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BPPM Contract Administration

9.1 Documentation of Contract Administration


In listing the "General Procurement Standards Applicable to Third-Party Procurements," FTA has established two standards that address contract administration documentation as opposed to procurement 1administration documentation:

b. Contract Administration System - Grantees shall maintain a contract administration system that ensures that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders. . .

k. Responsibility for Settlement of Contract Issues/Disputes - Grantees alone will be responsible in accordance with good administrative practice and sound business judgment for the settlement of all contractual and administrative issues arising out of procurements. These issues include, but are not limited to source evaluation, protests, disputes, and claims. These standards do not relieve the grantee of any contractual responsibility under its contracts.

FTA will not substitute its judgment for that of the grantee or subgrantee, unless the matter is primarily a Federal concern. Violations of the law will be referred to the local, state, or Federal authority having proper jurisdiction. 2


Contract Administration - The post-award administration of the contract to ensure compliance with the terms of the contract by both the contractor and the Governmental entity.

Contract Administration File Documentation - The documentation contained in the contract file maintained by, or on behalf of the contracting officer. It reflects the actions taken by the contracting parties in accordance with the requirements of the contract and documents the decisions made, and the rationale therefore, of matters which may result (or have resulted) in controversy or dispute.

Procurement File Documentation - The documentation contained in a procurement file which details the history of the procurement through award of the contract. It includes, at a minimum, the rationale for the method of procurement, the selection of the contract type, the reasons for selection or rejection of the contractor, and the basis for the contract price.


Now that your contract has been awarded, performance is set to begin. It is important to get off to the right start in terms of documenting the administration of the contract and identifying what information should be maintained in the contract administration files. Different people involved in the project (QA, engineers, inspectors, financial, DBE office, safety, etc.) may have their own individual files relating to the contract reflecting their involvement with the administration of the contract, but it is good practice for the procurement official to maintain the "official" contract file. The "official" file would include all official correspondence relating to the administration of the contract so as to verify the contractor's adherence to the terms of the contract and demonstrate that the agency is following good administrative practice and sound business judgment in settling all contractual and administrative issues arising during contract performance.


Any contract involving the expenditure of public funds is subject to review/audit during and after performance to ensure that, at the very broadest level, the Government got what it paid for. This concept means that at the contract administration level, you want the file (standing alone and without need of interpretation or augmentation of the contract administrator or other staff element) to demonstrate that the contracting officer and the contractor have complied with the terms of the contract (i.e., bonds have been submitted, contractual issues requiring the approval of the contracting officer have been submitted and approved, requests for payment have been submitted, reviewed, approved, and processed, etc.) and that contractual and administrative issues in dispute have been addressed and settled in accordance with good administrative practice and sound business judgment.

Best Practices

File Contents - For sealed bid procurements and competitive negotiations, consider including as standard practice in the contract administration file the following:

  • The executed contract and notice of award;
  • Performance and payment bonds, bond-related documentation, and correspondence with any sureties;
  • Contract-required insurance documentation;
  • Post-award (pre-performance) correspondence from or to the contractor or other Governmental agencies;
  • Notice to proceed;
  • Approvals or disapprovals of contract submittals required by the contract and requests for waivers or deviations from contractual requirements;
  • Modifications/changes to the contracts including the rationale for the change, change orders issued, and documentation reflecting any time and or increases to or decreases from the contract price as a result of those modifications;
  • Documentation regarding settlement of claims and disputes including, as appropriate, results of audit and legal reviews of the claims and approval by the proper authority (i.e., city council, board of directors, executive director) of the settlement amount;
  • Documentation regarding stop work and suspension of work orders and termination actions (convenience as well as default); and
  • Documentation relating to contract close-out.

For small purchases and micro-purchases you may wish to automate the documentation or keep some of the above elements on a standard record.

Administration Duties - Every type of contract will have different contract administration actions and the documentation required to support that administration will differ as well. Supply contracts have different specific administrative actions than construction contracts do just as fixed price contracts are administered differently than cost-reimbursement contracts. The FAR has an extensive listing of contract administration functions that are considered "normal" and you might want to review them to see what might be applicable to your particular contract. 3

File Location - On any given contract, there may be a number of different agency personnel involved in monitoring various aspects of the administration of the contract such as the maintenance department quality control office, the engineering department, the construction management office, the safety office, the disadvantaged business department, and the finance department. In some agencies, these offices may have official contract roles for which they will be maintaining an "official" file as to their delegated responsibility. For instance, your contract may have a "contracting officer's representative" or "contracting officer's technical representative" that has delegated authority from the contracting officer to approve submittals and payments. Your agency may have delegated to your program office the authority, up to a certain dollar amount, to issue change orders and settle claims. In all situations, whether the contractual role is performed by the contracting officer or another designee, the files should be documented so that it would be possible to recreate, from the files alone, what happened and how issues were resolved. 4

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9.2 Changes


49 CFR § 18.30 Changes discuses certain classes of changes which require grantees to obtain the prior written approval of the Federal awarding agency.

FTA Circular 4220.1E paragraph 9.h. states:

A contract amendment or change order that is not within the scope of the original contract is considered a sole source procurement . . .


Contract Modification - Any written change in the terms of the contract.

Bilateral Contract Modification - A modification which is signed by the Contractor and the Contracting Officer; also referred to as a supplemental agreement. They are used to (1) make negotiated equitable adjustments to the contract price, delivery schedule and other contract terms resulting from the issuance of a change order, (2) definitize letter contracts, and (3) reflect other agreements of the parties modifying the terms of the contract.

Unilateral Contract Modification - A contract modification that is signed only by the Contracting Officer. They are used to make administrative changes, issue change orders, make changes authorized by clauses other than a Changes clause (e.g., Options clause), and issue termination notices.

Administrative Change - A unilateral contract change, in writing, that does not affect the substantive rights of the parties (e.g., changes of address for submittals of documents, reports, etc.).

Changes Clause - A clause which permits the grantee Contracting Officer to make unilateral changes, in designated areas, within the general scope of the contract, to be followed by such equitable adjustments in the price and delivery schedule as the change makes necessary. Although the grantee has a unilateral right, two general principles are important:

The right exists only because it is specifically conferred by the terms of the contract; and


When such unilateral rights are exercised, the grantee has an obligation to adjust the price and/or other provisions to compensate for the alteration in the contractor's obligations.

Change Order - A written order, signed by the Contracting Officer, directing the Contractor to make a change that the Changes clause authorizes the Contracting Officer to order without the Contractor's consent.

Cardinal Change - A contract change which is "outside the scope" of the original contract, and thus not within the authority of the Changes clause to order. Such changes are "sole source" procurements, and must be processed according to the requirements of FTA Circular 4220.1E, paragraph 9.h. (See Section 9.2.1Contract Scope and Cardinal Changes.)

Constructive Contract Change - A change to a contract resulting from the conduct of the grantee's officials that has the effect of requiring the Contractor to perform additional work. A constructive change results from the acts, written or oral, or from the omissions of the grantee's officials, which have the same effect as if the Contracting Officer had issued a formal, written change order. Actions giving rise to constructive changes should, of course, be avoided. Such changes represent actions which usually exceed the authority of the individual responsible for them, e.g., improper technical direction by the Technical Officer which is actually a change to the contract. When these actions occur, contractors need to be advised as part of the terms of their contracts to bring any such actions to the immediate attention of the Contracting Officer so that an official determination can be made by the appropriate grantee officials and proper directions given in writing under the Changes clause. Some common examples are:

  • Specifications or contract provisions that are "impossible to perform."
  • Specifications that are ambiguous.
  • Drawings that contain errors, omissions or inconsistencies.
  • Grantee-provided information that is late, defective, etc.
  • Technical direction by personnel that modifies the expressed terms of the contract.
  • Acceleration of work, where the grantee insists that the contract delivery schedule be met despite the Contractor's valid claims of excusable delays.
  • An inspector's interpretations of test specifications, procedures, methods, conditions and results that go beyond a reasonable interpretation of the specification.

Deductive Change - A change resulting in a reduction in the contract price because of a net reduction in the Contractor's work.

Equitable Adjustment - An adjustment in the contract price, delivery schedule or other terms of the contract arising out of the issuance of a change order.


49 CFR § 18.30 Changes, requires grantees to obtain the approval of the awarding agency (FTA) whenever a change would result in the need for additional funding from the awarding agency, and for other specified situations which grantees should be aware of.

FTA Circular 4220.1E paragraph 9.h. concerns the issue of contract changes and whether they are within the scope of the original contract. This issue is discussed in Section 9.2.1 Contract Scope and Cardinal Changes.


The Changes clause has several purposes:

  1. To give the grantee flexibility to order changes in the work which may be necessary due to advances in technology or changes in the grantee's requirements.
  2. To give the Contractor a method of suggesting changes to the work, thus improving the quality of the contract end-items. The equitable adjustment provisions of the Changes clause will encourage the Contractor to suggest improvements when those suggestions will increase the contract price. When, however, the situation calls for suggestions regarding dollar savings, the Changes clause may not incentivize the Contractor if it stands to lose the dollar savings because of a price reduction in the contract. For this reason, value engineering clauses are included in contracts.
  3. To give the grantee authority to order additional work which is "within the general scope" of the contract, and thereby avoid having to procure this work as a "new procurement" with all of the time and expense associated with another solicitation.
  4. To require the Contractor to proceed with the changed work and resolve the issue of compensation later. This is important since it gives the grantee a contract right to order changes without having to agree beforehand on the price of the work. Emergency situations can be thus be handled expeditiously without placing the Contractor in a position of demanding a certain amount of compensation before the work can proceed. In the event of a failure to agree on price, the issue can be resolved by a third party in accordance with the dispute procedure in the Disputes clause of the contract. But disputes over compensation will not impede the progress of the contract as changed.

