1. Unique General Conditions of the Alabama Building Commission (ABC)
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2. Justification for Change Orders
ABC Form B-11
Awarding authority and architect/engineer should justify
Within the general scope
Competitive bidding not appropriate
Generally, total change orders do not exceed 10% of contract price (unless “extraordinary circumstances”)
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3. Documentation of “Extraordinary Circumstances”
Attached to change order should be a signed statement from the project architect/engineer containing the following:
“A statement of what the change order covers, who instituted the change order, and why it is necessary or desired;
A statement of the reason for using the change order method rather than competitive bids;
A statement that all prices have been reviewed and found reasonable, fair and equitable and recommending the approval of the same.”
AG Opinion
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4. ABC Form B-11 Excerpts
Pursuant to these guidelines, the following types of changes meet the criteria for awarding work through Change Orders in lieu of through the Competitive Bid Process:
Minor Changes for a monetary value less than required for competitive bidding.
Changes for matters relatively minor and incidental to the original contract necessitated by unforeseeable circumstances arising during the course of the work.
Emergencies arising during the course of the work of the contract.
Bid alternates provided for in the original bidding where there is no difference in price of the change order from the original best bid on the alternate.
Changes of relatively minor items not contemplated when the plans and specifications were prepared and the project was bid which are in the public interest and which do not exceed 10% of the contract price.
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5. ABC Form B-11 Excerpts (continued)
Under these guidelines the cumulative total of Change Orders, including any negotiations to bring the original contract price within the funds available, would become questionable if the total of such changes and negotiations exceed 10% of the original contract price. These guidelines are not intended to interfere with the Awarding Authority’s good faith discretion to respond to specific situations in the public’s best interest.
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6. Liquidated Damages Purpose of liquidated damage clause?
Fix the amount of damages recoverable for inexcusable delay
Eliminate need to have trial and prove exact amount of damage
Enforceable so long as they are construed as attempts to measure actual damages in advance rather than as a penalty against the late contractor
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7. Three Criteria in Alabama for Enforcing Liquidated Damage Clause
Injury caused by the breach must be difficult or impossible to accurately estimate
The parties must intend to provide for the damages rather than a penalty
The sum stipulated must be a reasonable pre-breach estimate of the probable loss Alabama courts will conduct “after the fact” look to determine whether the stipulated sum reasonably approximates the actual damages that previously were unascertainable
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8. Do Contractors Want a Liquidated Damages Clause?
Perhaps so, for several reasons
A liquidated damage clause prevents owner from claiming a right to withhold an arbitrary amount and then coerce contractor to settle the owner’s claims
Contractor knows in advance his daily damages when facing an election between paying liquidated damages or undertaking a non-compensable acceleration
Litigation costs are avoided where liquidated damages have been agreed to
The amount set forth for daily liquidated damages can often be less than the owner’s actual damages
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9. How Does Owner Prove Liquidated Amount Stipulated Was Not a Penalty?
Owner should prepare pre-bid estimate of delay damage
Computations for damages for loss of use of facility (interest on capital investment)
Additional expenses for architects or engineers to inspect the work
Additional time for owner’s employees to inspect work
Any special requirements of the owner renting or otherwise securing alternative facilities
The owner and architect should retain the written document to reflect the pre-contract estimate of actual damages
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10. ABC General Conditions
Default setting: Liquidated damages of a “time charge equal to 6% interest per annum on the total “contract sum”
For entire period that the Work is not “substantially complete” after expiration of the “contract time”
Contract documents may specify a certain per diem dollar amount in lieu of 6%
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11. No Damages for Delay Cause
It is fairly common for construction contracts to contain a “no damage for delay” clause
Such clauses provide, in the event of delay:
Contractor shall be entitled “only” to a time extension
May specifically state that owner or architect/engineer will not be liable for delay.
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12. Example “No Damages for Delay” Clause
If the Contractor is delayed in the progress of the work by an act or neglect of the Owner or Engineer…then the Contract Time may be extended by Change Order for such reasonable time as the Engineer determines. It is agreed that no claim shall be made or allowed against Owner or Engineer for any damages, loss or expense which may arise out of any delay caused by the above-referenced acts or occurrences, other than claims for the appropriate extension of time.
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13. Example “No Damages for Delay” Clause (continued)
Such clauses are generally enforceable, although courts strictly construe such exculpatory provisions
Exceptions to enforceability (per Ernst case):
Delay not contemplated by the parties under the provisions
Delay amounted to abandonment of contract
Delay caused by bad faith
Delay amounted to active interference
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14. ABC Version
The Contractor shall not be entitled to any adjustment of the Contract Sum for damage due to delays claimed pursuant to this Article unless the delay was caused by the Owner or Architect and was either:
the result of bad faith or active interference or
beyond the contemplation of the parties and not remedied within a reasonable time after notification by the Contractor of its presence.
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15. Contact Information
J. Lister Hubbard
Attorney & Shareholder
Capell & Howard P.C.
(334)
Lister Hubbard
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