Chapter 7: Changes to the Contract

Section 1: Change Orders

Contract quantities or alterations in the work may be amended, in writing and at any time, to satisfactorily complete the project. As agreed in the original contract, the contractor will perform the work as increased, decreased, or altered. Amend the contract work by change order (CO) whenever a significant change in the character of the work occurs or a time adjustment is granted. A reduction in time may be warranted when scope changes reduce the amount of work on the project. Ensure that the CO is approved before beginning the changed or altered work; the Area Engineer (AE) may give verbal approval at his or her discretion prior to formal approval in SiteManager (written documentation is required to follow up approval)
. Refer to Professional Engineering Procurement Services Division for Consultant Errors
and Omissions.

Prior to developing a CO, work with the contractor to define the scope of the problem that requires a change to the contract. Evaluate possible solutions with the contractor. Determine the need for environmental review, re-evaluation, and approval as required. Include cost breakdowns and price justifications for any added items. “Fair and reasonableness” price determination must accompany an independent cost analysis/cost justification by the District. Do not approve COs based solely on the contractor's submitted request and documentation. Review all price justification documents received from the contractor. When approved, ensure the documents are initialed by the approver. Initial all price justification documents received from the contractor to ensure that it has been reviewed and approved. Use Statewide/District average prices, comparative analysis, materials/labor, and equipment break-downs to justify cost. Unit prices that are comparable to bid prices for the same character of work are acceptable. Obtain assistance from the Construction Division (CST), Design Division (DES), or the district construction office (DCO), as needed. Obtain contractor agreement regarding the scope of work and basis of payment for the CO. Provide the contractor the opportunity to sign the CO.

Do not use the written statement in the contractor's signature block on the CO form to deny the contractor legitimate additional compensation for work beyond the scope of the CO or for work under the CO that was not apparent or predictable at the time of CO execution.

When an agreement cannot be reached with the contractor based on cost, Article 4.4, “Changes in the Work,” of the Standard Specifications provides that the work may proceed under Article 9.7, “Payment for Extra Work and Force Account Method,” of the Standard Specifications
, or by making an interim adjustment to the contract. Document reasons for using force account procedures or interim adjustment.

Unless otherwise specified in the contract, a significant change in character of the work occurs when:

the character of the work for any item as altered differs materially in kind or nature from that in the contract or

a major item of work varies more than 25% from the original contract quantity. (The 25% variance is not applicable to non-site-specific contracts.)

Unless otherwise specified in the contract, the Standard Specifications
defines a "Major Item"
as "An item of work included in the Contract that has a total cost equal to or greater than 5% of the original contract or $100,000, whichever is less.”, Note that a major item at the time of bid will remain a major item. An item that is not originally a major item does not become one through overruns, COs, etc.

COs are not required for the contract amendments listed below. Show the following amendments in the final (as-built) plans:

Slight change, relocation, or adjustment:

in the flow line, grade, or the skew of a drainage pipe or culvert, Note: Contact the District’s Environmental Quality Coordinator (DEQC) if drainage affected conveys waters of the US

of a crossroad drainage facility

of the road grade line

to a drainage channel

to a traffic sign, traffic signal pole, or illumination pole foundation

Addition or deletion of a driveway pipe

Change Order Preparation

Prepare COs using the guidelines in this chapter when contract revisions, additions, or deletions to the work are necessary. COs may be required due to:

an error or omission in the contract (consultant errors and omission refer to PEPS procedures)

differing site conditions

adding a specification

adding new items of work

resolving a dispute

changing the sequence of work or

other contract changes.

Submit COs requiring a design exception to the appropriate division (Design, Bridge, or Traffic Safety) for approval.

The DCO assists the AO with the CO description and reason coding, if necessary, and coordinates with the District or Construction Division (CST) FHWA Liaison to confirm federal participation. The AE and /or DCO also coordinates with the District Transportation Planning and Development (TP&D) Financial Manager to procure funding for CO's.
Ensure that all COs are signed and sealed by the Area Engineer at minimum.

Show all information and quantities about the proposed change on the CO. A performance bond is required if the CO increases the contract cost above the $100,000 threshold.

Use the following steps and
Form 2146
, “Change Order Checklist,” for CO preparation.

For CO description, answer the following questions:

What is the CO for?

Why is the CO needed?

Where is the CO work being performed (alignment, station/offset, lane direction)?

How will the CO work be accomplished?

Are the costs verified and considered fair and reasonable?

Are there added/modified plan sheets?

Has environmental clearance been addressed?

Are there any TDLR requirements?

Determine appropriate CO reason code(s) using
Form 2146-RC
.

Determine appropriate function (zero dollar, overrun, time extensions, etc.)

Determine whether or not time adjustments are required. If so, provide a description, including a breakdown of the days added.

- Address time by one of the following methods:

1) Add Time extension number and time in the box provided

2) State in the narrative that no time in is added by this CO

3) State in the narrative that time will be addressed later in the project when time impacts to the critical path are known.

Methods 1 and 2 are preferred. Method 3 should not be normal practice. If time cannot be agreed on with the contractor upon execution of a CO, method 3 is acceptable. See “Additional
Time Guidance” below.

Before adding items in SiteManager, coordinate with the DCO to determine participation. Refer to the SiteManager Contract Administration User Manual
for information on creating CO’s in SiteManager.

NOTE: Participating and non-participating pay items must be on separate CO’s.

Unique CO items will only be used when an appropriate bid code is not available.

Under the New Contract Item tab, add a supplemental description in the following format, “Added by CO#X, description of Item”. When using a Unique Item also include the Unit of Measure (UOM) in the description.

