Change Orders

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 This Bulletin is meant as an introduction to the updated Change Order Process for University of California, Merced. The content will include the following key points: 
 * 1) Change Order Request, Review & Approval Process
 * 2) Introduction to Change Order Review Checklist (COR form)
 * 3) Cost Proposal Form
 * 4) Equipment Rental Rate Review
 * 5) Reasonableness & Stewardship

 Change Order Request, Review & Approval Process  : see attached Change Order Process flowchart (Appendix A) for schematic view.

 All of the information presented here can be referenced in the General Conditions of the University of California’s Long Format Construction Contract, Article 7. The purpose of this section is to expound upon and clarify the process described in Article 7. Please note, some of the steps explained in this section are not in the General Conditions, and are instead inter-departmental procedures that are being instated to ensure accuracy and completeness.

 The University, generally a Construction Inspector or Construction Management Team (CM), can order or authorize changes in work by Change Order or Field Order. If a Field Order was issued by the University it does not require the agreement or signature of the Prime Trade Contractor (PTC) in order to be a fully executed order to perform work [1]. These changes in work may be outside of the scope of the assigned Contractor’s contract, but they do not invalidate the original contract. Additionally, the University is not obligated to notify sureties of a change in work. However, this does not void the obligations of the sureties to the University [2].

 The PTC can request a Change Order [3], which is a Contract Document that has been signed by both the University and PTC. The Change Order reflects any agreed upon scope of change in work, the amount of any adjustment of Contract Sum, the amount of any adjustment of Contract Time, and any modifications to any other Contract term or condition [4]. To begin the process of obtaining a Change Order, the PTC must start by completing a Change Order Request and Cost Proposal.

 The Change Order Request and Cost Proposal must be filled out and submitted in the pre-approved format as provided by the University of California, Merced. The Cost Proposal documents will be given to the PTC in Excel format, and must be submitted both electronically and in hard copy to the University Representative [5]. Additionally, the Change Order Request and Cost Proposal must be submitted in a timely fashion, specifically, within 7 days of the PTC recognizing the circumstances resulting in a Change Order Request. If the University requests additional information from the PTC regarding the Change Order Request and/or Cost Proposal, the same timely fashion of 7 days is required of the PTC’s response [6]. Please see the Cost Proposal section of this bulletin for a more detailed description of this key step in the Change Order process.

 After a Change Order Request and Cost Proposal have been fully completed and submitted by the PTC, the University will review and make its final decision within 30 days of receiving the Change Order Request and Cost Proposal [7]. If the University has not responded to the request within 30 days, the PTC may file a written demand for a final decision no earlier than the 30th day. However, if the demand has not been answered in 30 days (a total of 60 unresponsive days from submission of Request), the PTC’s request is denied by default [8].

<p class="MsoNormal"> The review process of the Request starts with the CM overseeing the project under which the work is being performed. It is the responsibility of the CM to assist the University in carefully and thoroughly reviewing the Request and Cost Proposal for errors and inaccuracies <span style="font-size:12.0pt;font-family:Arial; mso-fareast-font-family:"Times New Roman";mso-ansi-language:EN-US;mso-fareast-language: EN-US;mso-bidi-language:AR-SA">[9]. This review can be a time intensive process, and in order to ensure the process is consistent, the CM will use the Change Order Review Checklist (COR) as supplied by the University. The COR form has been compiled using the General Conditions Article 7.3.3, where the University describes all items ineligible for determining a Change Order’s adjustment to the Contract Sum. The approved COR form can be seen in the attached Appendix B. This form requires that the CM verifies that each of the tabulated items is not included in the Cost Proposal, or provides the justification for the inclusion of a prohibited item. A Change Order Request and Cost Proposal submitted to the University without a COR form as a cover sheet, or the submission of a COR form without the CM’s signature, will be returned to the CM2. If justifications for prohibited items were made, the Director of Construction may accept these reasons and their effect on the Additional Cost. If the Director of Construction rejects these reasons, the Request will be returned to the CM for corrections and/or adjustments.

