Surety Bond Quarterly - Fall 2016 - 16


an average percentage, which came
to 19.6 percent of the overall change
order amount or 23.7 percent of the
direct cost items. Long indicated many
contracts limit this amount to 15 percent. The Guidelines include the formula for determining overhead as a
percentage of cost.
The authors reviewed court cases,
literature and case studies to identify impact factors. Potential impact
factors include labor productivityrelated costs, added cost factors, and

project and field conditions-related
factors. The Guidelines also discuss
consequential costs, which only can
be claimed when there is a breach in
the contract by one or more parties.
Consequential costs can be considered in the change order costs if they
are included in the contract.
The Guidelines offer three options
for determining impact factors and
how to calculate those consequential
costs. They are the Toronto Change
Order Protocol/MCAA Percentage

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16

SURETY
824099_BKD.indd
1

BOND QUARTERLY | FALL 2016

Method, the Stacking of Trades-
Hanna Method, and the Measured
Mile Approach. All three have gained
acceptance by some owners and the
courts, according to the guidelines.
"These are as close to scientific as we
could come up with because of the
vacuum in the literature and confusion
in the industry practices," Syal said.
Resolving cost disagreements
While following the Guidelines should
result in electrical contractors earning more money, Campbell said,
"We are trying to be fair and not trying to get the contractors anything
that is not deserved." NECA has held
educational sessions for members
about the Guidelines and how to use
them. Campbell hopes more trades
will come on board and adopt similar
guidelines. "Hopefully, this change
order study and Guidelines might help
people understand all of the costs
associated with the job," Hayes said.
The best time to introduce change
order guidelines is prior to the
request for a change to the job. For
the Guidelines to succeed, subcontractors need to negotiate their use in
their contracts with prime contractors
or owners, whichever the subcontractor has a contract with. The change
order process should be part of the
job specifications, Marcelli said.
"These are the things that need
to be talked about," Long added. "I
hope this document will be used in
the future with the industry leaders to
get this straightened out." Long said
sometimes the final cost of the change
order is negotiated after the work is
completed and may be delayed for as
long as a year. Disputes can end up
in the court system to resolve, a scenario that is best avoided. "We need
to make a fair profit to stay strong
and be there for our customer," Long
said. "This is a hot button issue for
the whole industry."
The Guidelines are available to
purchase for $100 ($50 for NECA
members) from the NECA bookstore
at http://www.necanet.org//store/
product/change-order-guidelines-forelectrical-and-low-voltage-contractors-Booklet.
●

12/08/16 12:11 AM


http://www.bkd.com http://www.bkd.com http://www.necanet.org//store/product/change-order-guidelines-for-electrical-and-low-voltage-contractors-Booklet

Table of Contents for the Digital Edition of Surety Bond Quarterly - Fall 2016

NASBP Upcoming Meetings & Events
2016-2017 Executive Committee
From the CEO: Success Comes with Sharing Perspective and Knowledge
Practical Insights: A Contractor’s Risk Management Portfolio Should Include a Commercial Crime Policy
Rethinking the Change Order Process: NECA Foundation’s Guidelines Offer New Approach, Substantially Reducing Change Order Costs
Six Considerations in Underwriting Subdivision Bonds (Part 2 of 2)
Affirmative Action and the Office of Federal Contract Compliance Programs: What Surety Professionals and Their Contractors Should Know
Surety Data Standards: What are They, and Why Should Surety Professionals Care about Them?
2016 NASBP Resource Directory
Index to Advertisers
Surety Bond Quarterly - Fall 2016 - cover1
Surety Bond Quarterly - Fall 2016 - cover2
Surety Bond Quarterly - Fall 2016 - 3
Surety Bond Quarterly - Fall 2016 - 4
Surety Bond Quarterly - Fall 2016 - 5
Surety Bond Quarterly - Fall 2016 - 6
Surety Bond Quarterly - Fall 2016 - 2016-2017 Executive Committee
Surety Bond Quarterly - Fall 2016 - From the CEO: Success Comes with Sharing Perspective and Knowledge
Surety Bond Quarterly - Fall 2016 - 9
Surety Bond Quarterly - Fall 2016 - Practical Insights: A Contractor’s Risk Management Portfolio Should Include a Commercial Crime Policy
Surety Bond Quarterly - Fall 2016 - 11
Surety Bond Quarterly - Fall 2016 - 12
Surety Bond Quarterly - Fall 2016 - 13
Surety Bond Quarterly - Fall 2016 - Rethinking the Change Order Process: NECA Foundation’s Guidelines Offer New Approach, Substantially Reducing Change Order Costs
Surety Bond Quarterly - Fall 2016 - 15
Surety Bond Quarterly - Fall 2016 - 16
Surety Bond Quarterly - Fall 2016 - Six Considerations in Underwriting Subdivision Bonds (Part 2 of 2)
Surety Bond Quarterly - Fall 2016 - 18
Surety Bond Quarterly - Fall 2016 - 19
Surety Bond Quarterly - Fall 2016 - Affirmative Action and the Office of Federal Contract Compliance Programs: What Surety Professionals and Their Contractors Should Know
Surety Bond Quarterly - Fall 2016 - 21
Surety Bond Quarterly - Fall 2016 - 22
Surety Bond Quarterly - Fall 2016 - 23
Surety Bond Quarterly - Fall 2016 - Surety Data Standards: What are They, and Why Should Surety Professionals Care about Them?
Surety Bond Quarterly - Fall 2016 - 25
Surety Bond Quarterly - Fall 2016 - 26
Surety Bond Quarterly - Fall 2016 - 2016 NASBP Resource Directory
Surety Bond Quarterly - Fall 2016 - 28
Surety Bond Quarterly - Fall 2016 - 29
Surety Bond Quarterly - Fall 2016 - 30
Surety Bond Quarterly - Fall 2016 - 31
Surety Bond Quarterly - Fall 2016 - 32
Surety Bond Quarterly - Fall 2016 - 33
Surety Bond Quarterly - Fall 2016 - 34
Surety Bond Quarterly - Fall 2016 - 35
Surety Bond Quarterly - Fall 2016 - 36
Surety Bond Quarterly - Fall 2016 - 37
Surety Bond Quarterly - Fall 2016 - 38
Surety Bond Quarterly - Fall 2016 - 39
Surety Bond Quarterly - Fall 2016 - 40
Surety Bond Quarterly - Fall 2016 - 41
Surety Bond Quarterly - Fall 2016 - Index to Advertisers
Surety Bond Quarterly - Fall 2016 - cover3
Surety Bond Quarterly - Fall 2016 - cover4
Surety Bond Quarterly - Fall 2016 - outsert1
Surety Bond Quarterly - Fall 2016 - outsert2
Surety Bond Quarterly - Fall 2016 - outsert3
Surety Bond Quarterly - Fall 2016 - outsert4
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