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MACDC Intercounty Drain Procedures Training. Construction Projects and Contracts. John Brennan Fahey Schultz Burzych Rhodes PLC. February 15, 2017 macdc.us. Who’s Mistake is it, Anyway?. macdc.us . What Contract to use?. Size of project will dictate Work order Simple contract
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MACDCIntercounty Drain Procedures Training Construction Projects and Contracts John Brennan Fahey Schultz Burzych Rhodes PLC February 15, 2017 macdc.us
Who’s Mistake is it, Anyway? macdc.us
What Contract to use? • Size of project will dictate • Work order • Simple contract • Multi-section construction contract • Larger projects: consulting engineer will propose contract form • MDTMB has forms as well macdc.us
Contract review • Board should be comfortable with contract form • The more complex, the more legal review is recommended • With input from consultants, board • Sets construction start/completion dates • Determines security and insurance to be provided • Agrees on contract terms and conditions macdc.us
Engineer Project Manager • In large projects, the engineering consultant will represent the drainage board to the contractor • Regular meetings, effective communication are essential • Establish procedures, follow them • Document, document, document! macdc.us
Tips: the Change Order Question: How important are change orders to contractors? macdc.us
Answer – You tell me!! macdc.us
Change Orders are common • Any alteration to scope of work, time of completion or cost – a change to the contract • Request may be from owner or contractor • Contractor: item of work is beyond scope • Owner: design change (expand or contract) • Contract will have procedure macdc.us
Change Orders in Writing • Must be authorized in writing before the work commences • Often, not the case – verbal with promise that “someone” will put it in writing • Decision making authority should rest in project manager • If true emergency, make immediate written notation and then fully document asap. macdc.us
Change Order Procedure • Demand that contract change order forms be used • Generally: do not authorize new work without written change order • Treat work performed without change order as contract work • Do not establish pattern of waiving written change order policy • Act on requested change orders promptly macdc.us
Denied Change Order Requests • Contracts have claim procedures and dispute resolution procedures • Deadlines adhered to or claim waived • Memorialize, save all communications and supporting documentation (e.g. daily inspection reports) • Protect your fixed-price bid project! macdc.us
Avoiding Change Orders • Too often, needed to fix problems, omissions in original contract • Scope of work not clear • Time pressures – seasonal work • Accepting form contract without review or sufficient tailoring to specific project • Result: verbal directives to modify work in the field macdc.us
Tips for Avoiding Disputes • Use best practices for daily inspections and reports • Communicate • Meetings • Follow-up • Require that change orders be signed by both owner and engineer macdc.us
Tips for Avoiding Disputes • When in doubt, address whether proposed work is inside/outside scope of contract first • Describe additional work in detail, including new deadlines, cost adjustment, design changes, etc. • Avoid a change order that permits work on time and material basis • Use technology: record site; send text, email or record verbal understanding • Memorialize any verbal communication with a letter promptly macdc.us
Decision making • The drainage board should consider pre-authorization for granting change orders up to a determined dollar limit • Not practical to call drainage board meeting for every change order • Designate representative with authority and direct to communicate change orders immediately • Make note and ratify change orders at drainage board meeting macdc.us
Tips: Unexpected Physical Conditions macdc.us
Soil Conditions, Utilities, Dinosaurs! • Significant problem leading to change order disputes • Contracts often have clauses • Requiring bidder to inspect • Requiring bidder to accept risk for conditions • Are these clauses enforceable? macdc.us
Contractor’s Position • Insufficient time to inspect before bids are due • Owner/engineer in better position to determine • Impossible for all bidders to inspect and impractical macdc.us
Owner and Engineer’s Position • Bidders can account for contingency in bid • All available technical data is disclosed • Uninsurable risk macdc.us
Risk-Shifting Provisions • Enforceable, but not if: • Owner/engineer has relevant knowledge about condition that was not disclosed or indicated in construction plans • Owner/engineer has misled through documents or otherwise • Contractor should not be permitted to allege negligence macdc.us
Valentini v. City of Adrian • “The withholding of the city of its knowledge of the conditions, resulting in excessive cost of constructions, forms an actionable basis for … damages.” • Contractor was permitted to recover for unforeseen condition even where contract placed burden of inspection on contractor, because owner withheld knowledge about condition. macdc.us
Valentini v. City of Adrian • Justice Edwards’ Concurrence: “We should not extend the present Michigan rule to all a successful low bidder to transform his fixed-price bid into a cost-plus contract by the simple expedient of proving that conditions which he encountered below the surface of the ground had been there all along and that somebody at some time knew of them or had reason to suspect their existence.” macdc.us
P.A. 57 of 1998 • Requires provision in all public contracts greater than $75,000 • Contractor discovers • Subsurface/latent physical condition differing materially from those indicated in contract; OR • Unknown physical condition unusual in nature differing materially from that ordinarily encountered and generally recognized as inhering in type of work in contract macdc.us
P.A. 57 of 1998 • MUST notify drainage district before disturbing the condition in writing • Drainage district investigates • Drainage district determines whether “materially different” • Either accepts and executes change order for “equitable adjustment” • Denies and contractor files a claim macdc.us
P.A. 57 of 1998 • Contractor may not file a claim for equitable adjustment if • Does not comply with notice requirement (so cannot disturb the condition); or • Contractor has received final payment under contract (e.g., request is denied and no claim is filed) macdc.us
P.A. 57 of 1998 Question: In the case of utilities that appear to be in conflict with construction plans after Miss Digg staking, will this provision apply to require an equitable adjustment for the contractor? macdc.us
P.A. 57 of 1998 Answer: It Depends. macdc.us
Questions? John Brennan Fahey Schultz Burzych Rhodes PLC 4151 Okemos Road, Okemos, MI 48864 Email: jbrennan@fsbrlaw.com Tel: (517)381-0100 Website: www.fsbrlaw.com macdc.us
