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Three aspects of change orders

So-called change clauses usually require consideration of a few elements that repeat whether it is a bespoke contract or FIDIC. It is the, e.g.:

(i) Authority to order the changes,

(ii) The Employer's right to force execution and the Contractor's right to deny,

(iii) Time barring clause,

These elements are issues worth reminding about because these often raise disputes. The resolution of the second and third issues depends on engineering matters, so I'll present examples.

[Power of authority] First, the changes arise from various circumstances. Among them might be (i) a detailing of the design that changes solution or quantities, (ii) a request to improve quality, or (iii) a new requirement that was omitted within the contract specification.

Naturally, all of these changes are usually initiated by competent and field-specialized Employer supervisors. Very often, these supervisors are in direct contact with the Contractor, so the Contractor listens to their instructions.

Is there a detailed design just issued? Let's proceed.

Does the employer sponsor wish better TV screen, fitness equipment, or extra desks in the temporary office? Let's proceed.

But there, we should be careful. Usually, the changes might be introduced based on written instruction only. It must be issued by personnel outlined in the Contractual Agreement. The Contractors too often forgot to check whether the change was properly authorized, therefore, whether it binds the Employer.

Without proper authorization, the change might be considered as voluntary. There are exceptions to cure such failure, but let me leave them for later consideration.

[Right to force or deny execution] Whenever we are about to introduce the change, the Contractor should evaluate it. If the right to force change execution would not exist, the Contractor could be in a position to inflate the change price, play on time and look for unjustified profits.

Therefore contracts allow the Employer to force change execution. It could be on the occasion of a wish to improve or cure some delays i.e., accelerate.

But there are limits to this. The Contractor might refuse if it's (i) cardinal change, i.e., change so significant that it requires services beyond the Contractor's competencies, (ii) deteriorates the safety, (iii) is about to increase workforce, or work intensity beyond the Contractor's abilities e.g. in order to accelerate.

[Time-barring clause] To be precise, time-barring clauses are usually matter of claim-related clauses, not change ones. But it doesn't make a difference for us.

The contract requires the Contractor to warn or inform the Employer about observed changes. It lets the Parties to jointly manage or mitigate the change. The timing of mitigation is of vital importance. Therefore, time barring clauses put e.g., 28 days limit, or 10 days for the contractors at the site e.g., to investigate the drawings.

But there is the kind of simplification, say generalization, that raises doubts. Such clauses generally waive the Contractor's right to compensation if he misses the timeframe. It is contrary to the "statutory limitation period" within civil law, so the court sometimes respects this time-barring clause, sometimes not. Let me explain what makes the difference for this case.

Whether the clause would be enforced depends on whether the timely issue of information/warning would have allowed for any mitigation, any action, or whether the change could be withdrawn if the Employer could consider the extra costs and compare to alternate measures. Let's look at the examples:

  • The Engineer issued enormous reinforcement quantities within a detailed design, and we could have revised the drawings, but the Contractor proceeded without consideration. The time-barring clause would be enforced.

  • The Engineer issued enormous reinforcement quantities within a detailed design, but we couldn't revise drawings and lessen quantities. The time-barring clause would not be enforced.

  • The Contractor had a problem with road works and looked for the deteriorated efficiency compensation. If we might suspend or cancel the road works, then the time-barring clause would be enforced.

  • The Contractor extended the time for performance without pre-warning, and we could have supported him with an additional workforce. Then the time-barring clause would be enforced.

  • The site is flooded, so we couldn't proceed with the work, and there was nothing we could do to avoid it. Then the time-barring clause would not be enforced.

Anyway, it's always better to issue warnings and information about observed variations.

Looking for some international cases to back up either (i) authority issue, (ii) right to refuse change proceedings, (iii) overcome time barring clause? Ask me trough comments, and I'll supply them.

Looking to resolve the change valuation or the issue related to introducing the changes? Call me.

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