Updated March 25, 2020

This Bulletin provides guidance to Steel Fabricators for ensuring compliance with contractual change order requirements in the event of detailer shutdowns, mill shutdowns, project shutdowns, workforce closures, or other delays, and supplements our previous COVID-19 Bulletin.

Many states have issued orders calling for the closure of non-essential businesses.  Orders are issued and may change hourly.  Click here for an interactive map that will show you the states that have issued orders.  As of today’s date, most steel manufacturing is being deemed “essential” even in states where construction has not been deemed essential.

PROTECT YOUR RIGHT TO PAYMENT BY FOLLOWING NEDD:

In order to preserve your right to payment, you must satisfy the contractual requirements supporting a change order for the increased costs due to the delay.  The Key to the successful presentation of change order claims is educating your team on the following:

1. NOTICE

• Review the change order and notice provisions of your contracts.  Make your contract searchable and insert the term “Noti” and look for the items listed below.
• Who:         Check the designated representative for notice.

• It may not be the project manager.
• Confirm who can authorize the change order.

• Is owner approval required?
• Ensure that the party approving the change order has authority to do so.

• What:       Check for specific information required by the contract.

• Provide ALL information available.
• If certain information is not yet available, state that the information will be provided when available.
• Reserve all rights to amend and submit additional information.
• Request both an increase to the Contract Sum and Contract Time.

• Make the request even if you do not believe the delay or time necessary will cause a significant impact.

• When: Check the time deadline for notice.

• Does the contract provide for waiver if notice is not provided?

• How:         Check the method for providing notice.

• Does it require certified mail? 
• Is email sufficient?
• If email is not proper notice, be sure to issue via the required method in addition to email.

• IF YOUR CUSTOMER DOES NOT ALLOW A TIME EXTENSION OR REJECTS YOUR NOTICE, respond and provide further notice that you consider the rejection a “Constructive Acceleration” and will be forced to incur overtime, sub-fabrication, and other potential labor, material, and equipment costs.

2. ENTITLEMENT

• Prepare and submit an entitlement packet that demonstrates your legal and factual entitlement to a change.
• Legal Entitlement:  Review your contract for clauses that would allow for the recovery of delay and/or acceleration costs, or look for common law options that may invalidate no-damages-for delay clauses such as the delay was “beyond the contemplation of the parties” or if you were “constructively accelerated”.

• Search your contract for the following terms:

• “Excusable Delay”
• Delay
• God (Acts of God)
• Epidemic
• Quarantine
• No Damages for Delay
• “Time Extension”
• “Sole Remedy”
• “Accelerat” – Acceleration damages are different from delay damages.  If you request a time extension and are not granted the extension, you may have a claim for directed, or constructive acceleration.[1]

• Factual Entitlement: Prepare a comparison demonstrating the impact on your detailing, fabrication, and erection schedule from your planned schedule.
• Supplement entitlement packet to substantiate the basis for the change order.

• Track and document each day of delay through schedules, time sheets, daily reports, payroll documentation, or other project records.
• Provide updated entitlement packet to support change order request as information is updated.

• Save the entitlement packet and all supporting information where it can be easily located, updated, and shared.

3. DAMAGES

• Track and document amount of actual costs incurred (to the extent possible).
• Monetary Damages may include:

• Increased cost of materials;
• Increased cost of labor;
• Increased cost of equipment rental charges;
• Storage of raw and fabricated materials at the fabricator’s shop, on trailers, or in special storage;
• Costs associated with cleaning or repainting materials after delay;
• Additional supervision or field costs for the extended duration;
• Costs associated with de-mobilization and re-mobilization;
• Lost overhead and profit;
• Costs for extended general conditions, equipment costs, or rental costs;
• Additional bond or insurance premiums;
• Tax implications;

• Document and provide proof of  ALL Expenses:

• Labor – Compare original estimated hours with actual hours delayed or spent in overtime.

• Use daily time cards, certified payroll, daily reports, or a separate phase code in your job cost accounting to track actual labor delays and impacts.

• Materials – Gather notices from suppliers relating to increased costs and delays.  Gather the invoices and checks showing payment for any increased costs.
• Equipment – Gather proof of down-time hours through daily time cards, certified payroll, daily reports, or a separate phase code in your job cost accounting to track labor.

• Be prepared to produce your rental agreement of proof of cost and payment for rental.

• Overhead and Profit – Cite to contract section setting forth allowable OH&P on changes.
• Storage, Subcontractor and Vendor Costs – Produce invoices and proof of payment for increased costs resulting from delays and acceleration.

4. DON’T WAIVE YOUR CLAIMS

• Check language in ALL lien waivers and ALL payment applications and ALL change orders to make sure (1) pending claims, (2) unpaid contract balances, and (3) unpaid retainage are not waived.

• Be aware of potential releases included in online payment applications (Textura).

• Confirm that contract does not provide that acceptance of payment is a waiver of all claims.

• If it does, consider whether to accept payment.

• Be aware claim deadlines.

• Follow dispute resolution procedures in the contract (including time provisions).
• Be aware of statute of limitations to file lawsuits.
• Bond and lien claim deadlines.

Please also visit the Gordon Rees Scully Mansukhani COVID-19 Hub in which we will be posting the latest related updates.