Contracting Case Study A contractor (C) contracted with owner (O) to build a 30,000 SF of 5-story pipe rack and piping with a very simple changes clause allowing, "changes within the general scope of the work." Must C perform an order to do any of the following? Explain why, and if performed, how should the price be determined.

Scope of Work Overview

The Scope of Work (SOW) is the area in an agreement where the work to be performed is Described and the SOW should contain any milestones, reports, deliverables, and end products that are expected to be provided by the performing party, as well as a time line for all deliverables (New York University, N.d.).

The problem with most Scopes of Work is a lack of specificity, namely, when the two parties disagree on what should be, or should have been, delivered and a review of the SOW does not support one interpretation over the other; this problem is common in agreements and is often where disputes arise. A Scope of Work should include the following components (New York University, N.d.):

1. Glossary

2. Problem Statement

3. Goals of the Agreement

4. Objectives of the Agreement/Deliverables

5. Administration

6. Timeline

The scope of work section of a construction contract varies greatly and these provisions can range from the incredibly vague and brief, to the exceptionally detailed and verbose; regardless of the length or detail of this construction contract provision, the scope of work section generally serves one overarching purpose: it establishes the duty owed by one party to another (Wolfe Law Group, 2013). To answer "what is my scope of work?," one will have to refer to the basis of your contract and without the contract it would be impossible to determine where a contractor's liability begins or ends.

When issuing a modification to an existing contract, order or task order made under FAR Parts 8, 14, 15, or 16, that requires a change to the scope of work to be performed, the Contracting Officer shall determine if the change falls within scope of the contract, order or task order (Farsite Hill, N.d.). However, in many cases the contract can be vague on specific matters and hence the Contracting Officer shall consider the following in making this determination (Farsite Hill, N.d.):

(i) Nature of Work to be Performed under the modification compared to the nature of the work performed under existing contract or task order;

(ii) Amount of Effort required to perform the work required by the modification compared to the amount of effort required to perform the existing contract or task order;

(iii) Changes in Quantity or Quality of Deliverables which exceed what offerors who proposed on the existing contract or task order should have reasonably contemplated;

(iv) Scope of the Original Competition and whether offerors who proposed on the existing contract or task order should have reasonably contemplated the proposed modification;

(v) Cumulative Impact of Multiple Changes/previous modifications;

(vi) Changes in Time of Performance.

These factors will be applied to the following contract modification issues to see if any insights can be drawn about the Cs liability in these changes.

a. Add a 48-inch underground pipe under the pipe rack, and over 1000-feet offsite;

Yes, an order will be needed. This is most likely a contract modification that could have been reasonably estimated before the contract was built if it was in the scope requirements. However, since this is probably entirely outside of the scope of work that was agreed upon and would require a contract revision bilaterally.

b. Build a control monitoring station on the roof of the pipe rack;

Yes, again, the control monitoring station would have likely been included in the original scope of work if it was to be included in the contract. Therefore, it is likely that the O will have to work with C to create a separate contract, or addendum to the original,

c. Substitute 8-inch diameter pipe with 6-inch diameter pipe for designated sections;

No, an order is most likely not needed given the structure will still meet all other requirements. Such a change would be of minor consequence to the SOW, with the exception that the work was already completed and would require major alterations to change the diameter. However, this would require a minimum amount of effort and thus would likely not require a change order to be made.

d. Change the exterior color of the pipe rack;

Change the entire instrumentation and control system;
An order is probably needed. This could potentially be a major revision to the scope and the classification of the change would likely depend on the motivations for why such a change would be needed. For example, if the scope included a control system that has recently become obsolete or replaced by a newer model then the newer model that was available would be considered an improvement that was within the scope of work designated. If the O latter decided that he wanted a design change that included a better system, then this would represent a different case and the C could deny the change or require additional compensation to cover the costs of the new control system.

e. Delete one-half of the top floor?

Yes, an order will definitely be need as this represents a major deviation to the original scope.

f. Suspend work for 30 days because of conflict with the construction of other contractors on-site?

No, it is unlikely that an order would be needed given the contractor can justify the reasons the interference of the other contractors prevents them from working on site.

g. Remove underground material not conducive to the construction of the foundation?

No, an order would not be need and the O would be responsible for any extra costs.

h. Suspend work for 60 days for redesign of the foundation because of a soil variance discovered during construction?

Yes, an order would be needed. Although the presence of soil variances could most likely not be planned for, given the major impact to the scope that this event would likely have a change order would definitely be recommended.

i. The specifications called for "dent proof" pipe insulation shielding for certain pipe runs. C bid the project using a shield of a certain brand that the manufacturer represented as "dent proof." Engineer (E) insisted that it was not, and that another, more expensive brand be used. C claimed this would be an extra and demanded a change order, in writing. E claimed that as judge of performance, he was ruling that the shield submitted by the contractor did not meet the contract requirements. C used the shield specified by E and, after completion of performance, demanded that he be paid extra for the shield. E instructed O not to pay because the tile used was required under the contract and because the contract required that a written change order be issued before there could be extra payment for any work. Is E correct in his position? (Assume that no tiles exist that are 100% dent proof, but that the tile demanded by E resisted denting better and cost more than the tile C wanted to use.)

It seems that E is using an entirely subjective opinion of the quality of the materials meeting the design specifications. Despite the fact that the more expensive pipe insulation may be of higher quality, this does not necessarily imply that the less expensive materials do not meet the standards for being dent proof. Unless E can provide some third party verification of the fact that the original insulation did not meet "dent proof" standards, then C should be paid a premium for using the more expensive materials. However, it should also be noted that C should have demanded a change order from O at the time of the dispute and not try to negotiate after the fact.

j. During the original negotiations with C, the issue of coats of painting required arose. The specifications state that the paint's thickness will be a minimum of 8 mils. They signed a written contract under which it was agreed that "C will do a first-class job of painting and receive $100,000 for painting services including 3 coats of paint." C drafted the contract language. A dispute arose when the 3 coats of paint did not achieve 8 mil thickness. C claimed three coats were adequate, while O stated that more coats were needed for a first-class job. C claimed the contract did not include extra coats. O stated that she pointed out the thickness requirement when they inspected the paint and that she said that another coat of paint was needed. C admitted O said this, but C contends that it was not included in the contract, so C assumed it was not required. How should a judge decide this change?

It is difficult to tell from the language used, but it appears that the mil requirement did not make it into the contract but the three coats of paint was the agreed upon…