Best Practices

National Transit Institute - The National Transit Institute (NTI) offers several in-depth courses for FTA which would be of great value to grantees who have to manage contracts with significant change order activity. 5

Grantee third party contracts should contain a Changes clause. The language of the clause may differ depending upon the nature of the contract and the end-item being procured.

The American Bar Association (ABA) recommends several different Changes clauses in its Model Procurement Code for State and Local Governments. There is a suggested clause for supply contracts and another for construction contracts. 6

The Federal Acquisition Regulation covers the subject of changes within Part 43 Contract Modifications, with alternative contract Changes clauses in Subpart 52.243. The Federal clauses are tailored to the specific contracting situation, e.g., fixed-price supply, construction, services, cost-reimbursement, etc. The Federal clauses direct the Contractor to proceed with the work in accordance with the change order directive and submit a proposal within 30 days, following which the parties are to negotiate an equitable adjustment to the price, delivery schedule and other affected terms. In the event of a failure to agree, the resolution is to be handled as a dispute in accordance with the Disputes clause of the contract. This provision is important because disputes over compensation do not delay the work. The Contractor is required to proceed with the work as changed and settle the issue of compensation later. The Contractor cannot quit work because of a disagreement over price.

Non-emergency changes - When time permits, the best procedure for issuing changes is to solicit a cost and technical proposal from the contractor before the change is issued, and to negotiate an equitable adjustment to the contract price, delivery schedule, etc. A bilateral supplemental agreement can then be issued setting forth the change in work and the adjustment to the contract price, etc.

Emergency changes - When time will not permit the negotiation of the change prior to issuance, it should be possible to obtain a "not-to-exceed" price from the Contractor prior to the beginning of work. A bilateral contract Change Order could then be issued defining the changed work, with a maximum/ceiling price which is to be negotiated at a later date, but downward only. This Change Order would have to be issued as a two-party modification because it contains a "not-to-exceed," maximum/ceiling price for the change, and the grantee could not unilaterally impose a ceiling price commitment on the Contractor. The Contractor would then submit a formal proposal within thirty days and negotiations would take place. A bi-lateral contract modification (supplemental agreement) would then be issued reflecting the equitable adjustment to the price, etc.

9.2.1 Contract Scope and Cardinal Changes


FTA Circular 4220.1E paragraph 9.h. states:

A contract amendment or change order that is not within the scope of the original contract is considered a sole source procurement . . .


Changes clauses limit the authority of the issuer in two ways. First, they stipulate that changes must be "within the general scope of the contract." Second, they describe the types of changes that may be made. In order for the change to be binding on the Contractor, it must meet both tests. It must be within the general scope and be one of the types of changes described in the clause.

With respect to the FTA requirements governing changes, the change must be within the scope of the original contract. If it is not within the scope, it is considered a cardinal change. Such changes are not properly processed as changes under the Changes clause, but are properly processed as new procurementsaccording to the principles of FTA Circular 4220.1E 9.h. — Procurement by Noncompetitive Proposals.

Within the general scope - The meaning of this phrase is somewhat vague and has been the subject of much interpretation by various judicial bodies processing contractor protests and claims. The Federal Court of Claims coined the term "cardinal change" to describe those changes that are beyond the scope of the contract. There are various tests used to determine if a change is within scope. One test examines changes in the nature of work to be performed. Another looks at the amount of effort the Contractor is required to perform. Still another test concerns whether the proposed change is within the scope of the original competition.

Nature of work - In one case the court held that the changed work is considered to be within the general scope if it "should be regarded as having been fairly and reasonably within the contemplation of the parties when the contract was entered into." 7 The Federal Court of Claims stated the test to be whether the work performed was "essentially the same work as the parties bargained for when the contract was awarded." 8 In another case the court stated that a cardinal change occurs if the ordered deviations alter the nature of the thing to be constructed. 9 The general principle appears to be that if the function or nature of the work as changed is generally the same as the work originally called for, the changes are considered to be within the general scope. For example, in a contract to build a hospital where there were many changes in the materials used, but where the size and layout of the building remained the same, the changes were held to be within the scope. 10

Amount of effort - The second test for determining if a change is within scope concerns the amount of effort in terms of work disruption and cost increases experienced by the Contractor. In one case requiring a subcontractor to place backfill simultaneously with the work of other subcontractors, the change was considered so disruptive as to be a cardinal change because it added over 200% to the cost of the backfill work. 11 In another case the court decided to hold a trial on the cardinal change issue where there had been 130 changes, the time of performance had doubled, and costs of $4.6 million were incurred above the contract price of $5.8 million. 12 But it should be noted that contractors have rarely been successful in arguing for cardinal changes on the basis of amount of effort.

Scope of the original competition - Competitors sometimes protest the issuance of changes when they believe that a new competitive procurement process should have been used for the changed work. In deciding these cases, the courts have used the criterion of whether the change was within the scope of the original competition, i.e., what the competitors should have anticipated to be within the scope of the competition. An important factor to be considered is "whether the original solicitation adequately advised offerors of the potential for the type of changes during the course of the contract that in fact occurred . . . or whether the modification is of a nature which potential offerors would reasonably have anticipated under the changes clause. 13 This issue is an important one because the Changes clause lends itself to potential abuse in the matter of ordering quantities not originally competed. This practice tends to become an expedient to avoid the time and expense of a new procurement action, but it is improper when the additional quantities exceed the scope of the original competition. Such additional quantities should either be bought through a new competitive procurement, or processed as a sole source action with the requisite organizational approvals.

Number of changes - The number of changes issued has not been a determining factor as to whether the changes cumulatively are within scope. The Board of Contract Appeals held that approximately 100 change orders was not beyond the general scope. 14 Another case held that 200 change orders was not beyond the general scope. 15

Time of issuance - The time of issuance of the changes has not been considered a factor. In one case the Contracting Officer issued six changes after completion of the work, which extended the contract period by 120 days, and the court held that these changes were within the general scope.16

Changes in quantity - Major changes in the quantity of the work have been held to be cardinal changes. This principle applies to both additive and deductive changes. Major additions in the quantity should be processed as new competitive procurements. Large reductions in quantity should be processed as contract termination actions. The Comptroller General has held that a change adding quantities above the contractual maximumswas outside the scope and therefore a cardinal change. 17

Collateral impacts of change - This criteria involves looking at all the various factors, such as changes in schedule, quantity, quality, and costs, no one of which may be sufficient in itself to render a change outside the contract's scope, but the cumulative impact of the change being such as to alter the nature of the item being procured. For example, a change in specification from a gasoline to a diesel driven heater was outside the scope because the change required substantial alteration of other components: (1) it substantially increased the heater's weight (2) added an electrical starting system (3) required a redesigned fuel control (4) required a redesigned combustor nozzle (5) altered the performance characteristics (6) increased unit price by 29%, and (7) doubled the delivery schedule. 18

Best Practices

Buying additional vehicles - In order to avoid the problem of having to conduct a new competitive procurement for minor increases in quantities, grantees should structure their initial competitive solicitation with option provisions for additional quantities that could conceivably be required. When there are no option provisions, however, and it becomes clear that increases in the quantity of vehicles are necessary, grantees should either conduct a new competition or process a justification for noncompetitive procurement (sole source) through the required internal approving official or board.

Changing bus specifications - Certain types of specification changes are clearly within the authority of the Changes clause. They satisfy all of the "within scope" criteria noted above. For example, changes to seating fabrics and colors, exterior paint schemes, signage, and floor coloring. Such changes are "reasonably within the contemplation of the parties when the contract was entered into," and they do not alter the nature of the vehicle being procured.

Bus engine changes - There are other potential bus design changes, however, which may not be proper under the Changes clause. One of these would be a change in engine type, which was not within the scope of the original competition. For example, several manufacturers do not build buses with certain engine types (CNG or Diesel). Such a change would be one that was not within the scope of the original competition (i.e., what the competitors should have anticipated to be within the scope of the original competition). This type of change is so critical that it would have affected the original bidding seriously enough that another company could have won the contract.

High floor vs. low floor buses - Another design change that would not be proper under the Changes clause would be a change from a "high floor" to a "low floor" configuration. The cumulative impacts of the changewould be so serious that it would in fact be a "cardinal change."

Construction contract changes - For a discussion of changes to construction contracts and the issue of the types of changes that would be "within scope" vs. "cardinal changes," see section 9.2.3 Construction Changes.

9.2.2 Cost/Price Analysis of Changes


Paragraph 10 of FTA Circular 4220.1E requires a cost or price analysis for every procurement action:

Grantees must perform a cost or price analysis in connection with every procurement action, including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, grantees must make independent estimates before receiving bids or proposals.

  • (a) Cost Analysis - A cost analysis must be performed when the offeror is required to submit the elements (i.e., Labor Hours, Overhead, Materials, etc.) of the estimated cost; e.g., under professional consulting and architectural and engineering services contracts.

A cost analysis will be necessary whenever adequate price competition is lacking and for sole source procurements, including contract modifications or change orders, unless price reasonableness can be established on the basis of a catalogue or market price of a commercial product sold in substantial quantities to the general public or on the basis of prices set by law or regulation.

  • (b) Price Analysis - A price analysis may be used in all other instances to determine the reasonableness of the proposed contract price.
  • (c) Profit - Grantees will negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed.
  • (d) Federal Cost Principles - Costs or prices based on estimated costs for contracts under grants will be allowable only to the extent that costs incurred or cost estimates included in negotiated prices are consistent with Federal cost principles. Grantees may reference their own cost principles that comply with applicable Federal cost principles.


