Attachment H1 Section 012600 CONTRACT MODIFICATION PROCEDURES.pdf

SECTION 01 26 00 - CONTRACT MODIFICATION PROCEDURES

PART 1 GENERAL

1.1 PROJECT INFORMATION

Drawings and general provisions of the Contract, including General and Supplementary Conditions and other Division 01 Specification Sections, apply to this Section.

1.2 SUMMARY

The CONTRACT MODIFICATION or Change Order is fundamental to construction contracting as the primary means to modify the contract for construction and is defined as “A written instrument prepared by the CMa and signed by the GSA Contracting Officer and the Contractor stating their agreement upon all of the following:

1) the change in the Work; 2) the amount of the adjustment, if any, in the Contract Sum; and 3) the extent of the adjustment, if any, in the Contract Time.” The operative language is that a change order is an “agreement” amongst the parties and, therefore, the terms are settled and become a part of the contract.

A. This Section specifies administrative and procedural requirements for handling and processing contract modifications.

B. There are two primary types of modifications: bilateral, signed by the GC and the CO; and unilateral, signed only by the CO.

C. Related Sections include the following:

1. GSA FY23 01 25 00 SUBSTITUTION PROCEDURES for administrative procedures for handling requests for substitutions made after Contract award.

2. GSA FY23 01 31 00 PROJECT MANAGEMENT & COORDINATION

D. Contract Modification Process

1. Initiated by one or more of the following actions:

a. Proposal Request: A proposal request is issued by the CO/CS to the contractor requesting a proposal for a change, or a modification to the scope of the contract and is issued on behalf of the owner, to determine the cost of a change it is contemplating or that may be required to properly perform the Work.

b. Architect’s Supplemental Instructions (“ASI”): The ASI is a directive issued by the A/E to the contractor providing additional information within the scope of the contract documents or to make minor changes to the work that, in the CMa’s opinion, will not result in an adjustment to the contract sum or time.

c. Construction Change Directive (“CCD”): A CCD directs the contractor to immediately commence additional work or to implement a change to the work.

This tool may be used where GSA and contractor have not agreed on proposed changes in the contract sum or time, or to direct changes in the work which, if not expeditiously implemented, might delay the project. It is important to understand, however, that while a CCD directs work and binds the contractor to perform such work, the modifications to the scope, cost and time still must be incorporated into the contract by change order.

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U.S. Department of Health and Human Services (HHS) 90 7th Street, San Francisco, CA Solicitation 47PK0124R0010

d. Request for Information (“RFI”):

e. Request for a Change Order: A Change Order Request is a proposal issued by the contractor either as a self-initiated claim, or in response to a proposal request, RFI or ASI if, in the Contractor’s opinion, the RFI or ASI modifies the scope of the Contract.

2. Contractor Submits a Change Order Proposal

The contractor will submit to the CMa its proposal documenting the cost and time impact of the proposed change.

The CMa must consider the proposed impact on cost and time. The CMa shall analyze the schedule logic, and assess whether the proposed schedule impact is reasonable. In reviewing the impact on time, the CMa will need to consider a number of factors, including:

1. Does the proposed change impact the schedule’s critical path?

2. Could the contractor mitigate delays by adjusting other activities?

3. Are there concurrent delays that are already the responsibility of the contractor.

If the CO does not fully agree with the contractor’s proposal, the CO must respond in writing to the contractor, detailing its reasons, and then endeavor to reach mutually agreeable terms with the contractor.

3. Change Order Finalization

Once all parties agree, the CMa prepares the change order. The description of the change should be clear, succinct, and complete. It should be adequate for a third-party to generally understand the change and its impacts. There are three parts to the description that coincide with the definition of the change order – the scope, the impact on cost, and the impact on time. For the scope, the change order should reference the specific Contract Documents that are to be changed as well as the documents prepared and issued by the CMa that describe and detail the change. For the cost and time, the change order should state the contractor’s proposed change to the contract sum and contract time, referencing its proposal.

After describing the change and the impacts on the contract sum and time, the change order should list any attachments, including each of the supporting documents, with the date of each. Upon completing the changer order form, the CMa will compile all attachments and issue with the change order.

4. Change Order Issuance

Once the change order is finalized, it is signed first by the contractor and then by the CO.

