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Frequently Asked Questions

Can Contractors Safely Rely on Soils Data, Soil Borings, and other Geotechnical Research when Formulating their Bids?

Project Owners obtain soils data to both design the project and to provide to contractors bidding the project. However, laws vary from state-to-state on the extent to which a contractor can make a claim if they encounter different subgrade conditions and these conditions impact the time, expense, and ability to construct the project as designed. Some states, for example, enforce disclaimers in contracts like “Soils data provided for information only,” while others do not. Other states will limit a contractor’s right to rely upon soil borings if there are fewer than required, if the borings are farther away from the work at issue, or if they show conflicting subgrade conditions. Contractors should collect this information for each state where they work, so they can be prepared from the outset for how these types of claims might be handled.

What are the Main Elements of a Change Order in Public Construction Projects

In road construction projects, change orders provide legal permission to allow Contractors to perform work outside the scope of the original contract documents. Change orders can be used in a variety of different ways, but are often used to address unforeseen circumstances that arise in the course of a project.

Technical, legal definitions of a Change Order can vary based on each state’s specific standard specifications for road construction, but each of these definitions typically includes the following elements:

  • Must be written
  • Signed by both parties (or at least the project Owner/Engineer)
  • Specific details outlining the precise work to be added or modified.

Some state definitions for change orders state that any additional work added can be assumed to be performed at the original contract prices. Other definitions don’t include this “default” language, and require the change order include terms regarding pricing and payment.

What are “Significant Changes in the Character of Work?”

In most states’ standard specifications, a project Owner/Engineer retains the right to make alterations to the contract quantities and the work to be performed under the contract with no change in compensation to the Contractor. However, if this work amounts to a “significant change” in the character or quantity of the work, then an adjustment to the contract needs to be agreed upon, in writing, between the Owner and the Contractor before the work is performed.

While standards vary from state to state, a typical definition of what constitutes a “significant change” includes two types of changes. The first part of a significant change clause might include language discussing whether the change in work differs “materially in kind or nature” from what was originally contemplated. The second part of a significant change clause might include language about whether a “major contract item” is increased (e.g. in excess of 125%) or decreased (e.g. below 75%) by a specific percentage of the original contract quantity.

Most state specifications reserve the right to make these contract adjustments to the states themselves, but it is important for the Contractor to be in (written) contact with the Owners as early as possible in this process, that way the owner can provide feedback on what might be an equitable outcome for both parties. In any event, a Contractor should not provide changed work until a written agreement and the basis for the change is agreed upon. Throughout this process, early contact with an attorney can be helpful to ensure the proper procedures are followed and so that equitable compensation for a Contractor’s changed work may be provided for.

How Does and Arbitration Provision Affect my Public Construction Contract?

Many standard form construction contracts contain a dispute resolution clause that specifies arbitration as the means of resolving a dispute between the Contractor and the Owner. For example, subsection 15.4 of the AIA-201 (2017), permits the parties to have their disputes be resolved by binding arbitration.

Arbitration is a dispute resolution mechanism by which the parties contract to have certain disputes resolved by a third-party who issues a final and binding decision as to the dispute. The overarching benefit of a construction contract with an arbitration clause is that it allows the parties to choose how they resolve the dispute, rather than allowing a judge or jury decide for them. This can save time, money, and even face. Because arbitration agreements can specify the rules the arbitrator must abide by, they allow the parties almost unfettered control over the process, something usually dictated under court rules. Some important preliminary questions that should be asked are:

  1. Does a valid agreement to arbitration exist?
  2. Does the dispute between the parties fall within the scope of the arbitration agreement?
  3. Do preconditions to arbitration exist? If so, have those conditions been met?

Depending on the language in the arbitration agreement, these questions may either be answered by the court or the arbitrator. Consult with a licensed attorney to understand how your dispute resolution clause operates in your contract.