FTA Circular 4220.1E paragraph 10 requires that grantees perform a cost or price analysis, as appropriate, for every contract action, including change orders. Paragraph 10(d) requires the use of Federal cost principles, which are found in the Federal Acquisition Regulation Part 31, whenever grantees are negotiating costs or prices based on estimated costs. The nature of change orders is such that contractors will almost always be required to submit change order cost proposals which are based on estimated costs which are expected to be incurred as a result of the change order. Thus, change order proposals will almost always be subject to the Federal cost principles found in FAR Part 31 (or equivalent grantee cost principles). Grantees should ensure that their third-party contract provisions provide for the Federal cost principles, or equivalent grantee cost principles, in determining allowable costs for equitable adjustments arising out of changes to the contract. For a general discussion of cost and price analysis techniques, see Section 5.2Cost And Price Analysis. For a discussion of price adjustment criteria for construction contracts, see Section Pricing of Construction Change.

9.2.3 Construction Changes


§ 23 of the Master Agreement MA(12), Construction, requires grantees to provide and maintain competent and adequate engineering supervision at the construction site to ensure that the complete work conforms to the approved plans and specifications.

FTA Circular 4220.1E paragraph 10a. requires a cost analysis for every procurement action, including contract modifications and change orders. Paragraph 10e of the Circular prohibits cost-plus-percentage-of-cost methods of contracting, including percentage of construction cost methods.

With respect to pricing methods, FTA Circular 4220.1E paragraph 7j states that the Time and Materials type of pricing requires that a determination be made that no other type of agreement is suitable and that a ceiling price be specified in the contract.


The issue of on-site supervision as it relates to the issuance of construction contract changes will be discussed in Section Field Change Orders. The pricing of construction contract changes is discussed in Section Pricing of Construction Changes.

Every construction contract should include a Changes clause giving the grantee the unilateral right to order changes in the contract work during the course of performance, and the Contractor the duty to proceed with the work as changed upon receipt of the change order, assuming that the change is within the scope of the contract. The Changes clause must contain language deferring the pricing of the changed work until some later time, while obligating the Contractor to proceed with the work and resolve the issue of compensation later. Failure to reach an agreement on compensation would be a dispute to be processed according to the procedures of the Disputes clause of the contract.

It is not a best practice to issue change orders where the price and schedule for the changed work is not negotiated and agreed upon beforehand. However, in construction projects, proceeding with work prior to agreement may be necessary to avoid delay. In such cases, time and material records must be kept, and a price agreed upon as soon after the beginning of work as practicable. Grantees must ensure that they are authorized to do this under their own regulations.

The Federal clause for construction changes is found at FAR 52.243-4. It authorizes changes, within the general scope of the contract:

  1. In the specifications (including drawings and designs);
  2. In the method or manner of performance of the work;
  3. In the Government-furnished facilities, equipment, materials, services, or site; or
  4. Directing acceleration in the performance of the work.

The Federal clause also provides guidance on the processing of claims which the Contractor regards as "constructive changes", i.e., Government actions, directions, interpretations or determinations which were not identified as changes, but which cause the cost of the work or the time required to do the work to change.

The ABA Model Procurement Code (MPC) Changes clause for construction contracts is very broad in giving owners the right to order:

  1. Changes in the work within the scope of the contract; and
  2. Changes in the time for performance.

The MPC clause gives the Contractor the duty to proceed with the work while the issue of compensation is being resolved. This clause also contains a notice to the Contractor not to perform work above a certain dollar amount unless the change order has been signed by an appropriate fiscal officer or other responsible officialcertifying that the funds are available for the work being ordered. 19

Within scope v. cardinal changes - Construction contracts are, of course, subject to the same criteria as other contracts with respect to the requirement that changes be within the general scope of the contract. See Section 9.2.1 Contract Scope and Cardinal Changes. A few observations can be made concerning construction contracts as they have been litigated in the Federal realm with respect to the within scope issue:

Changes in quantity - Increases in the quantity of the major items are not generally regarded as authorized by the Changes clause. For example, on a construction project, additional buildings may not be added by theChanges clause. 20 On unit price contracts, this rule regarding additional quantities has been interpreted to allow increases in the quantity of subsidiary items unless the variation is so large that it alters the entire bargain. For example, on a contract requiring the doubling of the amount of material for an embankment to build a levee, the court held that the change was beyond the scope of the contract.21 Deletions of major items or portions of the work are likewise not within the scope of the Changes clause. For example, buildings may not be deleted from construction contracts. 22 However, deletions of portions of the work are permissible unless the deletion becomes so large as to alter the original bargain. When large deletions are necessary, they should be made under the Termination for Convenience clause.

Changes in time of performance - The Federal clause lists acceleration of performance as one of the types of changes permitted by the Changes clause. In contracts which do not contain the acceleration language, it is unclear whether such changes are permitted by the Changes clause or not. Some Federal Contract Appeals Boards have held that the contract schedule was part of the specifications, and therefore a permissible change. Grantees may wish to review their changes clause and add the ability to accelerate or delay performance. Another approach would be to state in the contract that the schedule was part of the specifications for purposes of ordering accelerated or decelerated performance under the Changes clause. Remember that having this ability under the Changes clause gives the grantee the right to change the schedule of work immediately and resolve compensation later, instead of having to agree on the price of the change before the schedule can be altered.

Changes in method or manner of performance - Changes in the method or manner of performance have traditionally not been a "changes issue" under the Federal clause because such changes altered the work itself and were seen as changes to the specifications. It is not necessary that the contract initially specify a certain method or manner of work in order to find a change if, in fact, the Contractor is ordered to perform in such a manner or use a method other than one that could have properly been used. Differing Site Conditions

Unless the contract provides otherwise, the construction contractor will usually be held to bear the risk of unexpected subsurface site conditions. This creates a serious problem for the company wishing to bid on a construction project. The contractor must either perform a costly site inspection, even though there is no assurance that its bid will be successful, or it must include a substantial contingency in its bid price to cover the risk of the unknown site conditions. The latter alternative results in much higher bid prices to the owner than would be the case if the risk were not being assumed by the bidders. It is only where the contract contains a clause shifting the risk to the owner that the bidder can safely assume it will be compensated for "differing site conditions" or "changed conditions." For these reasons most construction solicitations will contain a "differing site conditions" clause describing the types of risk being assumed by the owner, promising the contractor an equitable adjustment if the defined conditions materialize.

The usual clause will refer to "subsurface or latent physical conditions at the site differing materially from those indicated in the contract, or unknown physical conditions at the site, of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inherent in work of the character provided for in the contract." 23 The clause will normally require the Contractor to notify the owner prior to disturbing the site conditions so that the owner's representative can investigate the site and confirm the conditions alleged by the Contractor.

Equitable adjustments - The phrase equitable adjustment allows for considerable latitude in establishing the measurement of the compensation. The equitable adjustment includes added costs for any contract work, whether changed or unchanged by the unforeseen conditions; i.e., the Contractor is entitled to recover any increased costs for any portion of the contract work, presuming it can demonstrate that it will incur increased costs, including delay and impact costs, on account of the differing site condition. 24 In the event that the parties cannot agree on the amount of compensation, the clause will require the Contractor to proceed with the work and resolve the issue at a later date, which is the same procedure as the Changes clause.

This clause enhances the competitive bidding environment by allowing bidders to submit their best prices, without having to include substantial contingencies. It provides a mechanism to compensate the contractor through negotiation rather than litigation. The clause does not, however, automatically guarantee the contractor an adjustment; the contractor must prove that the site conditions encountered differ materially from the conditions indicated by the owner's contract or from conditions ordinarily encountered. Field Change Orders


§ 23 of the Master Agreement MA(12), Construction, requires grantees to provide and maintain competent and adequate engineering supervision at the construction site to ensure that the complete work conforms to the approved plans and specifications.

Construction projects require on-site engineering supervision by a resident engineer/program manager. At the same time it is not feasible to have a contracting officer at each construction site. It is also inherent in the nature of construction projects that emergencies will occur which require immediate direction to the contractor to do changed work. For these reasons it has become generally accepted practice by most organizations doing construction contracting that some type of delegation of authority from the contracting officer to the resident engineer to direct field changes is essential. Delegations of authority to issue and/or negotiate field changes are the prerogative of the grantee. Where the grantee chooses to delegate authority to resident engineers, several procedures should be observed:

  1. The grantee's procurement policies and procedures must clearly establish organizational responsibility and provide a general procedural framework for the process of contract modifications to construction contracts. This policy will clearly define which personnel are authorized to issue change orders, including the limits of their dollar authority.
  2. The grantee should ensure that any person authorized to issue change orders has met certain educational, training and experience requirements. Suggested courses for resident engineers/project managers would include: 25
    • Basic Contract Administration (1 week)
    • Cost and Price Analysis (1 week)
    • Contracting Office's Representative Course (1 week)
    • Construction Contracting Basics (1 week)
    • Contracting by Negotiation ( 1 week)
    • Changes under Contracts (1 week)
    • Federal Contract Law (1 week)
    • Construction Claims (1 week)
    • Contracting by Sealed Bidding (1 week)
  3. Delegations of authority to issue field changes should be limited to those situations where time is critical; where there is insufficient time to process the change through the contracting officer. Where time permits, the change should be processed through the contracting officer, who would obtain a proposal from the contractor and conduct negotiations before the change is issued. The change could then be issued as a bi-lateral contract modification setting forth the changed work and the equitable price adjustment and time extension for the change. Where time is critical, however, the resident engineer would issue the change, furnish the contracting officer with an in-house cost estimate for the work, evaluate the contractor's proposal when received, and assist the contracting officer in the negotiation of the change. Pricing of Construction Changes

Price adjustments under contract clauses - When a contract clause exists which addresses the action causing the change (e.g., the changes clause, differing site conditions clause, etc.), the contract clause will determine the manner of the price adjustment. For Federal contracts and many State and local contracts, the termequitable adjustment is used to describe the method of adjusting the contract price. 26 The term equitable adjustment includes an allowance for profit, while the term adjustment, which is used in the FederalSuspension of Work clause, 27 provides for an adjustment for increased performance costs, due to directed suspensions of work under this clause, but not profit. The specific language in the grantee contract clause will determine whether the adjustment is to include profit or will be limited to costs only. There are certain rules governing equitable adjustment methodology which have been developed in Federal cases, and these Federal contract rules have generally been adopted in cases involving non-Federal contracts as well. The Federal contract rules pertaining to equitable adjustments arising out of change orders on construction contracts are summarized below.

