CONNstruction - Summer 2009 - (Page 7)

newsandviews Adapting to Change Timely payment for changed work has been the subject of much discussion over the past year. It is not surprising, since parties sign construction contracts expecting changes, knowing that the terms become dysfunctional when neglect of the change order process hinders timely payments that are necessary to get the best project at the best price. The contracts falter because evolution of the construction industry has inadvertently destabilized the payment system that sustains it. New project delivery systems, contractual risk transfer, innovative building systems, and deficient documents are changing the dynamics of risk and control that once drove the payment process in construction contracting. Independently, or together, these and other factors lead to situations where lowertier subcontractors, who have the least influence over the payment process, incur the actual cost of changes to the project, and are easily left proceeding under a contract while unable to bill for, or get paid for, changed work. The construction industry and owners have been exploring methods to ensure that change orders are processed appropriately to keep vital payments flowing. We have considered the benefits of mandating tracking programs to monitor the status of change orders and directives during construction. We have also discussed the idea of relieving unpaid contractors and subcontractors of any duty to perform changed work when pending change orders or directives are not being processed on time. Other groups across the industry are doing the same. The writers of the new ConsensusDOCS™ almost get to the issue by providing a more balanced relationship between the contracting parties when changes occur. The documents allow an owner to issue an “Interim Directed Change” and to negotiate a change in the contract price or time. If there is a dispute over the change, the owner pays 50 percent of the contractor’s estimated cost, with both parties reserving their rights. However, ConsensusDOCS expect that undisputed change orders will be processed in a timely manner and don’t provide additional measures to ensure it happens. The Connecticut Department of Public Works has implemented a measure that may identify delays in the change order process. The agency created a Subcontractor Payment Questionnaire that subcontractors can use to bring nonpayment issues to the Department’s attention. This may provide a useful signal to alert the owner when change orders and directives are not being processed. By Donald Shubert CCIA President CRBA Executive Secretary CRMCA Executive Director CAAPA Executive Secretary The construction industry and owners have been exploring methods to ensure that change orders are processed appropriately to keep vital payments flowing. The Connecticut State Legislature has approved valuable protections to lower-tier subcontractors over the past decade, but is only beginning to deal with change order processing issues. At the time of this writing, it is considering a new law that would require payment requisitions to include a statement showing the status of pending change orders and directives. The purpose would be to hold contracting parties accountable and alert the owner of exposure to changes on the project. At this point, policymakers are reluctant to entertain hard line measures, such as relieving over-extended contractors and subcontractors of any duty to continue performing extra work. While everyone is trying to reduce the risk associated with unprocessed change orders, it may be expanding. The general assembly is considering limiting the state’s participation in change orders on school construction projects to 5 percent of the original contract value. If this limit is enacted, and school building committees don’t have safeguards in place to monitor and manage change orders on their projects, contractors and subcontractors could be exposed to the risk of performing changed work, then finding out that there is no funding in place to pay for it. We all recognize that a change is in order. We need to process it. CONNstruction / Summer 2009 / 7

Table of Contents for the Digital Edition of CONNstruction - Summer 2009

CONNstruction - Summer 2009
Adapting to Change
The Future will be Lean and Green
Think Regionally, Act Regionally
Demanding Notice and an Opportunity to Be Heard When a State Agency Changes its Rules: A Call for Democracy
U.S. Supreme Court Expands Employee Protection Against Retaliation
ConsensusDOCS™: Dare to Change
Reauthorization of Federal SAFETEA-LU
Get on the Bus: LiUNA
Get on the Bus: LiUNA
Economic Downturn Gives Owners Time for Business Exit Strategy Planning
AGC/CT Annual Meeting
CONNDOT-CAAPA Paving Conference
Senator Lieberman Visit
UCAC’s Spring General Membership Meeting
Local 478 Education Trust Dinner
Index to Advertisers

CONNstruction - Summer 2009