HomeMy WebLinkAboutAgenda Statement 1986/06/03 Item 8 COUNCIL AGENDA STATEMENT
Item 8
Meeting Date k. . ' ,
ITEM TITLE: Resolution / ?5 '7 Amending City Council Resolution 6716
regarding contract change orders
SUBMITTED BY: Director of Public Works/City En. ' '- r
Director of Bulding & Housin' /;r
REVIEWED BY: City Manage 4/5ths Vote: Yes No X )
On January 16, 1973, Council adopted by resolution a Council policy on change
orders (Attached). At that time, change orders were allowed to be made by the
Director of Public Works in the amount not to exceed $1 ,000. The purpose of
this resolution is to modify that policy to be more reflective of today' s cost.
RECOMMENDATION: Approve increasing amount of contract change orders
approved by staff to:
$ 5,000 (Director of Public Works)
$10,000 (City Manager)
BOARDS/COMMISSIONS RECOMMENDATION: Not applicable.
DISCUSSION:
Purpose of Change Orders
The purpose of a change order is to provide for circumstances in the field
which were not known or were not anticipated during the design stage of a
project. There are two reasons why the final contract cost on any kind of
project (especially a Civil Engineering project) will be different than the
total estimated bid. The first reason is that there will be change orders
approved which will increase or decrease the cost of a project; and the second
reason is that most Civil Engineering projects use unit costs for excavation,
pavement, curb gutter, etc. The final cost is based on measured work in the
field - square footage, tonnage, etc. - as opposed to lump sum charges.
Therefore, the final cost is dependent upon the amount of the work measured in
the field. The Green Book (adopted by City Council ) , entitled Standard
Specifications for Public Works Construction, provides that any single
contract item cannot be increased or decreased by more than 25 percent without
a negotiated change order. I know of no project that the City has done in the
past 10 years where that limit has been exceeded. However, the final cost on
any project is not known until after the work is completed; so whether the
estimated amount is exceeded or underestimated is not known until after the
work is completed.
Page 2, Item 8
Meeting Date Sit 86
6/3/86
Contingencies
All projects when awarded by City Council provide for a contingency amount.
That amount is to provide for change orders and the possibility that the
measured quantities are different than the estimated quantities. The current
policy for contingencies is recommended to stay in force and as is stated
below:
Original Contract Range Maximum Aggregate Percentage Increase
Up to $100,000 10 percent
$100,000 to $1 ,000,000 5 percent
More than $1 ,000,000 2 percent
This provision puts a further limit on the aggregate amount of the change
orders that can be approved by staff and/or Council without Council increasing
the contingency amount. The current policy provides that no single change
order will increase or decrease that original contract amount by more than
$1 ,000. Because this amount has not been changed since 1973, it is staff's
opinion that it is too low to be effective. It it understood that the purpose
to control change orders is to keep public contracts under proper control . No
contract at this point can be changed for any amount without at least three or
four people in the Engineering Department reviewing and approving it. That
includes the inspector in the field, the civil engineer in charge of
inspection, the senior civil engineer in charge of design and construction and
the Director of Public Works. It appears then that at the administrative
level in Engineering enough people are involved to avoid the possibility of
wrongdoing. Also at the time that the final information in the contract work
is accepted by the City Council , change orders are listed so the Council has
the possibility of looking at the work after the fact to see if there is a
possibility of wrongdoing.
Survey of Other Agencies
A survey was made of practices of other agencies in the San Diego region.
Agency Change Order Limits by Staff Approval
Chula Vista $ 1 ,000
El Cajon $ 2,000
Escondido No limit (up to the amount appropriated)
National City $ 4,000 (City Engineer)
$ 7,000 (City Manager)
Page 3, Item 8
Meeting Date 1UUi 6
6/3/86
Agency Change Order Limits by Staff Approval
Poway $ 5,000 (Director of Public Works)
$ 10,000 (City Manager)
Santee $ 5,000
City of San Diego $ 25,000
County of San Diego 10 percent of the amount of contract
As can be seen there is a wide variation in the amount of approvals allowed to
be made at staff level .