A. Basic Pricing Formula

The basic pricing formula for an equitable adjustment is "the difference between what it would have reasonably cost to perform the work as originally required and what it reasonably cost to perform the work as changed." 28 State courts have adopted the same basic formula for equitable adjustments. When repricing as a result of the change order, courts have limited the repricing to the changed work, without altering the original profit or loss position of the contractor. This is known as the "leave them where you find them approach." This rule would preclude a contractor from converting a loss to a profit or vice versa.

  1. Pricing the deleted work - Under the basic pricing formula, the amount of the adjustment for the deleted work is the cost that the contractor would have incurred had the change not been issued; i. e., had the work been performed. Usually one of the parties will argue that the amount should be the amount originally estimated by the contractor when the original bid was prepared. However, the courts have usually rejected this argument if better information is available showing what the contractor's actual cost of performance would have been had the change not been issued. The "would have cost" rule is applied to cases involving deductive changes or changes where work is deleted, and other work is substituted for the deleted work.
    • In one Federal case, the contractor had failed to include costs in its original bid price for a certain specification requirement, which was later deleted by the Government. The contractor argued that the Government was not entitled to a price credit because there was nothing in the contractor's original price for the work, but the Board held that the Government was entitled to a price credit based on the amount that the contractor would have spent to comply with the deleted specification requirement.29
    • In another case involving a change from underground electrical ducts and cable to an overhead system, it was determined that the original electrical work "would have cost" about $61,000. The work as changed only cost about $19,000. The Government argued for a price reduction of $42,000, which was the net difference. The contractor, however, had only included about $35,000 in its original bid for the underground work. The contractor argued that, if the Government's price reduction of $42,000 were allowed, the contractor would actually be paying the Government $7,000 on account of the changed work. The court, however, ruled for the Government, finding that the contractor's own negligent bid caused the problem, not the change order. 30 Here again we see the basic pricing formula applied-- the amount of the adjustment for the deleted work is the cost that the contractor would have incurred had the work actually been performed. The cost adjustment is not based upon the amount included in the contractor's original bid if that amount is not indicative of the cost to actually perform the work .
  2. Pricing the added work - The basic pricing formula requires that the contractor recover the increased cost of performing the work as changed. This is true even if the amount included in the original bid/contract was more than what was necessary for performance of the original work.
    • In one case where the contract was improperly changed to require the contractor to comply with the Davis-Bacon Act, the contractor was entitled to an increase in the contract price even though its bid already included enough costs for Davis-Bacon wages.31
B. Exceptions to the Basic Pricing Formula
  1. Complete Deletion of a Severable Item - When the contract contains severable items, thecomplete deletion of such an item will result in an equitable adjustment which deducts the original price of the deleted item as stated in the contract. This is an exception to the "would have cost rule." Whether the contract items are severable or not depends on the provisions of the solicitation, the nature of the work, and the intentions of the parties. Merely because an item has a separate unit price in the contract does not make the item severable.
    • In a case where the Government awarded a contract for work to be performed in four phases and priced each phase separately in the original contract, a cancellation of one phase in its entirety resulted in a price reduction equal to the amount of the price for that phase in the original contract. This was proper even though the contractor had seriously overpriced that phase and had underpriced another phase. 32
  2. Advance Agreements in the Contract - The parties to the contract may agree in advance upon the methodology to be followed in making equitable adjustments. For example, the contract may state that equitable adjustments for deductive changes will be the unit prices included in the contract. Another approach to deductive changes is to state in a contract clause that price credits for deductions will be based upon estimated costs at the time the contract was made.
  3. Deletion of Minor Items - It is customary to use the contractor's bid price to delete relatively minor items. To attempt to base the adjustment on a "would have cost" approach may be costly without producing a better result, so courts usually follow the expediency of using the original bid price for deletion of minor items or work.
C. Cost Impact on Contractor

The contractor's cost must be affected in order for there to be an equitable adjustment. The use of market value of the old/new work is generally rejected. 33

  1. Incurrence of Costs - A contractor must make payments or incur obligations which are greater than it would have incurred to do the original work. When no payment has yet been made, or when the loss is recoverable, costs are not considered incurred. For example, where the contractor's "loss" is covered by insurance, no costs are incurred and therefore no adjustment is due. In the case of a credit for decreased work, the amount of credit is the cost savings to the contractor. If the contractor realizes no savings from the change, then no credit will be due.
    • In a case where the Government waived a requirement for an American product, but the contractor had used foreign costs in its bid initially, the waiver did not result in cost savings to the contractor. The Court found that the Government was not entitled to a price reduction. 34
  2. Allowable Costs - Whenever a contract modification requires the submission of estimated costs for negotiation, as is the case in virtually all construction change orders, the cost principles in FAR Part 31 (or equivalent grantee cost principles) must be used to determine what is an allowable cost. This is true for all contracts, whether they be cost-type or fixed price. FAR 31 provides that allowable costs must meet all of the following tests:
    • Reasonableness;
    • Allocability;
    • In accordance with generally accepted accounting principles and cost accounting standards (if applicable);
    • Not excluded by specific contract provisions such as advance agreements.
D. Burden of Proof

The party seeking the adjustment has the burden of proof in establishing the amount of the price adjustment. The grantee has the burden to prove, for example, how much price reduction is appropriate for deleted work, while the contractor carries the burden of proving how much of a price increase it may be entitled to receive. To meet this burden, the party must show the reasonableness of the claimed costs and demonstrate that these costs have a causal connection to the change or other action on which the claim is based35

  1. Causation - The cost increase or decrease must be caused by the event for which an adjustment is being claimed. There must be a relationship in time between the costs and the event on which the claim is based. This relationship is demonstrated when the costs follow the event in a predictable sequence. Also, the costs must bear a logical relationship to the event, resulting from its occurrence.

  2. Reasonableness of Amount - FAR 31.201-3(a) places the burden of proof of reasonablenessfor both direct and indirect costs on the contractor. However, the test of reasonableness gives the contractor broad discretion in how it performs the work. A "reasonable cost" has been defined as follows:

    "A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by an ordinary prudent person in the conduct of competitive business."36
E. Major Cost Elements
  1. Labor - The contractor bears the burden of demonstrating that the cost of its additional labor effort has been caused by the event on which the claim is based. In some cases the contractor may be able to segregate the cost of the changed work in its records, and thus demonstrate the additional labor hours due to the change. However, when it is impossible to segregate the additional labor hours resulting from the change or other action of the owner, courts have accepted an approach to pricing the change known as the total cost method. By this is meantthe total costs actually incurred compared to the original estimate. This method can only be used if:

    • The original labor estimates in the contractor's bid are reasonable, based on objective, external evidence, and
    • The owner was solely responsible for the overrun--there must be no concurrent delays, etc.
    • There is no other reliable method to establish the additional labor costs. If there is another method, the total cost approach cannot be used. 37

    If the change disrupts the labor effort on unchanged work, having a "ripple effect or impact" on the effort required to do the unchanged work, the additional costs of performing the unchanged work are compensable. 38 One case of this nature involved a "disruption of the work because of the unexpected and excessive number of change orders." 39 Increases in labor costs are recoverable when a contractor incurs higher wage rates because of compensable delays in performing the work. Contractors are also entitled to compensation when there is a disruption to the work sequence, thus resulting in inefficiencies. For example, disruptions which preclude planned simultaneous work activities, or forced use of overtime work paid at premium rates, or delay of work until unfavorable weather conditions.

  2. Field Overhead - Field overhead is the cost of maintaining the contractor's field operations staff, facilities and equipment at the job site. Field overhead includes the cost of personnel chargeable to the specific project, such as the salaries for office clerks, project supervisors, timekeepers and engineers. It may also include rental or ownership costs for on-site trailers, office equipment, utilities, telephones, automobiles, trucks, etc. Field overhead is different than Home Office Overhead, which are general costs of conducting the contractor's overall business and cannot be attributed directly to any one project.

    Direct vs. indirect costs - In any proposal for a price adjustment arising out of a change order, it is always important to determine if the costs being proposed are direct or indirect (overhead) costs. If your contract includes a clause specifying the markup for field overhead--the percentage which will be allowed in the pricing of changes--then it is critical to ensure that the contractor is being consistent in its treatment of direct vs. indirect costs, and that there is no duplication of costs. For example, if the contractor's normal accounting practice is to include the cost of its salaried general foreman in the field overhead pool, then a change order claim cannot propose this foreman's salary as a direct labor cost because the cost is already included in the field overhead markup which is applied to direct labor costs. It is important, therefore, for the grantee's contract administrator to have an in-depth knowledge of all of the elements in the contractor's field overhead pool; that is, a good understanding of the various accounts which make up the pool. The contract administrator will then be in a position to evaluate the contractor's cost proposals and ensure that there is no duplication of costs because of the improper charging of overhead costs as direct costs. An audit of the Contractor's indirect cost pools may be necessary to obtain the required degree of information/knowledge concerning the composition of the indirect cost pools.

