In government construction contracting, prime contractors often litigate contract disputes about construction scope of work changes. For large federal projects, the risk of losing company revenues is extremely high.
Therefore, as a business executive, you should make sure that your employees and project managers are trained in handling agency requests to do out-of-scope work and how to deal with change order request, scope work demands from contracting officer representatives or others. Court decisions contain ample proof that construction contracts have been dealt severe blows for lack of compliance with federal procurement regulations.
The Changes Clause demands that you protect your rights to compensation by giving notice to the government. Sleeping on those rights does not create sympathy from an appeals court.
Under FAR 43.104(a) When a contractor considers that the Government has effected or may effect a change in the contract that has not been identified as such in writing and signed by the contracting officer, it is necessary that the contractor notify the Government in writing as soon as possible.
Also under FAR 43 43.102 (a) Only contracting officers acting within the scope of their authority are empowered to execute contract modifications on behalf of the Government. Other Government personnel shall not—
(1) Execute contract modifications;
(2) Act in such a manner as to cause the contractor to believe that they have authority to bind the Government; or
(3) Direct or encourage the contractor to perform work that should be the subject of a contract modification.
(b) Contract modifications, including changes that could be issued unilaterally, shall be priced before their execution if this can be done without adversely affecting the interest of the Government. If a significant cost increase could result from a contract modification and time does not permit negotiation of a price, at least a ceiling price shall be negotiated unless impractical.
The bottom line is that when you have reason to know that the scope change in your construction contract, you must notify the contracting officer immediately. Why? Because there is too much litigation as to what is reasonable.
Did You Get Scope Change Order?
Many government construction scope of work changes and contract disputes occur when the government initiates order to perform additional work without a change order. Prime contractors should be extremely careful in these situations. Without getting some level of permission to proceed from the contracting officer, or without some agreed upon change control process in place, you may run the risk of not getting paid. Many federal construction contractors without a change control procedure in place often finds that the Boards of Contract Appeals general rule in favor of the government in these types of scope change scenarios.
- Always get written permission from the contracting officer before proceeding with a scope change
- Having a scope change procedure in place minimizes your risk of non-payment
- Continue to request change orders and build a record
Are Your Construction Scope of Work Changes the Result of Another Contractor?
When there are other contractors or designers controlled by the federal government, litigating construction scope of work changes in government contracts can become a lot easier. Meeting the federal government’s schedule is essential to successful past performance. However, there are situations where other construction contractors on site can cause problems.
- When construction scope of contract changes arise because of another company’s fault, you should immediately notify the contracting officer (in writing).
- Your notification should describe any scope changes resulting from the other contractor’s actions and delays it will cause, if any
- When an appeals court looks at your change order process and procedures, sending notice of a construction scope change only the Contracting Officer Representative is a huge mistake (this person generally has no authority to bind the government).
Court illustration: In one case, the Armed Services Board of Contract appeals ruled that “a contractor does not assume the risk of interference with its performance by the government’s other contractors who are also under the control of the government.” See Toombs & Co., Inc., ASBCA No. 34590 et al., 91-1BCA~23,403 at 117,423 (government’s failure to assure timely performance of its asbestos contractor breached its duty to cooperate with construction contractor whose performance was delayed).
Documentation: Federal construction contractors should always document the details including times, impact of schedule and how other contractors under the control of the government caused the alleged construction scope of work changes.
No Change Order? Construction Scope of Contract Changes Directly From the COR?
The contracting agency sometimes has a tendency to demand scope changes on a construction project. This is not always intentional simply because the details in government construction can be substantial and overwhelming.
As a practical matter, you should always keep your project manager and cost estimator working closely together. Both of them should know the Statement of Work in great detail.
- When the COTR / COR directs you to perform additional construction scope of the contract changes, you should not start work unless you get written approval from the CO.
- Failure to follow this rule can cost your company millions.
- After meetings, always clarify in writing what your understanding of scope changes would cost the government.
- Never perform work simply to build relationships
Although companies seek to build long lasting relationships with their government customer, sometimes the project can turn sour. This sometimes can be too late to raise construction scope of contract changes via the claims process.
What Happens When the Contracting Officer Denies Your Construction Scope Claim? Make sure to always follow requirements under the Contract Disputes Act. When the CO issues a final decision, you can appeal the decision not to pay construction scope of work claims to either the Board of Contract Appeals or the U.S. Court of Federal Claims.
When filing an appeal of the contracting officer’s final decision denying your claim, you want to make sure that the initial claim provided all of the facts and documentation supporting the scope of work change.
- Mere allegations will not suffice on appeal.
- You generally cannot introduce new evidence at the appeals level.
Be Aware of Constructive Scope Changes
If you are contemplating litigation because of construction scope of contract changes in a differing site condition construction contract, you have to show that
- You performed work beyond the contract requirements, and
- That the additional scope of work for a project was ordered, expressly or impliedly, by the government.
The key to success in winning a contract dispute based on construction scope of work changes goes to the fine details and facts. Construction companies make costly mistakes when seeking payment for quantum meruit or other legal theories by making the unrelated legal arguments on appeal.
- You should preserve your right to appeal by always creating the record at the Agency level with all the minute facts and details.
For help litigating or appeals contract disputes based upon construction scope of work changes, call our government construction lawyers at 1-866-601-5518.