Change (order) is a fact of life in Construction

Contract additions, subtractions and other types of alterations are routinely analyzed, processed and recorded

The times they are a-changin’. So, often, are contracts involving Caltrans’ Division of Construction and those who are performing the work.

Change orders, shortened to COs or sometimes CCOs (contract change orders), occur routinely and are representative of how the department adapts when situations warrant and pursues efficiencies whenever possible.

Following each fiscal quarter, Construction posts a change-order report. In the period from October through December 2023, Caltrans’ 12 districts issued a total of 1,253 COs with a value of $346.9 million, including supplemental change orders.

In the previous quarter, July through September of 2023, the division reported 1,187 COs with a value of $285.1 million. A year earlier, from October through December of 2022, there were 1,303 COs valued at $151.7 million.

Either the contractor or Caltrans can initiate a CO. The resident engineer usually determines the need for a change order, but the contractor, other Caltrans units, or outside agencies or individuals may request changes.

COs can increase, decrease or leave alone the cost outlined in the original contract, although cumulatively they tend to result in the state paying more.

Most change orders come about due to one or more of the following reasons:

• Method of payment
• Method of materials processing
• Type or quality of materials to be furnished
• Proprietary material
• Specifications
• Any change resulting in a significant time adjustment to the contract

Any CO that has a total absolute value exceeding $200,000 (or $500,000 for districts with an increased change order delegation, with District 4 being the only one to have attained that status at the time of Mile Marker publication) is subject to review by Caltrans Headquarters.

The “absolute” designation can be explained in this example:

A change order containing a $50,000 decrease of items, a $20,000 increase of items, and $150,000 of extra work at force account has an absolute value of $220,000 (50+20+150), not $120,000 – the fact that the $50,000 is a decrease in costs does not matter to the absolute value.

Out of the 1,253 COs recorded in the second quarter of the 2023-24 fiscal year, Headquarters reviewed 181 of them (which represented 14.5 percent of the total number of COs), with a value of $53.8 million (15.5 percent of the total value of the change orders). Two were “authorized to proceed,” four were “revised not authorized” and the rest were issued and approved. None was rejected outright.

The Division of Construction’s webpages include one that can generate a change order’s coding, one that provides examples of standard clauses for specific situations found in various types of change orders, and another that contains CO templates.

For example, if the contractor’s work hours required to fulfill a contract end up being less than was stipulated in the original contract, Caltrans suggests this standard clause be used in the change order: “For the work involved in this change order, you agree to credit Caltrans the lump sum $ ___. The credit reflects the savings in the resources and activities required to complete the work.”

The templates webpage delves into minutiae, reflected in this entry, under “Maintain Traffic”: The department “and the contractor will share the cost of furnishing flaggers to provide for passage of traffic through the work. The department determines the cost under Section 9-1.04, ‘Force Account,’ of the Standard Specifications, and pays the contractor one-half the cost."

Learn more about the Division of Construction by visiting its homepage.

Source: Marvin Guinez and Randy Stellhorn, HQ Division of Construction