<p class="MsoNormal"> Once the CM has done his or her due diligence with the Request and Cost Proposal, he or she may or may not recommend that the University accept the PTC’s Request. If the CM does recommend that the University accepts the Request, he or she shall sign the last page of the Change Order Request form as indicated. With this signature, the review process under the CM is complete. The CM will submit the Change Order Request and Cost Proposal to the Physical Planning Design & Construction (PPDC) Accountant for interdepartmental routing, review and possible approval. This submission is now deemed a “Potential Change Order” (PCO) and is considered complete with the following components assembled in the order shown (verifying that all components are assembled is done on lines 1-5 of the COR “CO Packet Component Checklist” table): <p class="MsoNormal">
 * Change Order Routing Slip (1 page)
 * Complete and signed COR (1 page)
 * Signed Change Order Request document (2 pages)
 * Fully endorsed Field Order(s) (2 pages)
 * Cost Proposal document   per Field Order (at least 3 pages)
 * Supporting Documentation for each line item noted in Cost Proposal per Cost Proposal

<p class="MsoNormal"> PPDC Accountant will review the PCO for completeness, verifying all components and required signatures have been collected. Once satisfied that the PCO is complete for routing, the PPDC Accountant will sign the indicated line on the Change Order Routing Slip (see attached Appendix C for a sample of Change Order Routing Slip) and route to the Director of Construction for review.

<p class="MsoNormal"> The Director of Construction will review the PCO for correctness, accuracy, and reasonableness. Once satisfied that the PCO reflects the actual change in work performed and reasonable adjustment to both Contract Sum and Contract Time, the Director of Construction will sign the last page of the Change Order Request document as well as the indicated line on the Change Order Routing Slip. The PCO is then routed back to the PPDC Accountant.

<p class="MsoNormal"> The PPDC Accountant will then route the PCO to the Plant Accountant as notification that the PTC may be applying for payment with regards to the change order work. The Plant Accountant will verify that there are sufficient funds in the appropriate project account to fund the proposed Additional Cost. The Plant Accountant will then sign the last page of the Change Order Request form as well as the indicated line on the Change Order Routing Slip. The PCO is then routed back to the PPDC Accountant to be distributed to the Project Manager and Director of Operations for signature.

<p class="MsoNormal"> The Project Manager and Director of Operations will review the PCO as a notification of the change in work and its possible adjustment to Contract Sum and Contract Time for the PTC. Both the Project Manager and Director of Operations will then sign only the Change Order Routing Slip. Again, the PCO is routed back to the PPDC Accountant.

<p class="MsoNormal"> The PPDC Accountant then creates a copy of the so-far signed PCO for their records, and distributes the complete original PCO to the Contracts Analyst. The Contracts Analyst records the PCO in the appropriate systems, and mails the complete original PCO, excluding the Change Order Routing Slip, to the Contractor for signature. The Contract Analyst logs the date on which the PCO was mailed to the Contractor for signature on the Change Order Routing Slip.

<p class="MsoNormal"> The Contractor will then sign on the last page of the Change Order Request Form. The PCO is now complete, and the Contractor will return the complete package via mail to the Contracts Analyst. The Contracts Analyst will log the date on which the PCO was returned on the Change Order Routing Slip and then distribute to the Associate Vice Chancellor for Design and Construction (AVC) for final approval. The date on which the PCO was routed to the AVC is noted on the Change Order Routing Slip by the Contracts Analyst.

<p class="MsoNormal"> The AVC will review the PCO for correctness and reasonableness. Once satisfied that the scope, justification, and associated cost and time extension of the PCO are reasonable, the AVC will sign the last page of the Change Order Request document. The PCO is now a fully endorsed and approved Change Order (CO). The AVC will route the CO to the Contracts Analyst. The Contracts Analyst will then distribute an electronic copy of the fully endorsed and approved CO to the following parties: <p class="MsoNormal"> After electronic distribution of the CO, the Contracts Analyst will file the complete CO, including a print out of the distribution email, in the Contractor/Subcontractor’s contract binder for the project under which the work was done. The CO will be filed under “Contract Modifications” with an index tab labeled with the CO number.
 * Contractor/Subcontractor
 * University Representative (CM)
 * Director of Construction
 * Project Manager
 * Director of Operations
 * PPDC Accountant

<p class="MsoNormal"> Cost Proposal Form  : see attached Appendix D for a sample Cost Proposal Form.