    Extended performance - When the contractor is delayed or the contract performance period is extended by a change order or other action of the owner, the contractor will incur additional job site overhead expenses which are time-related. These will consist of additional costs for supervision, maintenance of trailers, telephones, insurance, etc. There are two ways to price these additional overhead expenses. The first is to total all of the job site overhead expenses for the entire project and divide this total by the number of days over which the costs were incurred in order to compute a daily overhead cost. This average daily overhead cost is then multiplied by the number of days of delay in order to compute the cost of the delay. However, this method of using the average daily cost may not produce an equitable result. For example, if the contractor is delayed in the earlier stages of a project when it has a full complement of supervisory personnel and equipment at the job site, the field overhead cost of a day's delay will be much greater than if it occurs at the end of the project when most of the supervisors have been released and the equipment has been removed. Because daily field overhead charges may vary materially depending on the stage of the project when the delay occurs, it may be more equitable to use another method of computing the field overhead delay costs. This method computes the daily field overhead cost for the time period when the delay occurs.In one Federal case involving this issue, the Government argued that the delay costs should be computed using the tail end of the project; i.e., the extended period of performance. The Court, however, ruled that the delay damages should be calculated using the specific time periods in which the delay occurred--the actual period of the work disruption. The average daily field overhead costs during this period of actual work disruption were considerably higher than the daily costs at the tail end of the job, and the court chose a more equitable method of compensating the contractor for its actual costs during the period of work disruption. 40

  3. Home Office Overhead - Home office overhead is generally referred to as "General and Administrative" (G & A) costs, and these costs include those activities necessary for the overall business of the contractor. They would include the salaries of the company's executives, legal counsel, corporate liability insurance, accounting, depreciation, proposal/bidding costs, bad debts, etc. These costs are usually fixed costs, not varying with the volume of business, and continuing to be incurred with the passage of time. These costs cannot be assigned to any specific project. They are not of the type that can be reduced, or mitigated, during periods of project delays associated with work stoppages, change orders, etc. These costs are allowable and recoverable by the Contractor as part of its cost proposal for an equitable adjustment arising out of delays (assuming the delays are compensable). The method of computing the recovery is discussed below.

    Federal cost principles - Since virtually all construction change order proposals/claims involve the submission of cost data/estimates by the contractor, the Federal cost principles contained in FAR Part 31 would apply to the determination of an allowable cost for the purpose of negotiating these change order proposals or claims. 41 These cost principles stipulate that certain costs, usually included in home office overhead costs (G & A) are unallowable, including entertainment costs, contributions, interest, and bad debts. 42 Thus while the contractor may have based its original sealed bid price on the company's full home office overhead rate, it will not be able to base its change order proposals or claims on this full rate--the rate must be adjusted to remove unallowable costs because the proposal is being negotiated on the basis of cost data and not sealed bidding as was the original contract. 43 In order to remove these costs, the Contracting Officer may wish to obtain an advisory audit of the indirect rate cost pools prior to negotiations, or simply ask the Contractor to submit overhead information identifying the unallowable portion of the rate and accept the Contractor's submission as being factually accurate without an audit. The dollar value of the negotiations, (as well as the future potential for changes) may be the determining factor in deciding whether to audit the rates or not.

    Extended performance - The contractor's performance time may be extended by owner-caused disruptions of work, suspensions or change orders. Some of these actions may have a negligible effect on the contractor's direct costs, and thus entitle the contractor to only a small amount of markup on the direct costs for home office overhead. This type of situation may leave the contractor with a significant under recovery of its home office overhead costs. The courts have recognized that the nature of construction projects is such that contractors may be entitled to recovery of extended home office expenses when their contracts are delayed, and this recovery is beyond the usual percentage markup on the direct costs. Where actual overhead cannot be demonstrated or agreed upon, the Eichleay formula has been widely used as a method of calculation. 44 This formula, however, should be used with caution, as it can overstate actual contractor's overhead. The use of the formula varies from State to State and you should consult with your legal counsel for guidance in the use of this formula.

    In the Eichleay case, the Government had argued for a percentage computation which applied the contractor's normal home office overhead rate to the excess direct costs incurred during the delay period. The Government argued that there was no increase in the overhead rate during the delay. But the Board found that the Government's method was totally inadequate because (1) the delay added very little direct costs to the contract price; thus there was very little for the contractor to recover for home office overhead using a recovery method of a percentage of direct costs for overhead, and (2) the contractor's home office overhead costs continued throughout the delay period and could not be reduced (the costs were fixed, not variable). The facts were that the delays and suspensions occurred through an extended series of interruptions, and it would not have been prudent for the contractor to lay off its Home Office personnel or to take on other new business commitments during this delay period. The Eichleay formula is proper, then, if the contractor can demonstrate that it was not "prudent or practical" to reduce its home office staff or to seek new business commitments during the period of the disruption. 45 The Eichleay formula is accepted in Federal and State courts, boards of contract appeals and by arbitrators as a fair and reasonable method for compensating construction contractors for extended home office expenses resulting from owner-caused, compensable performance delays.

    The Eichleay formula - The formula consists of three calculations: 46


    Contract Billings During Performance
    Total Billings During Performance

    ×Total Corporate Overhead During Performance=Corporate Overhead Allocable to Contract

    Contract Allocable Corporate Overhead
    Total Calendar Days of Contract Performance

    =Contract Corporate Overhead Daily Cost
    3Compensable Delay Days×Corporate Overhead Daily Cost=Additional Corporate Overhead Expense During Contract Delay

    The methodology outlined above consists of taking the total home office overhead costs for the contract performance period and multiplying this total cost by the ratio of contract billings to total company billings; this calculation produces the amount of home office overhead dollars allocable to the contract. That amount is then divided by the number of days of contract performance; the result is the daily home office overhead rate in dollars per day allocable to the contract. That rate is then multiplied by the number of days of delay. The final result if the dollar amount of recovery for home office overhead costs.

  4. Profit - Profit is allowed as part of any owner action which entitles the contractor to an "equitable adjustment" under the terms of the contract. The profit would be that which is reasonable and customary for the type of work being performed. The contract may include a recoverable profit rate on change order work, but it is suggested that the rate be stated as maximum percentage, negotiable downward only. The reason for this approach is to avoid a cost-plus-percentage-of cost methodology, which is prohibited. 47 In this way the grantee can negotiate a lower rate of profit on changes where the nature of the work and the risks might warrant a lower rate of profit than for the basic contract. Variations in Estimated Quantities

Many construction contracts contain unit prices and estimated quantities of the various pay items. This procedure is used when the quantity of work cannot be estimated with sufficient accuracy so as to permit the work to be priced on a lump-sum (total price) basis. When it is necessary to use unit prices with estimated quantities, owners frequently include a clause requiring adjustment of the unit prices only when the actual quantities vary significantly from the estimates. For example, both the Federal clause and the Model Procurement Code clauses require that actual quantities must vary by more than 15% (up or down) before an adjustment will be made in the unit prices. 48 The adjustment can be at the request of either party.

Relationship to Differing Site Conditions clause - The Variation In Quantity clause will not govern the Contractor's entitlement to an equitable adjustment when the Contractor encounters conditions of the type described in the Differing Site Conditions clause. In such situations, where the Contractor encounters materially differing physical conditions not anticipated by either party, the Differing Site Conditions clause will take precedence and the Contractor will be entitled to an equitable price adjustment even if the final quantities vary by less than the % stated in the Variation In Quantity clause. 49 In one case the Board of Contract Appeals found a differing site condition when the Contractor encountered an unforeseen rock ledge in a river being dredged. The contract contained a pay item for dredging loose rock, and the removal of the rock ledge did not cause the Contractor to exceed the estimated quantities of rock actually removed. However, the Board ruled that the methods required to remove the rock ledge were not those normally used for loose rock, and thus the Contractor was entitled to a price adjustment under the Differing Site Conditionsclause even though the total quantity of rock removed was not in excess of the estimated quantity in the contract.

Unit price adjustments - Both the Federal clause and the MPC clause call for a unit price adjustment when the Contractor's costs increase or decrease due solely to the variation above 115% or below 85% of the estimated quantity. The phrase "due solely to variation" means that the amount of the equitable adjustment is determined solely from the difference in costs which is due to the larger or smaller quantity, rather than from a complete repricing of the work based on actual incurred costs for the excess quantity. Furthermore, the party demanding the adjustment has the burden of proving that costs have varied because of a difference in quantity. 50

The typical Variation In Quantity clause entitles the Contractor to a price adjustment for under-runs as well as over-runs in quantities. This presumes the Contractor can demonstrate that its unit costs have risen because of the under-runs. Typically the Contractor's fixed costs per unit will be higher because of fewer units over which to amortize the fixed costs. In the case of over-runs to the estimated quantity, the repricing would apply to only those quantities falling outside the range specified. In the case of under-runs, the repricing would apply to the entire actual quantity produced/delivered.

Payment on basis of actual costs - Some transit agencies have adopted contract provisions paying contractors' actual costs, on a "force account" basis, for quantities outside the range specified in the estimated quantities clause. In such cases the methodology is different than that described above where the contractor's starting point for establishing an equitable price adjustment is the unit price in the original contract, adjusted for cost increases or decreases due solely to the variation in quantities. In those cases where the price adjustment is to be based on actual costs for the increased/decreased quantities, the contract terms may describe in detail the methodology for determining payments, including the establishment of ceiling rates to cover such costs as home office overhead, field office overhead, equipment rental, etc. Where ceiling rates are used, they are subject to a final audit, and may be adjusted downward after audit to reflect the contractor's actual costs for the various individual cost elements (e.g., home office overhead). The rates are not fixed, predetermined percentages applied to actual costs of labor, materials, etc.--such an arrangement would be an impermissible cost-plus-percentage-of-construction-cost method which is prohibited by 51 Delays

There are many events which can occur to delay a contractor's performance. Delays can be of three generic types:

  1. Those where the contractor bears the risk of both time and cost--these are delays within its control. These delays are non-excusable.
  2. Those for which the owner is responsible for both time and cost impacts--these are delays for which the owner agrees to be responsible or which are caused by it. These are compensabledelays.
  3. Those for which neither party is responsible to the other--these are delays, such as concurrentdelays, where both parties have caused delays which have an equal impact on completion, and it is impossible to apportion or separate the delays. In such cases, the contractor may not recover its increased costs and the owner may not enforce liquidated damages.

The following provides typical examples of these types of delays. However, there are many variations used in contracts and grantees must make their own determination as to how the risks associated with delays are allocated between themselves and their contractors.

