AE and Construction Change Order Estimating

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A/E and Construction Change Order Estimating

• Bob Smoot
• [phone]
• bob.smoot_at_hq.med.va.gov

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Types of Change Orders

• Design Period Change Orders
• A/E Change Orders and Supplemental Agreements
  (SA)
• IDIQAE Task Orders (TO)
• TO Change Order
• TO-SA
• Construction Period Change Orders
• FCO/FSA
• COCO/COSA
• Settlement By Determination
• Unilateral by CO Can Be Appealed by Contractor

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Design Period Change Orders

• Owner Initiated Change Orders
• Programmatic Changes
• Example Change Conference Room into Multiple
  Exam Rooms
• Example Delete Office Space From Contract
• Systems Changes
• Example - Upgrade HVAC
• Example - Delete Total Light Fixture Replacement
  and Reuse Existing Light Fixtures and Supplement
  With New

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Design Period Changes Orders -Cost Ramifications

• A/E Contract Modification
• A/E Submits Proposal
• Develop Scope of Work as Directed by Contracting
  Officer (CO)
• Direct Costs of New Design
• Overhead and Profit on New Design
• CO or Project Manager (PM)
• Verify Scope of Work
• Develop Independent Estimate of Work Envisioned
  Negotiate with A/E
• Reconcile with A/E Estimate

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Design Period Changes Orders -Cost Ramifications
Contd

• At Times, CO Directs A/E to Proceed with Design
  Via Change Order
• Later Negotiate Price and Convert to SA
• On IDIQAE, Contracts are Issued as TO

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Design Period Changes Orders -Cost Ramifications
Contd

• A/E and CO/PM Prices the Construction Work
  Involved in the New Design
• Uses Local Market prices
• Uses Industry References
• RS Means
• MCA
• NEC
• Dodge
• Walker
• Richardsons
• Reconcile A/E and CO/PM Estimates

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Cost Ramifications Contd

• VA responsible for All Costs Associated With VA
  Generated Proposed Changes
• Methods to Determine A/E Fee
• Use Data From Previous Projects Similar in Size
  and Complexity
• Negotiate the Cost of Producing the New Design
  Based on the Number of Drawings Use Previously
  Negotiated A/E Contract as Basis
• Use Previously Agreed Upon Mark-ups Per Original
  Contract Provisions

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Cost Ramifications Contd

• If Due to the Size of the Change Order REQUIRES
  an Audit, That Needs to Proceed Prior to
  Negotiations

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Types of Construction Period Change Orders

• Errors and Omissions Usually RFI Generated
• Owner Initiated
• Programmatic
• Suspend Part of Work
• Acceleration of Work
• Value Engineering
• Time Extension

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General Procedures For Construction Period Change
Orders

• CO Issues a Change Order (CO), in Writing
• Contractor Has 30 Days to Submit Proposal for
  Change Orders or COCO or Request Extension
• GC and All Effected Subcontractors MUST Sign
  Their Respective Portions of the Submitted Change
  Order
• The Government MUST Negotiate in Good Faith for a
  Fair and Agreeable Price

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General Procedures For Construction Period Change
Orders Contd

• If an Agreeable Price CANNOT be Reached, the CO
  MAY Instruct the Contractor to Proceed Based on a
  Tentative Price
• Request the CO to Issue Final Decision
• CO May Issue Settlement By Determination
• Have IDIQAE Prepare Second Independent Estimate
  to Bring Closure

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Common Considerations For Construction Period
Change Orders

• Mark-ups Overhead and Profit Equal
• 10 Allowed for the First 20,000
• 7-1/2 Allowed for the Next 30,000
• 5 for everything Over 50,000
• The Primes or Upper-tier Subcontractors Fee on
  the Work Performed by Lower-tier Subcontractor
  Will be Based on Net
• 4 Tiers are the Allowable Limit No Matter the
  Number of tiers Involved
• Social Security Taxes, Workmans Compensation,
  and Public Liability Insurance Will Be Adjusted
  for each Change Order However, These Arent
  Marked up with OHP

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Common Considerations For Construction Period
Change Orders Contd

• Overhead Includes
• Insurance,
• Field and Home Office Supervisors and Assistants,
  
• Security Police
• Small Tools and
• Incidental Job Burdens
• Can Include Office equipment and Supplies,
  Port-a-Johns, Telephone, and OSHA Compliance
• And, General Home Office Expenses

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Errors and Omissions (EO)

• Architect/Engineer Responsible
• Forgot
• Example Branch Ductwork for an Exam Room
• Example Re-enforcing Beam
• Example Equipment Hook-up
• Wrong
• Example Wrong Size Waste Pipe
• Example Wrong Size Beam
• Example Wrong Equipment for Designated Room
• Lack of Coordination Between Disciplines
• Example Improper Electric Service for Motor
  requirements