<p class="MsoNormal"> For every Field Order, a Contractor/Subcontractor must prepare a Cost Proposal to be considered for compensation for performed change order work. In any one PCO, there can be several Field Orders and therefore, several Cost Proposals. A Cost Proposal is an accounting tool that assembles all of the Contractor/Subcontractor’s Actual Costs for performing the work and calculates the Additional Costs per University regulations. The costs that are eligible for compensation are described in Article 7.3.2, and those that are prohibited are in Article 7.3.3. Below is summarization of the points mentioned in these two sections of the General Conditions. <p class="MsoNormal">
 * 1) Straight-time wages or salaries for employees employed at the Project site, or at fabrication sites off the Project site, in the direct performance of the Extra Work may be included.
 * 2) Associated cost is placed in Line 1, under the Actual Costs section of the 2nd page of the Cost Proposal.
 * 3) Corresponding Fringe Benefits and Payroll Taxes for employees employed at the Project site, or at fabrication sites off the Project site, in the direct performance of the Extra Work shall also be included.   Associated cost is placed in Line 2, under the Actual Costs section of the 2nd page of the Cost Proposal.
 * 4) Employees that are excluded from this statement: Superintendent(s); Assistant Superintendent(s); Project Engineer(s); Project Manager(s); Scheduler(s); and Estimator(s).   Time sheets submitted by any of these positions shall not be included in determining Actual Costs.   Verifying that none of these positions are being billed in the Cost Proposal is done on lines 1 through 6 of the COR “CO Item Review” table.
 * 5) Overtime wages or salaries, specifically authorized in writing by University’s Representative, for employees employed at the Project site, or at fabrication sites off the Project site, in direct performance of the Extra Work may be included
 * 6) Associated cost is placed on Line 3, under the Actual Costs section of the 2nd page of the Cost Proposal.
 * 7) Corresponding Fringe Benefits and Payroll Taxes for overtime work specifically authorized in writing by University’s Representative, for employees employed at the Project site, or at fabrication sites off the Project site, in the direct performance of the Extra Work shall be included. Associated cost is placed in Line 4, under the Actual Costs section of the 2nd page of the Cost Proposal.
 * 8) Employees that are excluded from this statement: Superintendent(s); Assistant Superintendent(s); Project Engineer(s); Project Manager(s); Scheduler(s); and Estimator(s).   Time sheets submitted by any of these positions shall not be included in determining Actual Costs.   Verifying that none of these positions are being billed in the Cost Proposal is done on lines 1 through 6 of the COR “CO Item Review” table.
 * 9) Cost of materials and consumable items which are furnished and incorporated into the Extra Work, as approved by the University’s Representative, may be included.   Such costs shall be charged at the lowest price available to the PTC but in no event shall such costs exceed competitive costs obtainable from other subcontractors, suppliers, manufacturers, and distributors in the area of the Project site.   All discounts, rebates, and refunds and all returns from sale of surplus materials and consumable items shall accrue to the University and PTC shall make provisions so that they may be obtained.
 * 10) Total associated cost is placed on Line 5, under the Actual Costs section of the 2nd page of the Cost Proposal.   The amount entered on this line must be able to be substantiated with supporting documentation – itemized receipts, packaging slips, etc.
 * 11) Corresponding sales taxes on the costs of the materials and consumable items are calculated on Line 6, under the Actual Costs section of the 2nd page of the Cost Proposal.
 * 12) Items excluded from this statement: Small tools whose replacement value does not exceed $300; Office expenses regarding materials and supplies; and Site fencing. Verifying that none of these items are being billed in the Cost Proposal is done on lines 8, 9, and 11 of the COR “CO Item Review” table.
 * 13) Rental charges for necessary machinery and equipment, whether owned or hired, as authorized in writing by University’s Representative, exclusive of hand tools, used directly in the performance of the Extra Work may be included.   Such rental charges shall not exceed the current publication by the California Department of Transportation (CALTrans) scheduled charges for the region in which the work is performed <span style="font-size:12.0pt;font-family:Arial;      mso-fareast-font-family:"Times New Roman";mso-ansi-language:EN-US;      mso-fareast-language:EN-US;mso-bidi-language:AR-SA">[10]  .   PTC shall attach a copy of said schedule to the Cost Proposal as supporting documentation.   The charges for any machinery and equipment shall cease when the use thereof is no longer necessary for the Extra Work.
 * 14) Total associated cost is placed on Line 7, under the Actual Costs section of the 2nd page of the Cost Proposal. The amount entered on this line must be able to be substantiated with supporting U.S. ACE/CALTrans schedules.   Verifying that the schedules are attached and accurate is done on line 16 of the COR “CO Item Review” table.
 * 15) Items excluded from this statement: On-site or off-site trailer and storage rental and expenses.   Verifying that these charges are not being billed on the Cost Proposal is done on line 10 of the COR “CO Item Review” table.
 * 16) For additional information regarding equipment rental, please see the Equipment Rental Rate Review section of this Bulletin.
 * 17) Additional costs of royalties and permits due to the performance of the Extra Work may be included.
 * 18) Associated cost is placed on Line 8 for royalties and Line 9 for permits, under the Actual Costs section of the 2nd page of the Cost Proposal.
 * 19) It is prohibited to include utility charges (gas, electric, sewer, water, telephone, fax, copier equipment, etc) in the Cost Proposal.
 * 20) Verifying that there are no utility charges being billed for in the Cost Proposal is done on line 12 of the COR “CO Item Review” table.
 * 21) It is prohibited to include data processing personnel and equipment in the Cost Proposal
 * 22) Verifying that there are no data processing charges being billed for in the Cost Proposal is done on line 13 of the COR “CO Item Review” table.
 * 23) Federal, state, or local business income and franchise taxes are prohibited from inclusion on the Cost Proposal.
 * 24) Verifying that none of these taxes are being billed for in the Cost Proposal is done on line 14 of the COR “CO Item Review” table.
 * 25) Overhead and Profit are prohibited from being entered into the Cost Proposal.   However, this is not to say that the Contractor/Subcontractor is not allowed profit from their performance of the change order work.   While the Contract/Subcontractor may not factor in profit and/or overhead on any of the line items in Actual Cost, the “Contractor Fee” section of the Cost Proposal will automatically calculated the University-approved method for determining the additional cost that will act as “profit and overhead” <span style="font-size:12.0pt;font-family:Arial;      mso-fareast-font-family:"Times New Roman";mso-ansi-language:EN-US;      mso-fareast-language:EN-US;mso-bidi-language:AR-SA">[11]  .   Line 17, column 1under the Contractor Fee section of the 2nd page of the Cost Proposal shows the total Contractor Fee for the change order work performed.
 * 26) Careful review of all Supporting Documentation must be done to ensure that profit and overhead has not been included in the Actual Cost line items.   Verifying that the Actual Cost line items are not being compounded is done on line 15 of the COR “CO Item Review” table.
 * 27) Any item not specifically approved above are not eligible for inclusion on the Cost Proposal.
 * 28) Verifying that all Actual Cost line items fit in one of the University’s approved categories for inclusion is done on line   17 of the COR “CO Item Review” table.