Excusable delays - The primary purpose of an excusable delay provision is to protect the contractor from sanctions for late performance (e.g., default termination, liquidated damages, and actual delay damages).Excusable delays may not be compensable. Whether a delay is considered excusable depends on the language of the particular clause in the contract. The Federal clause for construction contracts names a number of events which can give rise to an excusable delay, but there are three elements which are critical in determining whether an excusable delay has occurred. 52 The three elements are:

  1. The delay must arise from unforeseeable causes. If circumstances which are known when the contract is entered into make certain delays foreseeable, then courts have held the contractor responsible and refused to grant relief. 53
  2. The event must be beyond the control of the contractor. If a contractor cannot prevent an event from occurring, that event is beyond the contractor's control. Also, the standard applied is one of reasonable economic practice. For example, where there has been unusually severe weather, the contractor is not obligated to institute a two-shift operation to overcome the delays caused by the weather. 54
  3. The delay must be without the fault or negligence of the contractor. Fault or negligence deals with either acts or omissions of the contractor that cause delays. A contractor was not granted relief when its subcontractor failed to perform because the contractor was negligent for failing to assure itself of the subcontractor's ability to perform. 55

If the excusable delay provision lists a type of event relieving the contractor from responsibility, then, under the Federal clause, the three criteria discussed above are applied to the event to determine the issue of excusability. It should be noted, however, that private contracts may or may not contain the same language as the Federal clause, and thus the proper interpretation of the clause should be sought from the grantee's in-house legal counsel. The types of events usually included in these provisions would include:

  • Strikes - To obtain an excusable delay for a strike under the Federal clause, a contractor must prove that it acted reasonably and did not wrongfully precipitate or prolong the strike, and it must take steps to avoid its effect. In other words, the three-fold criteria of being unforeseeable, beyond the contractor's control, and without the fault or negligence of the contractor, must be met. In private contracts which do not contain this language, however, a court may well excuse a delay even where the strike is precipitated by the contractor's actions, such as reducing its workers' wages. 56
  • Weather - Most contracts will contain excusable delay provisions concerning adverse weather. Generally, adverse weather is abnormal in comparison to the previous weather patterns at the same location for the same time of year. Some grantee construction contracts contain provisions noting the anticipated non-work weather days for each month of the year, and contractors are advised to bid with this information and to plan their schedules accordingly. 57 The usual method of proving that weather is unusually severe is to obtain comparative data from the U.S. Weather Bureau for past periods in the area with those recorded during the period of performance.
  • Subcontractor and supplier delays - Where the delay is caused by a subcontractor or supplier, and the excusable delay clauses mention this as an excusable cause, there is usually the added requirement that the subcontractor's or supplier's delay be excusable based on the same three-fold criteria as discussed above in connection with other causes of delay; i.e., it must have been due to circumstances unforeseen by the subcontractor, beyond the subcontractor's control, and without the subcontractor's fault or negligence.
  • Owner conduct - To be excused for owner conduct, contractors must show that the contractual acts or omissions of the owner were wrongful (e.g., an improper failure to pay for services performed, or improper interference with the work of the contractor). But where delays are due to owner acts properly taken, there is no basis for an excusable delay (e.g., where owner rightly insists on compliance with specifications, or properly rejects subcontractors who do not meet qualification/experience requirements). Of course when the owner issues Change Orders (which are not wrongful acts), the contractor is entitled to both a price and schedule adjustment in accordance with the terms of the Changes clause.

Compensable delays - These are delays for which the contractor is entitled to compensation, not merely an extension of time, as with many of the excusable delays. Entitlement to compensation may be expressly stated in a specific contract clause, but if not, there is an implied duty of each party not to hinder, delay or make more expensive the performance of the other party. Thus, even in the absence of a specific contract clause granting the contractor compensation for owner-caused delays, many courts find an implied owner duty not to hinder or delay, and they will grant compensation to contractors for such delays. 58 This implied duty has been used as justification for compensation in a wide variety of circumstances.

Compensable delays may arise because of express orders of the owner (e.g., suspensions of work for owner's convenience, written Change Orders, etc. ), or because of so-called constructive changes; i.e., some act of the owner or failure to act which causes a compensable suspension of work (e.g., delay in the availability of the site, delay in issuing approvals where prior approval is required before starting work, delays in the inspection process, or owner's interference with the contractor's work).

In order to be compensated for delays, a contractor must demonstrate that the delay is unreasonable in duration. It is important to determine if the delay is the result of the owner's fault or whether it results from an action taken by the owner pursuant to a contractual right. If the delay results from an owner's fault, the courts have generally held that the entire period of the delay is unreasonable and therefore compensable. If, on the other hand, the delay arises out of an action taken pursuant to an owner's contractual right, the contractor will be compensated only for the unreasonable portion of the delay. 59

Delays where the total delay period has been found unreasonable include:

  • Delay in issuing notice to proceed beyond date needed by contractor to perform work efficiently.
  • Delays because of conflicting or defective specifications.
  • Delays in obtaining city authorizations which could only be obtained by the owner.

Delays which have been found to be reasonable include:

  • Delays in awarding the contract arising out of compliance with bid protest procedures.
  • Delays in issuing changes which were not attributable to defective specifications.

Concurrent delays - When both parties contribute to a delay, the issue arises as to how to resolve the question of responsibility for the delay. The courts have resolved this issue by assessing the losses attributable to each party's delay and apportioning the damages accordingly. 60 The case law in this area focuses on apportioning the delay to its appropriate category of owner-caused, contractor-caused, and caused by neither--"excusable" per the contract terms. What this means is that if one party contributed in part to the delay, it will not be barred from recovering damages from the other party (e.g., an owner who is partly responsible for the delay will not be precluded from recovering liquidated damages). 61 Where it is impossible to allocate or separate the delays, or where the delays are truly concurrent (where each party has had an equal impact on completion, the following rules would apply:

  • Where contractor-caused delay is concurrent with owner-caused delay, the contractor may not recover its increased costs resulting from the delay.
  • Where noncompensable delays are concurrent with owner-caused delays, a contractor may not recover its increased costs resulting from the delay.
  • Where the owner has contributed to the project delay, and such contribution cannot be separated from other causes of delay, liquidated damages cannot be enforced by the owner. Acceleration

Acceleration is the speeding up of the rate of performance in order to complete the contract earlier than would be the case if the contractor pursued the effort in a normal manner. There are two situations where contractors are entitled to compensation for acceleration costs.

Owner-caused delay - When an owner causes a delay which would entitle a contractor to recover its increased costs (see compensable delays in section, the contractor may attempt to mitigate the costs of the delay by voluntarily accelerating its efforts. In this case the contractor is entitled to recover the costs of accelerating the effort and these increased costs are actually recoverable as part of the delay costs because they were incurred in mitigation of those delay costs. 62

Owner-directed acceleration - When an owner orders the contractor to complete the work earlier than the contract requires, the contractor is entitled to recover the costs of acceleration. The owner may expressly order the contractor to accelerate performance, thus creating a compensable acceleration, but in the majority of cases the acceleration is constructive rather than expressed; i.e., the owner orders the contractor to meet the contract completion date even though there has been an excusable delay which would entitle the contractor to an extension in the completion date. (See excusable delays in section The effect of this order by the owner is to require a rate of performance which is faster than the contract requires, and this is equivalent to an express order to accelerate. 63

Elements required for constructive acceleration - In order to recover for constructive acceleration, it is generally held that the contractor must demonstrate three elements:

  1. the delays which occasioned the order to accelerate were excusable.
  2. the contractor was ordered to accelerate.
  3. the contractor in fact accelerated performance and incurred extra costs. 64

Order to accelerate - An order to accelerate does not have to be a specific command. If the owner "requests" the contractor to accelerate, it has the same effect as an "order." Further, it makes no difference whether the contractor complies willingly or unwillingly. If the initiative comes from the owner and the work is done in a manner different than the contract requires, then the contractor will be entitled to compensation. Other circumstances giving rise to constructive acceleration would be: (a) a wrongful threat to terminate for default where the delays were excusable, 65 (b) a threat to assess liquidated damages where delays were excusable. 66

Acceleration orders where both excusable and non-excusable delays exist - The Federal cases have held that when the owner directs the contractor to accelerate in order to recover the non-excusable delay, the acceleration costs are not recoverable. 67 It has also been held that where both excusable and non-excusable delays exist, and the contractor accelerates performance pursuant to an order of the owner, the acceleration costs are not compensable when the time recovered is less than the amount of the non-excusable delay. 68

Recovery of acceleration costs not dependent on recovery of lost time - When the owner orders completion ahead of schedule, and the contractor uses its "best efforts" to accelerate completion of the project but fails to recover the lost time, the contractor is permitted to recover the increased costs associated with its efforts to accelerate. 69

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9.3 Improving Vendor Delivery Performance

Late deliveries from vendors can be, and often are, a serious problem for many agencies, especially those that are awarding and administering many thousands of purchases annually. New York City Transit (NYCT) is an agency that has faced this problem with respect to its maintenance materials and developed some innovative solutions to deal with it. This agency has faced all of the normal difficulties in dealing with vendors, including late deliveries, quality and quantity problems as well as difficulties in motivating its suppliers to grasp the significance of improved performance. The following summarizes some of the methods NYCT has used to address vendor performance problems.

Vendor Performance Module - The first step in addressing poor vendor delivery performance was to develop a computer software program or module that would accurately gather and report different measurements of vendor performance.

This permits NYCT's procurement and receiving functions to be electronically linked, thereby enabling receiving personnel to enter the data summarizing the details of each inventory receipt transaction. For example, the data recorded includes the actual date of delivery in comparison to the date promised by the vendor, purchase order quantity vs. actual quantity received and quality assurance rejections. The module accumulates this data on a vendor specific basis and provides performance information. Using this performance information, NYCT has implemented several programs to improve on-time delivery performance.