1.3 CONTRACT MODIFICATION PROCESSING SYSTEM

The CMa should establish a contract modification processing system consistent with GSA’s procedures and regulations The system must encompass potential, ongoing, and completed contract modifications and encompass the following:

1. Defining the roles and responsibilities of the parties involved

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Solicitation 47PK0124R0010

2. Identifying, evaluating, and justifying the need for modifications

3. Defining the scope of modifications

4. Tracking modifications through a numbering system

5. Prescribing all steps necessary to process modifications

6. Listing all required documents and forms

7. Identifying cost impacts of modifications on the project budget

8. Establishing time impacts of modifications on the project

1.4 CHANGES IN THE WORK

A. The Contracting Officer or designated representatives are the only entities authorized to direct work or change the contract.

1.5 MINOR CHANGES IN THE WORK

A. The Contracting Officer or his/her designated representative as directed by GSA will issue supplemental instructions authorizing Minor Changes in the Work, not involving adjustment to the Contract Sum or the Contract Time.

1.6 PROPOSAL REQUESTS

A. Contracting Officer-Initiated Proposal Requests

Sample Change Request Submitted by GSA [DOCX - 19 KB]

Sample Change Request Submitted by Customer [DOCX - 19 KB]

The Contracting Officer or designated representative will issue a detailed description of proposed changes in the Work that may require adjustment to the Contract Sum or the Contract Time. If necessary, the description will include supplemental or revised Drawings and Specifications.

Proposal Requests issued by Contracting Officer or designated representative are for information only. Do not consider them instructions either to stop work in progress or to execute the proposed change.

1. Within 10 business days (two weeks) after receipt of Proposal Request, submit a quotation estimating cost adjustments to the Contract Sum and the Contract Time necessary to execute the change.

2. Include a list of quantities of products required or eliminated and unit costs, with total amount of purchases and credits to be made. If requested, furnish survey data to substantiate quantities.

3. Indicate applicable taxes, delivery charges, equipment rental, and amounts of trade discounts.

4. Include costs of labor and supervision directly attributable to the change.

5. Include an updated Contractor's construction schedule that indicates the effect of the

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Solicitation 47PK0124R0010 change, including, but not limited to, changes in activity duration, start and finish times, and activity relationship. Use available total float before requesting an extension of the Contract Time.

B. Contractor-Initiated Proposals

If latent or unforeseen conditions require modifications to the Contract, the Contractor may propose changes by submitting a request for a change to the Construction Manager as Advisor (CMa).

1. Include a statement outlining reasons for the change and the effect of the change on the Work. Provide a complete description of the proposed change. Indicate the effect of the proposed change on the Contract Sum and the Contract Time.

2. Submit a complete cost proposal and TIA as outlined above for Contracting Officer-initiated changes. Include a list of quantities of products required or eliminated and unit costs, with total amount of purchases and credits to be made. If requested, furnish survey data to substantiate quantities.

3. Proposal Request Form: Sample Change Request Submitted by Contractor [DOCX - 19 KB]

4. Materials and Equipment: Materials incorporated in Work at Contractor's actual invoice cost, including freight but excluding sales tax. Indicate rates and units required.

5. Include an updated Contractor's construction schedule that indicates the effect of the change, including, but not limited to, changes in activity duration, start and finish times, and activity relationship. Use available total float before requesting an extension of the Contract Time.

6. Comply with requirements in SECTION 01 25 00 SUBSTITUTION PROCEDURES if the proposed change requires substitution of one product or system for product or system specified.

7. Overhead and Profit: The GC and Subcontractors will be allowed up to a negotiated percentage, but not to exceed 20 percent of the net change in cost for work performed by their own forces to account for both overhead and profit. The allowance for the overhead includes, but is not limited to, costs for: estimating; field supervision above the foreman level, general foreman, superintendents, assistant superintendents, engineers, accountants, timekeepers, schedulers, office managers, and others on staff; office supplies; drinking water; dumpsters; record documents; home office costs; and other materials and/or equipment unless specifically allowed by the change order scope of work.

a) GC Overhead and Profit on First Tier Subcontractors and Suppliers: The GC will be allowed up to 10 percent of the net cost of change order work provided by first tier Subcontractors.

b) First Tier Subcontractor Overhead and Profit on Second Tier Subcontractors and Suppliers: First tier subcontractors will be allowed up to 10 percent of the net cost of change order work provided by second tier Subcontractors and suppliers.

c) Second Tier Subcontractor Overhead and Profit on Third Tier Subcontractors and Suppliers: No allowance for overhead and profit on subcontracted work will be made for subcontractors and suppliers below the second tier.

d) Example: In the case of work provided by a third (or lower) tier subcontractor, the subcontractor providing the work will be allowed up to 20 percent of the net

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Solicitation 47PK0124R0010 change in cost for work performed by its own forces to account for both overhead and profit. The GC and the first tier subcontractor would each be allowed up to 10 percent of the net cost of the change order work. The total markup for overhead and allowance paid by the Government would not exceed 40%.

