Opinion ID: 526531
Heading Depth: 1
Heading Rank: 7

Heading: Did UE & C Properly Implement Changes?

Text: 47 Section 11 of the subcontract deals with Changes. According to Section 11.1 of the subcontract, UE & C reserves the right for any reason without invalidating this Subcontract ... to make or to direct Changes in the Work ... Furthermore, Section 11 also provides that in order to make changes, UE & C is to issue a written Change Order to A & M/C. The only exception to this procedure is in the event of an emergency condition which endangers life or property in which case UE & C could orally order Changes and confirm the changes with a written Change Order as soon as practicable. 48 In Appendix A, the subcontract defines change order as [a] change, addition, deletion or revision to this Subcontract, evidenced by a writing agreed to and accepted by both parties. 4 The question of changes is also considered in Section 3: No changes of any of the provisions of this Subcontract shall be valid unless reduced to writing and signed by both parties. 49 Appendix E of the Subcontract deals with compensation and payment. According to Paragraph A of this Appendix, the total amount to be paid by UE & C to A & M/C is $4,986,994.00, as a lump sum. Paragraph B of Appendix E deals with the necessity of consideration for changes: 50 In consideration of the potential for changes to the lump sum price of Paragraph A due to engineering finalization and field modifications of work within the overall scope defined in Appendix C, additional estimated funds are hereby authorized to this Sub-contract up to an amount not to exceed [$289,660.00], to be authorized by [UE & C] prior to work, as required. (emphasis added). 51 Finally, Section 33 of the subcontract deals with the order of precedence to be used in interpretation. Specifically, in the event of conflict between provisions of the subcontract and the appendices, the subcontract is to have priority over the appendices.
52 UE & C argues that Section 11 is to be applied only to changes outside A & M/C's scope of work while changes within A & M/C's scope of work are covered under Appendix E. A & M/C replies that there is no basis for this distinction. A & M/C argues that UE & C did not honor the Changes Clauses when changes were made for engineering finalization, complaining that it was expected to perform work required by informal design changes conveyed by handwritten notes, speed memos, and field sketches. Thus, the crux of the dispute deals with the viability of UE & C's engineering finalization concept. 53 UE & C points out that questions regarding drawings, plans, and specifications are inevitable on any construction project. 54 In its efforts to assist A & M/C with the installation, UE & C occasionally provided A & M/C with informal sketches or diagrams to help explain the drawings. Although these informal aids were not always incorporated into the subcontract by change order, UE & C's engineers took responsibility for these drawings by initialling or signing them. UE & C always made sure that A & M/C were compensated for work which was performed pursuant to such drawings, etc. 55 Appellee's Opening Brief at 31-32. 56 Basically, then, UE & C defends its practice as a manifestation of the engineering finalization concept. Under this concept, if new, different, or extra effort was required on a portion of the work already within A & M/C's scope, UE & C prepared a work authorization form summarizing the modifications, which was approved by representatives of both parties. Change orders were subsequently issued which would incorporate these work authorizations. According to UE & C, it was accepted practice between the parties that a change order on any particular item might be issued some time after the information covered by the change order had been transmitted to A & M/C. 57 The district court explicitly found that the subcontract's definition of change order is not vague, ambiguous, and/or contradictory. The court also found that the subcontract was not ambiguous as to those circumstances under which A & M/C was required to perform extra or changed work in the absence of a formal change order, but that the provisions of Section 11 were not uniformly followed by either party. 58