In 2013, the Engineers Joint Contract Documents Committee (“EJCDC”) issued updated construction contract documents that include significant changes to the 2007 EJCDC C-700 General Conditions. In addition to a general reorganization and updates to the insurance and bond provisions, the EJCDC made important modifications to the General Conditions’ change order and claims provisions. Owners, design professionals, construction managers and contractors often rely on institutional knowledge and their experience with contract forms in issuing formal notice, making claims, and requesting or approving change orders. The EJCDC’s modifications create a number of pitfalls for those who do not take note of the changes and modify their project administration processes accordingly. Failure to do so could result in a waiver of rights.
The 2007 EJCDC C-700 has a relatively straightforward claims and change order process that is both familiar to construction professionals, and largely consistent with other contract forms. Under the 2007 General Conditions, change orders and claims are interrelated and both governed by Article 10.
Generally, any change to the contract price or contract times must be made by change order based on a recommendation from the engineer. As with most contract forms, under the EJCDC’s 2007 General Conditions, a change order can stem from (1) any changes to the work ordered by the owner; (2) defective work by the contractor; (3) a differing site condition; (4) a work change directive; and/or (5) a resolution of claims.
The claims process in the 2007 General Conditions is covered in Paragraph 10.5. A claim serves as a party’s appeal of the change order process, and the manner in which parties resolve disputes. All claims must be made within 30 days “after the start of the event giving rise thereto,” and all supporting documentation for the claim must be provided within 60 days after the start of the event. The engineer may deny the claim in whole or in part, approve the claim, or defer. If the engineer’s determination is not appealed through the dispute resolution process within 30 days, it is final and binding.
By way of example, upon discovering a differing site condition, the contractor must “promptly” notify the owner and engineer in writing. The engineer reviews the notice and then issues a finding and recommendation to the owner, with a copy of the same sent to the contractor. The recommendation may be adopted through a change order, or appealed by the owner or contractor through issuance of a formal claim. As noted, that claim must be made in writing within 30 days of the contractor’s discovery of the condition. The engineer then issues a second recommendation, this time on the claim, which can be appealed through dispute resolution process within 30 days.
The 2007 version of the EJCDC’s General Conditions has three notice “pitfalls” for both the owner and contractor: (1) the initial “prompt” notice of the event necessitating a change order, (2) the written notice of a claim within 30 days of the event, and (3) the appeal of the engineer’s claim determination within 30 days. Importantly, a party’s failure to issue appropriate notice can result in a waiver of rights. The EJCDC’s 2013 changes to the General Conditions add yet another crucial step, by requiring the contractor to issue a “change proposal” if it wants an adjustment in time or money.
Under the 2013 General Conditions, the contractor, but not the owner, must make a formal change proposal to (1) obtain an adjustment to the contract times or contract price; (2) appeal an initial decision by the engineer; (3) contest a set-off; or (4) seek other relief under the contract documents. Further, a change proposal must be issued to the engineer no later than 30 days after the start of the event giving rise thereto. The engineer then reviews the proposal, and within 30 days, either approves or denies the request. Unless the contractor appeals the engineer’s determination within 30 days the engineer’s recommendation is liquidated in a change order. Any appeal is pursued through the claims process found in Article 12.
Believe it or not, under Article 12 a claim issued directly to the adverse party, who is required to consider the merits in good faith, and engage in direct negotiations with the claiming party. The adverse party has the authority to deny the claim in whole or in part. Any denial is binding unless it is appealed within 30 days using the dispute resolution procedures now in Article 17.
Some may find an inherent unfairness in this process, particularly in the fact that the contractor is required to submit a change proposal seeking time or money, while the owner proceeds directly to the claims process. Accordingly, an owner’s claim is no longer subject to review by the engineer.
It remains to be seen whether this new process is beneficial to a project; however, it certainly gives owners more leverage. The notice pitfalls are also significantly different, now consisting of (1) prompt notice of the event giving rise to an adjustment in time or price; (2) for contractors, a change proposal within 30 days of the event; (3) a contractor’s appeal of the change proposal determination through notice of claim within 30 days; (4) an owner’s claim for equitable adjustment within 30 days of the event giving rise to the claim; and (5) any appeal of a claim determination through dispute resolution within 30 days.
Each of these changes impact the rights and risks of the contractor and owner on a construction project governed by an EJCDC contract. Owners and contractors, and the representatives of each, should take note of the 2013 changes to avoid inadvertently waiving rights, and to properly pursue their rights in the event of a dispute. Further, form contracts, and specifically the provisions related to claims, dispute resolution, timing and notice, should always be modified to address the specific needs of the parties and the project as well as the law of the jurisdiction where the project is located.