Page 255 - Sustainable On-Site CHP Systems Design, Construction, and Operations

228 C o ns truction

the parties at the time of the agreement. This is because the circumstances and condi-
tions which delineate the scope and parameters of a given project vary over time. In
most cases, the parties have little or no control over these changing conditions.
Changes during construction may be required for many reasons, including

1. Third-party requirements. This may come in the form of governmental regulatory
agencies or changes in the code or law.
2. Owner-operator changing requirements. For example, if the owner of a CHP project
is also the host facility and decides to expand its manufacturing plant, it may
need to change the project to obtain additional thermal output to support the
manufacturing plant’s expansion.
3. Changes in technology. This may occur if use of a particular process becomes less
economical than recently developed alternatives; also, situations can arise
where the technology specified by a contract is not compatible with actual
conditions encountered.
Astute owners should insist upon contractual provisions which give them the flexibility
to secure acceptable changes in the scope of work for a reasonable price. The changes clause
of the contract typically allows an owner to direct unilaterally changes in (1) the drawings
and specifications, (2) the manner or method of performance, (3) the time of performance,
or (4) the equipment, materials, facilities, or services provided by the owner.
It is important for an owner to recognize that one of the most important points
about the changes clause is the right to direct a change without the contractor’s consent
to the change. This allows the change to be made without giving the contractor the right
to insist upon unreasonable time or money concessions as a condition to promptly per-
forming the work. Nevertheless, the obvious risk to the owner is that by proceeding
with the change in the absence of an agreement on price and time, the owner will face
the risk of actual contractor costs being higher than the owner may have anticipated.
Thus, even though the contract should give the owner the right to make unilateral
changes, it is prudent to (1) discuss the change in depth with the contractor, (2) give the
contractor adequate time to price the change and integrate the change into the work,
and (3) to reach a lump sum price before the change is performed.
The “changes” clause should contain a procedure for determination of an appropri-
ate equitable adjustment in the event the contractor is directed to proceed prior to an
agreement on price or schedule. Generally, the contractor is entitled to be compensated
for its additional costs to complete with a reasonable allowance for overhead and profit.
Owners give some consideration to limiting overhead and profit to a percentage of
direct costs. To ensure no misunderstanding, the elements comprising overhead, such
as insurance, bond premiums and small tools should be precisely specified.
Where a change causes an increase in the amount of time required to complete the
project, the contractor is entitled to a commensurate extension of the project schedule.
It is prudent to include a contract provision stipulating that extensions are available
only to the extent that the work affected by the change is on the critical path at the time
and completion of the entire project is thereby delayed or extended.
Differing Site Conditions
One of the most frequent performance problems encountered on construction proj-
ects of any nature occurs when the contractor encounters unexpected site conditions.