplated by the contract. More specifically, the court held that the Changes clause cannot be used to delete work that is still necessary in order to complete the project.
In this case, the court determined that the owner’s motivation to secure an economic advantage was improper; especially since the inclusion of the grassy area within the total clearing acreage had the effect of lowering the overall contract unit price for clearing. Significantly, the court determined that the owner never intended to delete the grassy area from the scope of the project; it was merely trying to avoid application of the clearing and grubbing unit price to that area. By doing so, the owner would have denied the contractor and its subcontractor the opportunity to realize the profit they had built into the overall unit price for clearing and grubbing.
The Higgerson-Buchanan decision is consistent with other court cases interpreting local government, federal, and private construction contracts. Like the typical clause at the beginning of this article and the clause in Higgerson-Buchanan, most Changes clauses apply only to changes necessary to complete the work, and an owner cannot rely upon the Changes clause to delete work from a contract if the work is required to properly complete the project.
When confronted with an owner’s attempt to delete work from a contract, project personnel should read carefully the applicable Changes clause to confirm that changes under the clause must be “necessary” or “to satisfactorily complete the project.” Next, they should try to determine the owner’s reason for seeking to delete the work. If the purpose of the change falls outside the scope of the Changes clause or is otherwise suspect, project personnel should consult with upper management or legal counsel immediately so that a timely determination can be made whether to challenge the owner’s directive.
About The Author: Caudle is a principal in Kraftson Caudle LLC, a law firm in McLean, Va., specializing in heavy-highway and transportation construction. Caudle can be contacted via e-mail at [email protected].