"100 Worst" Program - Utilizing the vendor performance data, NYCT can identify the "vital few" vendors who are generally responsible for the greatest number of late deliveries and are having the most significant impact on NYCT's ability to support maintenance and production efforts. Presently NYCT has directed its focus on the 100 firms having the highest number of late deliveries through open, non-adversarial meetings between agency procurement staff and the chief executives of the companies in question. Specific emphasis is placed upon the expansion of the vendor's understanding of the significance of late deliveries. Individualized action plans are developed with clearly defined remedial steps and corresponding milestone dates. For the most part this approach has been successful; however, in those rare instances where a vendor is completely unable to improve, determinations of non-responsibility, suspensions, defaults and debarments are invoked.

Top 100 Suppliers - This program looks at the 100 best suppliers. NYCT holds an annual vendor conference and invites senior management officials from these suppliers. Awards are presented to the very best companies for excellent on-time performance, with special emphasis on companies showing marked improvement. These awards are perceived as prestigious within the industry and are anticipated to have an extremely positive effect on a vendor's ability to attract future business with other transit properties. Goals and strategies are discussed for continued improvement and the attendees are given a complete understanding of the major initiatives that NYCT has embarked upon which will require the support of the vendor community through timely performance.

"STATUS" Program - System To Automatically Track Untimely Shipments
The STATUS program is a standard method of late delivery notification to any vendor. At set time periods, letters detailing a missed delivery date are mailed to the vendor. The system officially notifies each vendor's sales representative and chief officer of late deliveries, advising them of potential action and affording the company an opportunity to respond.

Program Results - The programs adopted by NYCT (Vendor Performance Module, "100 Worst" Program, "STATUS" Program, and "Top 100 Suppliers") have proven to be highly successful in improving vendor performance.

Another program that has proven successful at MARTA involves linking employee performance to on time vendor deliveries.

9.4 Approval of Subcontractors


FTA Circular 4220.1E paragraph 16 requires grantees to evaluate Federal statutory and regulatory requirements for relevance and applicability to a particular procurement.

Appendix A.1 - Federally Required and Other Model Contract Clauses, and Chapter 8 - Contract Clauses, contain a discussion of many contract clause requirements, including the applicability to subcontracts.

49 CFR Part 26 sets forth the requirements of the Federal Department of Transportation concerning Disadvantaged Business Enterprise (DBE) participation in FTA programs. A discussion of these requirements may be found in Chapter 7 of this Manual.


The management of subcontracts usually involves three areas:

  1. Assurance that the prime contractor has included the required "flow-down" provisions (clauses) from the prime contract in the subcontract. A discussion of the requirements related to the flow-down of Federal contract clauses may be found in Chapter 8 - Contract Clauses, and Appendix A.1 - Federally Required and Other Model Contract Clauses.
  2. The prime contractor's compliance with the Disadvantaged Business Enterprise (DBE) requirements in its prime contract. Guidance related to the DOT requirements concerning DBE matters may be found in Chapter 7 - Disadvantaged Business Enterprise.
  3. Assurance that the prime contractor has selected its critical subcontractors in a prudent fashion, so as to protect the grantee's program interests.

The purpose of this section relates to the third objective above - it is to furnish guidance concerning those circumstances when grantees may wish to require their prime contractors to submit certain subcontracts for the grantee's consent prior to award of the subcontract by the prime. 70

When the prime contract is CPFF or T&M- Under a cost-plus-fixed-fee contract (CFPP) and a time-and-materials (T&M) contract, the grantee bears the burden of allowable costs incurred by the prime contractor, including amounts spent for supplies and services on purchase orders or subcontracts. It behooves the grantee, therefore, to exercise diligence in the management and administration of these types of prime contracts with respect to the primes' selection of its major subcontractors or suppliers. If the cost incurred by the prime is greater than necessary (for example, because of inadequate competition or a poorly negotiated subcontract), it is the grantee that will bear the higher than necessary costs. If the selected subcontractor performs poorly, it will be the grantee that will bear the cost of correcting the problems or be put in a position of having to accept a product that is substandard.

When the subcontract involves a critical component or subsystem - This situation is more likely to arise when the contract involves the procurement of a major system or involves new technology. Here the issue is not so much the cost risk that accrues to the grantee under every CPFF or T&M type of contract, but the risk of failure of the system being procured due to problems with subcontracted components or subsystems that are critical to the system's successful performance. For example, on a large contract for rehabilitating a subway station, a prime contractor with civil engineering experience may have to subcontract the electrical system work. You may very well require the prime to submit its proposed subcontractor for electrical work for your approval, and you will want to do a "responsibility" type of review of that particular subcontractor. If you have evidence of poor prior work by that subcontractor, or evidence of marginal financial resources, you may require the prime to select a different company with a better track record of performance or a stronger balance sheet.

When the subcontract exceeds a certain dollar threshold - Grantees may require their primes to submit all subcontracts over a certain stated value for consent. New York City Transit, for example, requires its prior approval of all subcontractors whose subcontracts will exceed $1,000,000 or 10% of the total contract price. For Federal contracts, the threshold for subcontract consent is 5% of the prime contract value when the prime contract is a CPFF or T&M type of contract. 71

Best Practices

Determining Subcontractor Responsibility - Sealed Bids - You may wish to consider a standard provision in your solicitations that would require the bidders to submit certain subcontractor information for your review prior to contract award. This information would enable you to make a determination that a proposed subcontractor or supplier was technically and financially qualified to perform the work. This determination would be part of your "responsibility" determination for awarding the contract. New York City Transit uses a standard provision in its Invitation for Bids (IFB's) entitled "Bidder's Qualifications/Responsibility." This clause requires the bidder to demonstrate to the satisfaction of NYCT that it has the integrity, skill, experience, facilities and financial resources necessary to perform the contract. The clause covers major subcontractors as well as the prime contractor. The pertinent part of this clause concerning subcontractors reads as follows:

(h) Except to the extent set forth in subparagraph (i) below, Authority approval of all Subcontractors and Suppliers is required. In order to assist the Authority in its evaluation of Bidder's qualifications, the Bidder shall supply to the Procurement Representative within three (3) working days after the opening of bids, or within three working days after notification, in the case of a subsequently identified apparent low bidder, a detailed list of: (i) proposed Subcontractors supplying labor or labor and materials, with a value exceeding the lesser of $1,000,000 or ten percent (10%) of the Total Contract Price as bid by the apparent low Bidder; and (ii) Proposed Subcontractors and Suppliers of the following equipment, materials or labor:

(See Information for Bidders Data Sheet)

Bidder's submission is to also include the completed form titled "Statement of Qualification of Subcontractor," a copy of which is available from the Procurement Representative. 72 These requirements are in addition to, and not in lieu of, submission requirements pertaining to subcontractor's proposal to meet DBE or MBE/WBE or affirmative action requirements.

The Bidder shall state in writing to the Authority the name and place of business of each proposed Subcontractor or Supplier, the portion of the work which such Subcontractor is to do or the equipment/materials which such supplier is to furnish and such other information as the Authority may reasonably require tending to establish that the proposed Subcontractor or Supplier has the necessary skill, facilities, integrity, experience and financial resources to perform the work or supply the equipment in a satisfactory manner and in accordance with the Contract. To be considered skilled and experienced, the proposed Subcontractor or Supplier must show that he has satisfactorily performed work, or supplied equipment, of the same general type that he is proposing to perform for the Bidder under this Contract. The Authority may require such proposed Subcontractor or Supplier to submit proof of financial or other qualification to do the Work. In addition to submitting for approval the above-mentioned categories of Subcontractors and Suppliers, Bidder may submit any other proposed Subcontractor or Supplier for approval prior to contract award.

The Authority will notify the Bidder within a reasonable time whether use of the proposed Subcontractor or Supplier has been approved. Where use of a proposed Subcontractor or Supplier has not been approved, the Bidder may propose another Subcontractor or Supplier, or propose to perform the work himself.

(i) With respect to any Subcontractor(s)/Supplier(s), the successful Bidder will be required to obtain approval of such Subcontract(s)/Supplier(s) in accordance with the provisions of Article 1.08.

The contract Article No. 1.08 referenced above in the solicitation provision requires the Bidder to use the Subcontractors/Suppliers that were approved by NYCT. The contract clause reads, in part:


(a) Any Subcontractor or Supplier which required and received pre-award approval in accordance with paragraph 16 of the Information for Bidders, must be utilized by the Contractor for the portion of the Work for which they were approved. The Authority will generally not entertain any post-award substitutes of any such Subcontractor or Supplier in the absence of compelling circumstances to do so. 73

Several points can be noted concerning the above solicitation provision and contract clause:

  1. Every subcontract greater than 10% of the bid price will automatically be captured for review.
  2. The provision is tailored on a case-by-case basis to capture any subcontract deemed important or critical by the grantee regardless of dollar value. You would simply insert the equipment, materials or labor in your "Bidders Data Sheet" (or wherever you wish to note the items) so as to require your review and approval of those subcontractors.
  3. The Bidder will be required by the contract Article 1.08 - Subcontracts, to use the Subcontractors/Suppliers that were proposed and approved unless there are "compelling circumstances" that preclude the Bidder from doing so.

