Contract Administration

Introduction to Construction Contract Admin – Change Management

During construction, your clients see evidence of your services through the quality and quantity of Construction Contract Administration (CCA) documents that you issue. These documents usually begin with CCDC 24 – a guide to model and support documents. Let’s take a closer look at a few of the common CCDC CCA documents.

Instructions

Instructions are the work horse of CCA forms. The CCDC 24 name for this document is Supplemental Instruction, although it is also commonly referred to as a Site Instruction (SI) or Architectural Instruction (AI). Instructions provide a vehicle to respond to any incoming query, and as a means to address any important issue that does not change the contract value or time. Instructions are the best way to respond to RFIs bandied about by general contractors.

One common mistake that architects make when they issue an Instruction is to attempt to change elements of the contract. This is expressly prohibited in CCDC 24, but sometimes done in practice in the name of expediency.

Notices

Notices are issued in anticipation of a change to the contract price or time. There are two types of Notices – Proposed Changes and Change Directives.

Notice Type #1: A Proposed Change (PC) in CCDC-24, this form goes by many names in the wild, including Contemplated Change Notices (CCN), Contemplated Change Order (CCO), Change Notice (CN), etc… Notices are intended for issues that are expected to change the contract time and/or price, and for which work will only proceed approval is given. The most common issue encountered with this form is that contractor may proceed with work upon receipt of the document, but before approval has been granted, so it is important the your form clearly indicates that approval is required.

Notice Type #2: This type of notice is called a Change Directive (CD) in CCDC-24 and elsewhere. Change Directives are used for issues for which work will proceed immediately, and when approved will change the contract time and/or price. The most common issue encountered when using this form is a dispute over the price that is ultimately approved for the work.

Orders

Orders are issued to approve changes to the contract price and/or time, and to direct work to proceed at an agreed price. There are 3 types of orders: Change Orders, Cash Allowance Draws, and Contingency Expenditures.

Order 1: This document is called a Change Order (CO) in CCDC-24. Change Orders  act as an extended agreement between the contracted parties that can change the contract price and/or time as noted. Whereas this form in CCDC-24 also records changes to a contingency allowance, we believe that is better done as a separate form for each Contingency or Allowance Fund. This is because expenditures or draws from funds generally do not change the contract price or time.

NOTE: Although rarely defined we use the following: Contingency funds are for Work that is undefined, but is anticipated to be needed for project completion.

Allowance funds are for Work that is defined but has not had a fixed value set prior to the bid process. There are only three (3) possible outcomes with these Funds. 1. they may be under spent, leaving a residual, 2. the may be over spent requiring a Change Order to increase the fund value, or 3. they may be spent until funds are exhausted.
 

Having said all the above, we generally recommend the use of 2 additional forms: Order 2 and Order 3.

Order 2: This form is often called a Draw from Allowance or Cash Allowance Draw (CAD). Draw forms replicate CO forms in all ways, with the addition of an impact section that shows the original allowance fund amount, the total amount of draws to date, and the current balance of the fund. After issuing a draw, the overall contract price is remains unaffected.

Order 3: This form is often called an Expenditure from Contingency or Authorization to Expend from Contingency (AEC). Expenditure forms replicate CO forms in all ways, with the addition of an impact section that shows the original contingency fund amount, the total expenditures to date, and the current balance of the fund. After issuing an expenditure, the overall contract price remains unaffected.

The issuance, progress tracking, and reporting of the above forms represent a process known as Change Management, and we’ll approach that topic in-depth in future posts.

Efficient Contract Change Management

If you are using Word & Excel to track changes to your construction contracts, there’s a more efficient and effective way – our unrivaled purpose-built CCA solution, FIVE by StatsLog!

Banner Image CC BY-SA 3.0 Nick Youngson

Leave a Reply