The Holloway Consulting Group's E-m@il Construction Reporter Experience Based on over $25 Billion in Construction
Experience Gained From Over $25 Billion in Construction Issue No. 81, sent May 18, 2007

CONTRACT DOCUMENTS THAT LEAD TO CHANGES, CHANGE ORDERS, AND DISPUTES (PART 1)

INTRODUCTION

Each construction project is a unique combination of countless design details, materials, and individual efforts. Despite the uniqueness of each project, there is one constant in construction --- change and the need to anticipate the unexpected.

This article, which was originally authored by Steve Holloway and published by Aspen Publishers in Chapter 3 of the 2006 Construction Law Update, describes recurring issues that tend to create changes and affect construction. Due to their effect on cost and time of performance, these issues also frequently cause disputes among the owner, contractor, and designer, harming relations and further adversely affecting construction.

This chapter provides a practical guide to alert all participants in the design and construction process to the source of disruptive changes, and illustrate how to anticipate and avoid them. This chapter is a practical guide to these issues, not a definitive legal analysis of who bears legal liability for the changes. By being better informed about the likely sources of changes, the parties may be able to limit their impact on their projects and avoid costly and protracted disputes.

OVERVIEW OF ASPECTS OF CONTRACT DOCUMENTS THAT CONSISTENTLY PRODUCE CHANGE ORDERS

Change orders are a normal part of construction projects. Their occurrence is not so much a question of ‘‘if’’ as of ‘‘when, where, how many, and how much.’’ Although it may seem a bit counterintuitive to some, change orders are not necessarily "bad things", as many contractors view change orders as sources of revenue and profit. Consistent sources of change orders in contract documents include:

  1. Defective Specifications;
  2. Illegal Restrictions;
  3. Improvements in Time;
  4. Incomplete Design;
  5. Intention of the Contract Documents;
  6. Lack of Design Discipline Coordination;
  7. Latent Conditions;
  8. Owner Changes; and
  9. Updated Information

This article addresses only Defective Specifications. Subsequent articles will address Illegal Restrictions and the other sources of changes.

Defective Specifications

The term defective specifications is common throughout the industry and generally refers to specifications containing errors and/or omissions. The resultant contract changes are of the type that are often approved by the owner without great objection. Common types of defective specifications include:

  1. Copied specifications
  2. Expired specifications;
  3. Generic specifications;
  4. Impractical specifications;
  5. Multiple specification interpretations; and
  6. Nondisclosure

Copied Specifications

Whether prepared manually or electronically, most specifications begin with a generic format. The specification might be one that the architect used on a past project or it might be a commercially prepared standard format, such as those produced by the Construction Specifications Institute (CSI).

In any case, specifications are rarely prepared totally from scratch or solely for a specific project. Principal factors that increase the probability that copied specifications will result in errors in the contract documents include:

  1. The engineering, design, and construction drawings are the primary focus of the design team and the owner, and
  2. The technical specifications tend to be a secondary priority and little attention is given them until the design is complete.

Under such circumstances, copying and editing an existing specification is often viewed as the obvious and easiest method of preparing specifications. Second, once the design is complete, the owner is eager to get construction underway and specifications are often assembled at the last minute. Copied specifications are not inherently defective or inappropriate, but when used improperly and assembled carelessly, they can lead to changes and problems during construction.

Expired Specifications

In an age of ever-changing building products, many product specifications have a limited life span. The age of a specification can become a problem on public projects, because these projects are subject to variations in political funding. Some state and federal projects can be shelved for years while awaiting the political climate that will allow them to proceed.

The amount of time a project is on hold increases the possibility that priorities will change and that the people in the chain of command will have different authority. Even the people who designed the job in the architect’s office may be working for another firm and the project architect might even be out of business. The net effect of all of this is that the original project concept may become altered, and the bases for certain design decisions lost.

Generic Specifications

Generic specifications are similar to copied specifications in that they often originate from a previous project. They can come from many sources, but common examples include:

  1. Product requirements provided by manufacturers. A problem often arises when several manufacturers are listed as acceptable, and the words ‘‘or equal’’ are included, because ‘‘equal’’ manufacturers will often have different specifications. If the differences are slight, they tend to go unnoticed. If differences are significant, the contractor may be entitled to a change order if forced to provide the specified item at an increased cost.
  2. Specifications provided by manufacturers. Architects may sometimes accept a manufacturer’s offer to prepare sections specifying his or her product. As a result, the final specifications might reflect the manufacturer’s preferred language, rather than what the architect might have specified.
  3. Specifications written without a specific product in mind. On occasion, specifications are written without a specific product in mind. Specific qualities or requirements are listed, even though the architect has not confirmed that they are available in a product currently on the market.

Impractical Specifications

Designers tend to follow old habits, sometimes fitting together components without due consideration for construction means and methods, or not properly coordinating an item with adjacent work. Design conflicts sometimes result in specifications that are needlessly difficult, and sometimes impossible, to build. Examples of this situation include:

  1. Foundation wall design configurations that did not allow removal of form work;
  2. Concrete anchors that were designed and installed in inaccessible areas;
  3. Equipment that could not be reached by available access routes;
  4. Illogical and needlessly costly construction sequences; and
  5. Equipment that could not be accessed for maintenance after installation.

Multiple Specification Interpretations

In general, if a specification is subject to more than one reasonable interpretation, the contractor has the right to choose one of those interpretations. Such inconsistencies have taken the form of:

  1. Discrepancies between requirements of the plans and specifications;
  2. Differences between small and large drawing details;
  3. Differences between initial and final finish schedules;
  4. Differences in plan dimensions among design disciplines; and
  5. Differences between the actual equipment cut sheets and those details originally shown in the contract.

Nondisclosure

Nondisclosure refers to the failure to inform a contractor of design or construction information that is or may be significant to the pricing and completion of the work. Such nondisclosure can be inadvertent or can be intentional for fear that it would lead to a corresponding increase in price. Depending on the terms of the contract and applicable law, the contractor may be entitled to additional time and/ or compensation due to the nondisclosure. Examples from previous cases of the type of critical information that was withheld and caused unanticipated financial hardship on the contractor and hindrances to the project include:

  1. Changes in the owner’s construction financing that affected the timing and amount of progress payments;
  2. The presence of undisclosed bedrock in areas of excavation;
  3. The presence of organic material with unsuitable bearing capacity that was not noted in the geotechnical investigation or report; and
  4. Restricted staging, lay-down, and site access that caused damage, increased costs, and reduced worker productivity.

Unintentional nondisclosure can be the result of a deficiency in the design effort or simply the failure of an owner to understand the significance of the information to the construction process. Intentional nondisclosure can stem from any number of self-serving causes. In either case, the contractor may be unfairly denied the opportunity to consider the information at the time of bid.

Closing

This article has addressed the elements of defective specifications that have consistently produced changes and disputes. Subsequent articles will address Illegal Restrictions and other sources of changes.

See part 2 for information on contract documents that lead to disputes.

See part 3 for information on pre-bid circumstances that produce change orders.

 


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