Copy the supplemental description, navigate to the CO Item tab, and paste the supplemental description into the CO Item Description field.

Coordinate with DCO to determine funding category.

CO signatures can be either written or electronic. Signatures must follow District, Construction Division and Executive Director "Signature of Authority,
found on

Contract Services Division

webpage (internal access only)
.

If the CO involves third party funding, complete the funding notification sheet (Form 2146-AFA
). Provide notice to the local government or other third party. Ensure that an authorized third-party representative signs the Third-Party Funding Notification Sheet, regardless of the CO amount. See “Advance Funding Agreements” under “Other Factors Affecting CO’s” for additional requirements.

The dollar amount to be placed for Advance Funding Notification or Donation Agreement (third party funding) on the Form CO should be the same as the dollar amount on line 3(a) on the Form 2146-AFA
, which should be only the amount of contract items corresponding to the third party without the E&C and Indirect Costs.

The contractor is not responsible for any delays the district may have in the obtaining a third party’s signature.

Determine if the CO requires Form 1295. See "Texas Ethics Commission Form 1295", under "Other Factors Affecting CO's", for addtional requirements.

Additional Time Guidance

Per FHWA, method 3 for adding time should rarely be used. Discussion of additional time needs to take place with the contractor. This may be done by reviewing when work will take place on the most recent accepted project schedule.

Questions to consider include:

Is the CO work on the critical path or affects current and downstream critical path activities?

Will a crew need to be pulled from a critical path activity to do the CO work?

Is a crew available to work off critical path for the CO work?

Can a crew from a different project be mobilized to perform the CO work off critical path? Will involve negotiating additional cost.

Will additional barricade months be needed? Be wary of contractor requesting to move work to end of project.

Is float time available to mitigate some or all of the needed time?

Is the extent or impact of the change order work able to be estimated?

Document the information and then work to resolve the time issue as soon as possible (not at the end of the project).

Environment Review of Change Orders

The District Environment Quality Coordinator (DEQC) must approve all COs for environmental clearance. Include evidence of review and approval as supporting documentation. The CO description must contain a statement addressing environment clearance.

Example: DEQC reviewed this CO and approved it for environmental compliance on 02/19/20.

Other Factors Affecting COs

Advance Funding Agreements

An Advance Funding Agreement (AFA), or Donation Agreement, is used when some, or all, of a project’s funding is from an outside source-also referred to as third party funding. If the third-party is a local government, an AFA is used. If the third party is a private entity, a Donation Agreement is used. AFAs and Donation Agreements are developed and coordinated by the Contract Services Division (CSD).

Under standard AFA, the local government (LG) is responsible for all non-federal or non-state participation costs associated with the project, including any overruns in excess of the approved local project budget. Obtain payment from the LG within 30 calendar days of the written notification date, unless otherwise provided in the AFA. Include in the required written notice to the LG the exact language in the AFA concerning funding.

Refer to the Contract Donation Agreement to determine if the private sector donor is required to fund overruns. Follow the procedure outlined above for the AFAs if the private sector donor is responsible for funding overruns.

The AFA or Donation Agreement must be amended if the CO expands the scope of the original agreement or the third-party contribution is for a fixed amount. Coordinate with CSD to amend an AFA or Donation Agreement.

Texas Department of Licensing and Regulation (TDLR) Submissions

If the CO causes the total contract amount for the pedestrian elements to exceed $50,000, or it modifies the existing plans set it will need to be registered with TDLR and/or
reviewed by a Registered Accessibility Specialist (RAS). Submission for this process can be found on

TDLR Construction Accessibility Requirements

on CSTs intranet page.

Converting Change Orders from Participating to Non-Participating

In the event the District mistakenly processes a CO as federal participating (when it should have been non-participating), the District must make the correction in SiteManager. To do this, process a participating CO to subtract items that were added under the incorrect CO, then process a non-participating CO re-adding the items. This process may be completed similarly to convert non-participating CO to participating.

Texas Ethics Commission (TEC) Form 1295

Texas 1, Texas Administrative Code, Chapter 46 and Texas Govenment Code

§2252.908

stipulates that a governmental entity or state agency may not enter into certain contracts with a business entity unless the business entity submits a disclosure of interested parties (TEC Form 1295) to the governmental entity or state agency at the time the business entity submits the signed contract to the governmental entity or state agency.

Beginning with contracts let after January 1, 2016, CST handles receipt and acknowledgement of Form 1295 for all state-let construction and maintenance contracts prior to execution and in case of a change in interested parties, but the district must fulfil the requirements before processing:

f a project is let less than $1 million and a CO adds value to increase the project value to $1 million.

any CO with a value equal to or greater than $1 million, or

cumulative COs that increase the contract amount by $1 million or more. (E.g., CO #1 + … CO #9 = $900,000. CO #10, for $100,000, cumulatively increases the contract by $1 million and will require a new Form 1295. Following CO #10, a new form is necessary only if additional COs (individual or cumulative) increase the contract value by $1 million or more.)

CST Standard Operating Procedure 01-19 provides instruction for:

ontractor completes the Form 1295 on the Ethics Commission

website, the Contractor should print the form and complete the remaining requested information of the hard copy.

AO internal processing of CO and Form 1295, and acknowledgment of receipt in the Texas Ethics Commission's Electronic Filing Application.

Once the Contractor completes the Form 1295 on the Ethic Commission website, the Contractor should print the form and complete the remaining requested information on the hard copy.

Once that information is completed on the hard copy form, the Contractor should provide that to the District and upon receipt the District then logs onto the Ethics Commission website and acknowledges the Contractor's Form 1295.