Public construction contracts are sometimes subject to change order limitations. These may be imposed by statute, regulation or the contract itself. The purpose is to protect the project budget and the integrity of the public procurement process by limiting the expansion of the contractual scope of work. If the estimated cost of a change order exceeds a stipulated percentage of the original contract price, the additional work must be put out to bid.
Change order limitations can lead to shenanigans, however. In a recent California case, a public project owner and its construction manager tried to circumvent a 10 percent limit in a site work contract in order to avoid the delay of competitive bidding. New grading work was added to the general building contract and then the building contractor subbed the work to the site contractor. The purported subcontract was ruled a sham.
Other cases this week involved a bidder’s false statements during the prequalification process and a contractor’s attempt to assess delay damage backcharges against a subcontractor’s performance surety. The public project owner had been aware of the bidder’s misrepresentations and had discretion to award the contract nonetheless. And, the contractor could not backcharge the sub’s surety due to lack of timely notice of default.