<p class="MsoNormal"> Equipment Rental Rate Review:  A recent revision to the Construction Contract Documents now requires the CALTrans schedule of equipment rates to be used as a reference for appropriate line items <span style="font-size:12.0pt;font-family:Arial;mso-fareast-font-family:"Times New Roman"; mso-ansi-language:EN-US;mso-fareast-language:EN-US;mso-bidi-language:AR-SA">[12]. The schedule is updated annually every March, so be sure to confirm that the PTC has included the most up-to-date published schedule in Cost Proposal. The CALTrans schedule can be found online at the following address: http://www.dot.ca.gov/hq/construc/equipmnt.html

<p class="MsoNormal"> Reasonableness & Stewardship:  No two Cost Proposals will be the same, whether in substance or circumstance, so it is important to have a good sense of judgment when reviewing these documents. A balance of upholding University policy and maintaining the Project timeline must be found when reviewing Cost Proposals.

<p class="MsoNormal"> Any comments or questions about the Change Order process described in this Bulletin may be posed to either the Director of Operations or the Director of Construction.

<p class="MsoNormal"> Steven Murray

<p class="MsoNormal"> Physical Planning, Design & Construction

<p class="MsoNormal"> University of California, Merced

<p class="MsoNormal"> Attached to this Bulletin: <p class="MsoNormal">
 * 1) Appendix A: Change Order Process flowchart
 * 2) Appendix B: Change Order Review Checklist (COR)
 * 3) Appendix C: Change Order Routing Slip
 * 4) Appendix D: Cost Proposal

<p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[1] General Conditions, 7.1.3 <p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[2] General Conditions, 7.1.1 <p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[3] General Conditions, 7.1.2 <p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[4] General Conditions, 7.2.1 <p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[5] Inter-departmental procedural step, not previously required in the General Conditions <p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[6] General Conditions, 4.2.3.1 <p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[7] General Conditions, 4.2.4 <p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[8] General Conditions, 4.2.5 <p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[9] Construction Management Agreement, Article 2.6.5 <p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[10] General Conditions, 7.3.2.7 <p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[11] General Conditions, 7.3.4 <p class="MsoFootnoteText"> <span style="font-size:10.0pt;font-family:"Times New Roman";mso-fareast-font-family: "Times New Roman";mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA">[12] General Conditions, 7.3.2.7