Many construction cases that end up in court or arbitration do so because contractors are unable to prove each of the elements of its claim. Additionally, the value of many out-of-court settlements is also reduced because the contractor is unable to prove each of the elements of this claim.
One of the more litigated issues on a construction project is about changes to the work. Changes, alterations and extra work claims typically involve construction changes where the owner refuses to acknowledge that the work has changed. The best explanation of changes that I have read came from a government contracts case in the Federal Circuit:
A constructive change occurs where a contractor performs work beyond the contract requirements, without a formal order under the changes clause, either due to an informal order from, or through the fault of, the government. Before it can recover, the contractor must show that the government ordered it to perform the additional work. The contractor cannot merely show that the government disapproved a mode of performance. Rather, the contractor must show that the government actually compelled the additional work. The government order need not be formal or in writing. The additional work must be beyond the requirements of the pertinent specifications or drawings. At the same time, the additional work performed by the contractor cannot be beyond the general scope of the contract. Drastic modifications or fundamental alterations ordered by the government beyond the scope of the contract will constitute a breach of contract. The additional work must therefore be beyond the requirements of the contract, albeit still within the general scope of the contract. NavCom Defense Electronics, Inc. v. England, 53 Fed.Appx. 897 (Fed.Cir. 2002).
In order to prove a constructive change or extra work claim, here is what you should do:
- Review your contract. There should be a "Changes", "Alterations", or "Extra Work" clause. Generally, the clause permits the owner to order the change in the work that has been requested.
- Confirm change in writing. If the changes clause requires the contractor to have a written change order prior to commencing work, then you should make sure written approval has been given. You would be surprised at the number of disputes arising from supposedly "approved changes" that were never formally approved or reduced to a writing.
- Track your notice provisions. Again, the contract contains the notice provisions regarding changes and the contractor will be required to prove that it complied with those notice requirements.
- Prepare for both entitlement and quantum. The contractor will be required to show that the work was, in fact, additional work required by the owner. A written change order will go a long way to establishing this claim, but the contractor also has to be prepared for the case when the change is disputed by the owner. The contractor should keep track of the extra costs it is claiming for proof at mediation or trial or arbitration.
What other tips can you share when dealing with a changes claim?
Image: David Reece