Is your Project scope under control?
Changes to the Contract technical baseline must be avoided as much as possible, for two reasons:
- first of all, changing the technical requirements might change the cost from what it was estimated at bid stage, in other words the budget for the corresponding item might be exceeded,
- secondly, and just as important if not more, changes always lead to disturbances and re-works for the various parties involved in the Project execution. The later the change comes the larger its impact. In engineering alone, whose production of deliverables is roughly linear with time, a change three months after the start of the contract might require revision of one document whereas the same change 12 months later might impact 15 documents
Numerous changes to the technical baseline are made during the execution of the Project. A large number of them cannot be avoided, as they result from normal design development, information from vendors, interfaces with third parties etc. All that can be done for such changes is to implement them as early as possible to minimize their impact.
There are, however, numerous changes that a Contractor may prevent. These are the additional requirements from the Client.
They are of two types: acknowledged changes, e.g. formal letter from the Client with a request for additional work, new requirement etc., and non-acknowledged changes, that come in the form of comments on deliverables, requirements transmitted “candidly” vide letters, records in minutes of meetings, informal communication (oral, emails etc.).
Acknowledged changes are a lesser issue as they will lead to compensation (time and money) from the Client through a Contract change order. Accumulation of such changes, however, would have a disturbing effect on the Project.
Non-acknowledged changes are the most numerous. They are the most dangerous as they are often undetected and therefore uncompensated. They consist of additional requirements from the Client that are not transmitted through an official “request for change” instruction. They come in the form of comments on Contractor’s deliverables, emails, minutes of meetings etc.
If Contractor is not vigilant about this type of changes, it will just not be able to detect them and will not be compensated for their cost and/or schedule impact.
The system described herein, together with pedagogical effort of the Contract manager to impart contractual awareness to each project member, will prevent this from happening.
First of all, the Contractor must request from the Client to receive an official instruction to implement any additional requirement, with an acknowledgment that this is a change to the Contract. Contractor must state that, if no such instruction is received, the additional request will not be implemented.
The practical way to implement this, for additional Client requirements coming from comments on deliverables, is to provide the following answer to the comment:
“This comment constitutes an additional requirement to the Contract. It will not be implemented unless Company issues an instruction pursuant to Article X of the Contract “Company initiated change-order”.”
This will, first of all, eliminate the vast majority of such requests, as the Client will want to avoid the resulting extra cost. Secondly, it will ensure compensation of Contractor for the few changes that will come through.
A similar wording must be attached to the additional Company requests recorded in minutes of meeting. When this has not been done, a notification shall be issued to Company, within the time limit specified in the Contract, that such additional request constitutes a change to the Contract, that will not be implemented unless an instruction from Company, pursuant to the change clause of the Contract, is received.
Such wording has the merit to clearly state how the additional requirement will be treated: it will not be considered unless an instruction is received.
In the case of receipt of an official transmission from Company, i.e. vide a letter, containing additional requirements that are not acknowledged as changes, Contractor must notify, within the period specified in the Contract, that they constitute a change. Contractor may either state that a change request will be prepared and submitted to Company or that it will not implement such requirements unless he receives an instruction from Company pursuant to the “Company initiated change” clause of the Contract.
This will depend on the Contractor willingness to implement the change, its impact, and time/effort required to evaluate the latter.
Unofficial requests made by email, orally, or any known Company preferences that would constitute an additional requirement shall also be clarified at the earliest. One way to do that is to issue a letter, stating that such additional requirement has come to the Contractor’s knowledge, which would constitute a change to the Contract, and would only be implemented upon receipt of a request from Company pursuant to the Contract change clause.
This will qualify the way Contractor is proceeding and force a decision on Company’s side. It will allow to raise an open issue and bring it to a close, avoiding it to drag on and impact the project to a larger extent at a later stage. It is advisable to specify a time limit for the answer stating that, if no received within that date, Contractor will proceed according to the contractual baseline.
At some points of the Project, decisions will be made by Contractor pursuant to the development of the design. Such decision might entail deletion of an unnecessary piece of equipment for instance. In some cases Contractor is aware that his Company counterpart disagrees with such decision. It is advisable to raise the issue in a similar way, by qualifying in a letter the way Contractor is proceeding, to secure the path forward.
Once the above notification has been issued, the answer from Company shall be tracked and properly addressed.
The latter may be a denial of that the additional requirement constitutes a change. If such is the case, Contractor will not implement it unless the answer contains a formal instruction to do so. Contractor will then work under “force account” and record the expenses made for future claim to Company.
Should the answer not contain an instruction to proceed, or no answer be received, Contractor shall not implement the additional requirement.
Proper tracking by the Contract administrator of the client answers and communication to the concerned Project disciplines whether or not to implement the additional requirement is essential.
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