Consenting to Subcontracts When the Prime Contract is Cost Plus Fixed Fee (CPFF) or Time & Materials (T&M) - For these types of contracts, grantees may wish to require the prime contractor to submit the proposed subcontract for the grantee's consent prior to award by the prime, especially if the subcontract is significant in dollar terms, involves a critical component, or is itself a CPFF or T&M subcontract. If the grantee determines that any subcontracts should be submitted for consent, the grantee will want to identify the types of information that the prime should submit with its request for consent. The type of information that will usually be relevant as part of an advance notification for consent package would consist of:

  1. A description of the supplies or services to be subcontracted. The best description would be the actual subcontract specifications and/or statement of work.
  2. Identification of the type of subcontract to be used. The actual subcontract document itself would be best since it would give you all the terms and conditions which you can then review to ensure that all required flow-down clauses are incorporated in the subcontract. The BPPM Appendix A.1 contains the required Federal clauses and identifies those that have flow-down requirements.
  3. An explanation of how and why the proposed subcontractor was selected, including an identification of the competitive proposals obtained, and their relative strengths and weaknesses.
  4. The subcontractor's cost or price proposal, together with the prime contractor's cost or price analysis of the subcontractor's proposal.
  5. Evidence from a competent auditor that the subcontractor's accounting system is adequate for cost-type subcontracts (if the subcontract is cost-type) and that the proposed labor and indirect expense rates are reasonable in light of recent actual rates incurred and the best available business projections for the company.
  6. The Prime contractor's explanation of how the subcontract price was determined.
  7. The Prime contractor's assessment of the subcontractor's "responsibility," including the subcontractor's performance record on prior jobs of a similar magnitude.

Degree of Work that is Subcontracted - Grantees may consider requiring the prime contractor to perform certain tasks on a project or a minimum percentage of the work, to insure that the prime contractor maintains a certain degree of control over the project. For instance, where a job is primarily civil/structural work, bidders may be allowed to subcontract associated electrical work, but may be required to perform the civil structural work with their own forces. In any event, where a significant amount of the work is subcontracted, the agency may wish to take a more active role in approving subcontractors. 74

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Chapter Footnotes

1 - See § 7.i., FTA Circular 4220.1E, and discussion in Section 2.4.1, "File Documentation."

2 - § 7.k. FTA Circular 4220.1E. See also the extensive discussion of the documentation required for the settlement of claims and disputes found in Paragraph 7, Chapter I, FTA Circular 5010.1C, "Grant Management Guidelines," dated 10/1/98. As appropriate, some of these requirements will be discussed later in the "Best Practices" portion of this section.

3 - FAR § 42.302.

4 - It is important that the files stand on their own because at the time a matter comes into controversy or at the time of a post-contract performance audit or review. The key characters may not be available (dead, moved away, terminated from employment, etc.) to respond to those issues.

5 - National Transit Institute, 120 Albany Street, Suite 705, New Brunswick, NJ 08901-2163. Phone (732) 932-1700. FAX (732) 932-1707. Courses include: An Effective Change Order Process, Management of Transit Construction Projects and Contract Administration.

6 - MPC § R6-101.03 Changes Clause (supplies), and §R5-401.03 Changes Clause (construction).

7 - Freund v. United States, 260 U.S. 60 (1922).

8 - Aragona Constr. Co. v. United States, 165 Ct. Cl. 382 (1964).

9 - Air-A-Plane Corp. v. United States, 187 Ct. Cl. 269, 408 F.2d 1030 (1969).

10 - See Aragona above.

11 - Peter Kiewit Sons' Co. v. Summit Constr. Co., 422 F.2d 242 (8th Cir. 1969).

12 - Atlantic Dry Dock Corp. v. United States, 773 F. Supp. 335 (M.D. Fla. 1991).

13 - Neil Gross § Co., 69 Comp. Gen. 247 (B-237434), 90-1 CPD § 212.

14 - Coley Properties Corp., PSBCA 291, 75-2 BCA § 11,514.

15 - Reliance Ins. Co. v. United States, 20 Cl. Ct. 715 (1990).

16 - J.D. Hedin Constr. Co. v. United States, 171 Ct. Cl. 70, 347 F.2d 235 (1965)

17 - Liebert Corp., 70 Comp. Gen. 448 (B-232234.5), 91-1 CPD § 413.

18 - American Air FIlter Co., 78-1 CPD 136.

19 - MPC R5-401.03 Changes Clause.

20 - A-66501, 15 Comp. Gen. 573 (1935); B-95069, 30 Comp. Gen. 34 (1950).

21 - Saddler v. U.S., 287 F. 2& 411 (Ct. Cl. 1961).

22 - General Contracting & Constr. Co. v. U.S., 84 Ct. Cl. 570 (1937); McMasters v. State, 15 N.E. 417 (N.Y. 1888).

23 - ABA Model Procurement Code clause R5-401.06 Differing Site Conditions Clause. FAR 52.236-2 Differing Site Conditions.

24 - Kenny Constr. Co. v. Metropolitan Sanitary Dist., 309 N.E. 2d 221 (Ill. 1974).

25 - Courses of this nature are offered by Management Concepts, Inc., the U.S. Agriculture Department (888/744-GRAD), and the National Transit Institute at Rutgers University (732/932-1700).

26 - FAR 52.236-2 Differing Site Conditions Clause, and FAR 52.243-4 Changes Clause.

27 - FAR 52.242-14.

28 - Modern Foods, Inc., ASBCA 2090, 57-1 BCA § 1229.

29 - Noblebrook Contractors, Inc., ASBCA 9736, 1964 BCA § 4283, 1964 BCA § 4408.

30 - S.N. Nielsen Co., v. U.S., 141 Ct. Cl. 793 (1958).

31 - B-E-C-K Christensen Raber-Kief § Assocs., ASBCA 16467, 73-1 BCA § 9884.

32 - Gregory § Reilly Assoc., Inc., FAACAP 65-30, 65-2 BCA § 4918. Holtzen Constr. Co., AGBCA 413, 75-2 BCA § 11,378.

33 - Bruce Constr. Corp. v. U.S., 324 F.2d 516 (Ct. Cl. 1963).

34 - L.G. Lefler, Inc. v. U.S., 6 Cl. Ct. 514 (1984).

35 - Nager Elec. Co. v. U.S., 442 F.2d 936 (Ct. Cl. 1971). S.W. Elecs. § Mfg. Corp. ASBCA 20698, 77-2 BCA § 12,631 (1977), aff'd, 655 F.2d 1078 (Ct Cl. 1981).

36 - Bruce Constr. Corp. v. U.S., 324 F.2d. 516 (Ct Cl. 1963).

37 - Wunderlich Contracting Co. v. U.S., 351 F.2d 956 (Ct. Cl. 1965). Turnbull, Inc. v. U.S., 389 F.2d 1007 (Ct. Cl. 1967).

38 - Paul Hardeman, Inc. v. U.S., 406 F.2d 1357 (ct. Cl. 1969).

39 - Clarke Baridon, Inc. v. Meritt-Chapman § Scott Corp., 311 F.2d 389 (4th Cir. 1962).

40 - Laburnum Contrs. Corp. v. U.S., 325 F.2d 451 (ct. Cl. 1963).

41 - CFR §18.22 (b).

42 - FAR 31.105 and FAR 31.2.

43 - FTA Circular 4220.1E paragraph 10.d.

44 - This method is named after the landmark 1960 decision in Eichleay Corp., ASBCA 5183, 60-2 BCA § 2688, aff'd, 61-1 BCA § 2894.

45 - Capital Elec. Co. V. U.S., 729 F.2d 743 (Fed. Cir. 1984).

46 - The formula as stated in Construction Contracting, The George Washington University, 1991.

47 - FTA Circular 4220.1E paragraph 10.e.

48 - FAR 52.211-18. MPC R5-401.04.

49 - Brezina Constr., Inc., ENGBCA 3215, 75-1 BCA § 10, 989.

50 - Victory Constr. Co. v. U.S., 510 F.2d 1379 (Ct. Cl. 1975).

51 - Bay Area Rapid Transit District (BART), General Conditions For Construction Contracts, Articles GC4.5 Increased or Decreased Quantities, and GC9.3 Force Account.

52 - FAR 52.249-10, Default (Fixed-Price Construction).

53 - Dicon, Inc. v. Marben Corp., 618 F.2d 40 (8th Cir. 1980).

54 - Southern Flooring & Insulation Co., GSBCA 1360, 1964 BCA § 4480.

55 - Kaufman DeDell Printing, Inc., ASBCA 19268, 75-1 BCA § 11,042.

56 - Panzieri-Hogan Co. V. Bender, 143 N.E. 739 (N.Y. 1923).

57 - BART, Clause GC. Anticipated Non-Work Weather Days.

58 - Peter Kiewit Sons & Co. v. Summit Constr. Co., 422 F2d 242 (8th Cir. 1969).

59 - Davho Co., VACAB 1005, 72-2 BCA § 9683 at 45,214.

60 - U.S. ex. Rel. Heller Elec. Co. v. William F. Klingensmith, Inc., 670 F2d 1227, 1231 (D.C. Cir. 1982).

61 - Aetna Casualty & Sur. Co. v. Butte-Meade Sanitary Water Dist., 500 F. Supp. 193, 197 (D.S.D. 1980).

62 - Canon Constr. Corp., ASBCA 16142, 72-1 BCA § 8622.

63 - Contracting & Material Co. v. City of Chicago, 314 N.E. 2d 598 (Ill App. Ct. 1974).

64 - Norair Eng'g Corp v. U.S., 666 F. 2d 546 (Ct. Cl. 1981).

65 - William Lagnion, ENGBCA 3778, 78-2 BCA § 13,260. Lewis Constr. Co., ASBCA 5509, 60-2 BCA § 2732.

66 - Pathman Constr. Co., ASBCA 14285, 71-1 BCA § 8905.

67 - Electrical Enters., Inc., IBCA 971-8-72, 74-1 BCA § 10,528.

68 - Pan-Pacific Corp., ENGBCA 2479, 65-2 BCA § 4984.

69 - Varo, Inc., ASBCA 15000, 72-2 BCA § 9717.

70 - The grantee may find it helpful to review the Federal policies and procedures concerning subcontracting in the FAR Part 44. Grantees are not required to follow these Federal procedures.

71 - FAR 44.201-1.

72 - A copy of this Qualification Statement is included in this Manual as Appendix B.17 - Statement of Qualification of Subcontractor.

73 - For a complete contract clause and further information dealing with Subcontracts, contact Stan Grill of NYCT at (718) 694-4350.

74 - Some states or jurisdictions have established minimum requirements.

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Last updated: Monday, January 25, 2016