Change Orders – Be Clear on Intent
Just as clarity in contracting is a virtue, clarity with change orders is a must. Witness the dispute in an Ohio case, when the original and incorrect prevailing wage reference was revised via change order.
The project was for renovation of housing units, funded by HUD. The contract incorrectly called for Ohio prevailing wage rates. The asbestos abatement sub, Safeair, paid Davis-Bacon wage rates to its workers. Submission of Safeair’s certified payroll reports brought the issue to light, and the architect then advised the prime contractor that a contract amendment was required. The change order was silent, though, on whether the shift from state to federal wage rates was retroactive or not. The difference in total wages for Safeair was apparently $7,647, against a total subcontract of $37,147. Safeair was not paid anything, and filed suit.
The trial court found that Safeair was correct on the applicable wage rate, but also found that the change order to reflect the shift from state to federal wage rates was not retroactive, since it was silent on that point.
The appellate court noted that the change order was ambiguous, and remanded the case to the trial court to determine the intent of the parties. Regardless of the outcome, each party will likely have invested in legal fees far exceeding the amount in controversy.
Thus, the real lesson of this case is that specificity and clarity in change orders is critical. If there is a change which would or could affect work already performed, then the change order should be clear on that issue: is the new rule retroactive, or only going forward? There are many ways to be ambiguous. Look for ways to be clear on intent, to avoid unnecessarily wrangling after the fact. The case is Safeair Contrs., Inc. v. Alabasi Constr., Inc., 2017-Ohio-7951 (Sept. 29, 2017).