1.7 CONTRACT MODIFICATION PROCEDURES

A. On Contracting Officer's approval of a Proposal Request, the CMa will issue a Contract modification (Change Order) for signatures of Contracting Officer and the Contractor on CO Template [XLSX -

84 KB] SF30.

1. If the change order is on a T&M basis or is directed by GSA at a not to exceed amount. The contractor must submit an itemized account and supporting data necessary to substantiate cost and time adjustments to the Contract upon completion of the work.

B. A Copy of fully executed contract modification will be maintained by CMa and record copies will be distributed by the CMa to the A/E, Contracting Officer/Contracting Specialist, and GC .

1.9 SUPPLEMENTAL AGREEMENT (BILATERAL)

A. In a Supplemental Agreement, the SF30 must be signed by both contractual parties; an authorized representative of the GC and the CO. Sufficient lead time is needed to execute a supplemental agreement for negotiations and funding of the change order.

1.10 CHANGE ORDER WITH PRICE-TO-BE-DETERMINED-LATER PDL (UNILATERAL)

A. A PDL is used when the SOW has been established and a proposal obtained from the GC , but the necessity to proceed with the change does not permit time to negotiate the proposal and/or reach agreement on cost and time. Issuance of this type of change order requires preparation of an SF30 that describes the SOW, indicates the change is being made on a PDL basis, and states the not-to-exceed amount. The change document requires only the signature of the CO.

1.11 CONSTRUCTION CHANGE DIRECTIVE

A. Once a contract is awarded, its requirements can only be adjusted by issuing a contract modification, signed by the CO. It is important that the contract modification process be understood by all project management personnel. Although FAR clauses associated with modifications may be periodically updated, the current construction contract on each project governs the modification process for that project.

B. Construction Change Directive contains a complete description of change in the Work. It also designates the method to be followed to determine change in the Contract Sum or the Contract Time.

C. Documentation: Maintain detailed records on a time and material basis of work required by the Construction Change Directive.

D. After completion of change, the contractor shall submit an itemized account and supporting data necessary to substantiate cost and time adjustments to the Contract.

1.12 CHANGE ORDER-- UNILATERAL DIRECTION

The construction contract clause, GSAM 552.243-71, Equitable Adjustments, allows the CO to determine the price of a change order if agreement is not reached with the GC.

In a unilateral change order, the government sets the cost and time adjustments for an SOW.

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Once issued, a unilateral change is subject to the provisions of the construction contract clause FAR 52.233-1, Disputes, and the GC can pursue final settlement. In this process, the GC is required by contract to perform the changed work pending resolution.

Payment of a unilateral change order amount is made as the related work is performed.

1.13 ADMINISTRATIVE CHANGE (UNILATERAL)

This type of change is used to amend the contract provisions when the modification does not alter the specified contract work, the contract time, or the performance cost.

1.14 PENDING CHANGE LOG PCL

When a pending change issue arises, the Project Team shall assign a tracking number, referred to as CE (Cost Event or Change Event) numbers. Pending change issues include:

A. A Request for Proposal (RFP) issuance

B. A claim is received from the Contractor

C. An action occurs that may require modification of the contract

The pending change numbers should be used to identify all further correspondence and documents pertaining to the issue. Proposal requests and the status of the corresponding issues can be tracked in the Project Management Information System by the Project Team, or a Proposal Record SF1520 can be used.

1.15 TRACK CONTRACT MODIFICATIONS

The CO must ensure the contract modification is established in accordance with the General Services Administration Acquisition Manual (GSAM) 504.7001-4.

PART 2 PRODUCTS (Not Used)

PART 3 EXECUTION (Not Used)

END OF SECTION 01 26 00

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