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Errors and Omissions (EO) - Contd

• Process
• Contractor Develops Change Order Based on RFI as
  a Result of EO
• Under 1,000 Detail Breakdown NOT Required
• Between 1,001 and 100,000 Contractor Submits
  Breakdown Based on Spec Section and/or Trades for
  Labor, Materials, and Equipment
• Over 100,000, Contractor MUST Submit Cost
  Pricing Certification Detailing Breakdown
• A/E Develops Scope of Work and Estimate
• CO/PM Develop Independent Scope Of Work and
  Estimate
• Contracting Officer Reconciles all Data

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EO - Contractor Proposed Change Order

• Contractor Prices Change Order
• Direct Costs
• Take-off Quantities
• Price Materials, Manpower and Equipment
• Use Previously Agreed Upon Unit Costs
• Prevailing Market Prices
• Use Previously Agreed Upon Reference Books
• RS Means
• MCA
• NEC
• Dodge
• Walker
• Richardsons

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EO - Contractor Proposed Change Order Contd

• Indirect Costs
• Mark-ups on Direct Costs Overhead and Profit
  Equal
• The Primes or Upper-tier Subcontractors Fee on
  the Work Performed by Lower-tier Subcontractor
  Will be Based on Net
• 4 Tiers are the Allowable Limit No Matter the
  Number of Tiers Involved

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EO - Contractor Proposed Change Order Contd

• A/E Submits Proposal
• Develop Scope of Work as Directed by Contracting
  Officer
• Develop Construction Cost Estimate
• CO/PM
• Verify Scope of Work
• Develop Independent Estimate of Work Envisioned
• Reconcile with A/Es and Contractors Estimate

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Owner Initiated Programmatic and Completion
Items

• CO Issue the Change Order
• Again the Contractor Must Respond Within 30 days
  with a Proposal Signed by All Subs and the Prime
  Following
• Again, the 10, 7-1/2 and 5 Overhead and Profit
  Markups Apply to ONLY 4 Tiers
• CO Reconciles Contractor, A/E and the Independent
  Estimates

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Other Sources of Change Orders

• Value Engineering Proposals
• Savings are Split 60 to Government and 40 to
  the Contractor
• Contractor Factors-in Design, Construction Costs,
  and All Other Impacted Items Social Security,
  etc..
• Usually Overhead Is Negotiated and Profit is Per
  10, 7-1/2 and 5
• Again a Maximum of 4 Tiers

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Supplemental Change Orders Over 500,000

• When requested by the CO, Contractor Submits
• Itemized Breakdown Including Quantities, Labor,
  Materials, Unit Costs, and Equipment,
• With Each Subs and the Primes Signatures,
• Including the 10, 7-1/2, and 5 Markups on a
  Maximum of 4 Tiers,
• CPC within 30 Days
• Audit Require for anything Over 550,000
• If Agreement is NOT Reached or Contractor Has NOT
  Submitted the Proposal within the Timeframe,
• CO MAY Issue Unilateral Equitable Adjustment to
  the Contract
• Or, Direct the Contractor to Proceed Based on a
  Tentative Price

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Change Order Issues

• SF 30 Need to Address Scope of Change Order in
  detail
• Need to Get All Administrative Signatures on PNM
• PM Codes FCO/COCO
• Item 13 of the PNM Must Present a Complete
  History of Negotiations, NOT a Couple of Lines
  and Signed By RE

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Change Order Issues Contd

• When is an Independent Estimate required
• FAR says 100,00
• VVAR Says 20,000
• FM Says for ALL Change Orders (COs)
• Below 20,000 Use Price Analysis
• Use Contractors proposal as a Basis for
  Quantities
• Call Local Suppliers and Subcontractors to Verify
  pricing
• Use a Pricing and/or Productivity Reference Books
• RS Means, MCA, NEC, etc
• Need Basis of Pricing and Justification

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Change Order Issues Contd

• Above 20,000
• Have A/E Prepare Estimate BEFORE GC Sends His In
• Use IDIQAE
• SRE or RE Could Prepare it, However, It CAN NOT
  Be Based on the GCs Change Order

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Change Order Issues Contd

• Daily Logs Absolutely Critical, Governments
  Only Way of Truly Documenting What Happened
• Note Weather, Where Work Occurred, Contractor
  Difficulties, What Is Important to VA, etc..
• Use A/E to Prepare Change Order Estimate, They
  See The Big Picture, Impacts on Other Items/Areas
  Have Vested Interest

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Change Order Issues Contd

• Verify Scope of Work Proposed by GCs Proposal
  Matches Change Order
• Proposals and Independent Estimate No More Than
  10 Spread