Proposed changes
It is recommended that the aggregate amount of change orders approved by staff
remain the same as that approved in 1973 (i .e. , based upon a percentage of the
total contract cost). It is also recommended that change orders involving (a)
changes in the scope of the project, (b) (25% up or down) changes in the
amount of individual quantities greater than allowed in the Green Book, (c)
changes or increases in the allowed time for completion, continue to be
submitted to Council for approval . The original policy indicated that changes
concerning the public health, safety, and welfare be submitted to Council . It
is staff's opinion that this is one area that definitely should be handled by
the staff due to the safety aspect. A time delay in getting to Council over a
safety issue could be very costly in litigation. It is further recommended
that the current policy be modified to read, "the Director of Public Works
and/or City Manager is hereby delegated a limited authority to approve change
orders for work be done under City contracts as follows:
1 . All change orders shall be processed in accordance with the applicable
project specifications.
2. No single change orders shall increase or decrease the original contract
amount by more than:
$ 5,000 - Director of Public Works Approval
$10,000 - City Manager Approval
3. The aggregate of all change orders, including those for differences
between estimated and actual quantities shall not increase the contract
amount by more than the percentage amount specified below without Council
approval :
Original Contract Range Maximum Aggregate Percentage Increase
Up to $100,000 10 percent
$100,000 to $1 ,000,000 5 percent
More than $1 ,000,000 2 percent
Page 4, Item 8
Meeting Date 511-31&6
6/3/86
4. All change orders involving changes in the scope of project, increases of
contract amounts greater than outlined above, increases in time allowed
for completion, shall be submitted to the City Council for consideration.
5. In those cases where the City Manager and City Engineer determine that the
public health and safety are involved or a substantial claim could be
submitted by the contractor for delays, the City Manager may exceed the
above amounts provided for both individual change orders or the aggregate
amount of change orders. The change order shall be submitted to the
Council at the next regular Council meeting for ratification.
Conclusion
It is apparent that in order to expeditiously conduct contract administration
in the City, the Council policy on change orders should be revised. The
changes recommended by staff are believed to be reasonable and prudent and are
within the commonly accepted practices of other agencies in San Diego County.
The policy should provide a reasonable balance between legislative vs.
administrative control on cost and expeditiously administrating contracts. In
staff's opinion, adopting this policy will :
1 . Decrease staff costs.
2. Reduce delays to the contractor.
3. Expedient completion of projects.
4. Reduce potential for claims filed by contractors.
5. Avoid the expenditure of staff time of preparing Council documents thereby
allowing more time for other work tasks.
FISCAL IMPACT:
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WPC 2040E
by the City Council of
Chula Vista, California
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CITY OF CHULA VISTA
COUNCIL POLICY
SUBJECT POLICY EFFECTIVE
CHANGE ORDERS - Director of • NUMBER DATE PAGE
Public Works 574-01 1-16-73 lof 1
ADOPTED BY RESOLUTION N0, 6716 DATED January 16 , 1973
•
BACKGROUND
. During the course of work on many City projects, it becomes
apparent that certain changes must be made in the contract
to obtain the finished product in its desired form.
PURPOSE •
Since most of these changes are of a minor nature which do
not change the scope of the project or affect the public
health, safety or welfare, delegating limited authority
to approve change orders would result in significantly
expediting these projects.
POLICY
I
The Director of Public Works is hereby delegated limited
authority to approve change orders for work being done
under City contracts, as follows:
1. • All change orders shall be processed in accordance with
the applicable project specifications.
•
2. No single change order shall increase or decrease the
original contract amount by more than $1, 000 . 00 .
3- The aggregate of all change orders, including those for
differences between estimated and actual quantities shall not
increase the contract amount by more than the percentage
amount specified below:
•
Original Maximum Aggregate
Contract Range Percentage Increase
Up to $100, 000 • 10%
$100, 000 to $1, 000, 000 5%
More than $1, 000 , 000 2%
4 . All change orders involving changes in the scope of project,
increases of contract amounts greater than outlined above, in-
creases in time allowed for completion, or aspects concerning
the public hearlth, safety, or welfare, shall be submitted to
the City Council for consideration.
Form C -001 4-73)
PPM too-o3