If you have worked on public works projects, you know that it can and will happen – over the course of the project, conditions and circumstances will unexpectedly change. These changes often cause significant cost overruns, and can devastate the company that ends up having to shoulder these costs. To protect your rights as a material supplier, subcontractor, or prime contractor, it is critical that you understand the procedures in your contract that address changing conditions.
Changing conditions can come in many different forms. Your scope of work on the project may need to expand, severe weather or some other event could cause unanticipated delays, or newly discovered site conditions could affect how the project must proceed. In any event, your contract will usually have specific clauses that describe how the parties must move forward under these changing circumstances, and each clause may have its own requirements and procedures that you must follow to make sure you adequately protect your interests.
For example, if you are a subcontractor on a public works project and the prime contractor is asking you to do something that is outside of your scope of work, the change order clause will probably come into play. These clauses often say that you must get a written change order signed by the prime contractor’s representative before you move forward with any additional work. These clauses also say that, if you do not strictly adhere to their procedures, you will waive your right to compensation for any extra work you perform, even if the general contractor verbally told you to proceed.
I regularly hear contractors say that following the rigorous procedures of the 70-plus page public works contract is just not realistic. However, it is incredibly important to understand what you could be risking by not following them. Washington courts tend to strictly interpret change order, delay, and unforeseen conditions clauses in public works contracts. If the clause says that you have to report a newly discovered site condition to the prime contractor within 3 days of its discovery and you fail to do so, there is a good chance that a Washington court would say that you cannot recover any additional compensation for additional work and delays that this new condition caused you.
On many projects, you can occasionally get away with not strictly following these procedures because the new conditions are not major or because the prime contractor/project owner will compensate you regardless of whether you strictly complied with the contract’s terms. But, if you contracted with a very strict project owner or prime contractor, and you are not adhering to the contract’s procedures, all it takes is one major condition change to wreak havoc on your bottom line and, potentially, your entire business because you could be waiving any right you may have to compensation by ignoring the contract’s formalities. At the end of the day, the burden of adhering to these procedures will usually outweigh the risk of loss associated with not doing so.
To protect yourself, here are some steps you should take:
1. Be sure to extensively document any change in conditions that could affect your work on the project;
2. When communicating to the prime contractor or project owner about a change in conditions, make sure to do it in writing and make sure to send the notice in the manner complies with the contract (usually there is a notice provision)
3. Review your contract very carefully before you bid on the project and make sure that you will be able to follow all of the contract’s procedures (including the change order, unforeseen site conditions, unexpected delay, and claims procedures) in the event that you are the winning bid. Also, make sure that you understand the exact scope of your work on the project and your accompanying responsibilities; and
4. Specifically itemize added expenses and delays that are associated with the change in conditions.
If you are unsure about whether you are correctly following all of the procedures in your contract, or if you would like advice concerning the proper precautions to take when engaging in a public works project, I suggest speaking with an attorney knowledgeable in public works projects. If you have any questions, please feel free to contact me at email@example.com.