Contract Changes Management

The two most important issues considered in contract

change management are Uncertainties and Changes.

Uncertainties are issues that can either be difficult to

reasonably predict or unknown during the planning phase of
Procurement and Contract Management.

For instance, when uncertainty is understood as the

difference between the amount of information required to
perform the task and the amount of information already
available by the planning team .

Changes are issues requiring alterations during the

implementation of Procurement and Contract Management.
Uncertainty is higher in the early phase and reduces
through time by getting more and better information.
Uncertainty is not only related to the future but also the
knowledge of the past as well, that is; information
records and those based on experiences are also
uncertain. This indicated that Uncertainty is always
with us and can never be eliminated. Therefore, all
projects were, are and will be planned under a certain
level of uncertainty.
This can be therefore one of the major reasons why
changes occur during implementations.

Uncertainties can be mitigated using the following

four interventions used in project contracts:
Absorbing: Understanding projects are planned
under uncertainty and changes are expected during
implementations imply alternative provisions for
implementation phases such as Contingencies,
Alterations, etc which are made and used to absorb
changes caused by uncertainties.
Dividing or Splitting: When a project uncertainty is
high or there is less past experience, dividing projects
into packages or different phases in order to make
them smaller in sizes and their complexities, etc is to
divide or split to reduce risks due to uncertainties.
Postponing: When Contracts could not clearly state
specifications, quantities and estimates; they often
place Provisional Quantity or Provisional Sum to
postpone uncertainties.
Transferring: Lump Sum Contracts, DB and BOT
delivery systems are some form of contractual
approaches to transfer uncertainties from Owners to
Providers.
Requirement Changes Management Systems
All projects are planned under the context of
uncertainties, what makes them different among each
other is that the type and degree of uncertainties does
differ.

so that Project Owners can prerogatively make

changes during implementations. For instance,
Clauses 51 and 52 of the General Conditions of FIDIC
Red Book provided provisions for Alterations
(Additions and Omissions) to enable Project Owners
use the Engineer (the Consultant) to make
requirement Changes.
They can cause review of designs and / or create
additional or changes in designs and / or just work
orders to instruct contractors to carryout the
requirement changes.
While project owners retain the right to requirement
changes, the contractor is obliged to accept as per the
conditions of the contract. However, the contractor is
entitled to request and agree upon new or existing
rates for such changes.

Change Orders are written instructions, agreed by

the Project Owner or His Representative, directing the
Project Doer to make changes with or without the
Consent of Regulatory Bodies. Often they are
entertained using standard formats
 There are three kinds of Change Orders:
Unilateral Change Order: is that provides the right to
any of the parties to make changes without causing
any effect on the other parties or disrespecting any
laws, regulations and rules binding the contract and
itself but requires notification to the other parties for
knowledge.
Bilateral Change Order: is a type of change order that
require the agreement and / or consent of the two
contracting parties (the Project Owners and The
Project Provider) to make changes but requires the
respects for laws, rules and regulations binding the
contract and itself and requires notification to the
other parties for knowledge.
Multilateral Change Order: is a type of change order
that require the agreement and / or consent of the
three or more contracting parties (the Project Owners,
The Project Providers, The Project Financiers and / or
the Regulators) to make changes but requires the
respects for laws, rules and regulations binding the
contract and itself and requires notification to the
other parties for knowledge
Requirement changes based on the different types of
change orders modifies contracts in either of or the
combinations of the following three ways:
Time changes only,
Time changes accompanied by Cost
Compensations, and
Cost Changes only.
Contract Time can either be Competitively or Directly
Time Changes Management System

assigned. In both cases, Time planning can be made

using different approaches such as using CPM, PERT,
MCS, SP or TOC. Bar Charts, Gantt Charts, Network
Diagrams and Tables can be used to show Time Plans
and Accomplishments. Contractual Agreement finally
defines the Contract Time of a project. The
Completion Time of projects include:
Dates between Contract Agreement and Handing
Over of Site,
Mobilization Period(s),
Contract Time, and
Justified and Agreed Supplementary or Extension of
Time.
Dhos = Dcont + Thos;
Dstart = Dhos + Tmob;
Dcomp = Dstart + Tcont + Tjust + Tsupp
If Dact < Dcomp; Bonus, if any
If Dact > Dcomp; Time Overrun and Liquidated Damage
Where,
Dhos = Date for Handing Over of Site; DCont = Date for
Contract Agreement; Thos = Time between Contract
agreement and handing over of site; Dstart = Date for
Start of Construction Works; Tmob = Time for
Mobilization; DComp = Date for Completion Time; Tjust =
Time for Justified Delay; and Tsupp = Time for
Supplementary Works or Agreements.
Unfortunately, in most instances projects exhibit a
principal dimension measured by such comparison
called Time Delays and Overruns.
Time Delays and Overruns
Time delays can occur in components of a project or
trades of works, but when their cumulative effect
makes the actual completion time beyond the contract
completion time, it is called time overrun
Contractors in some instances accelerate projects in
order to avoid liquidated damages.
 Time delays can be classified into the following three
categories:-
Classic delay ;-occurs "when a period of idleness or useless-
ness is imposed upon contractual work“
source of delay can be contractor ,owner or by an outside
force which neither party can control.

Serial delay :- is a "linkage" or series of delays one after the

other, created by one original delay.
Concurrent delay :- occurs when both the contractor and
owner cause separate delays during the same period of
time.
 The one that causes longer delay is considered for time
delay computations.

Justifiable and Non - Justifiable Delays

Justifiable delays ;- are delays that occurred due to causes
which are beyond the control of project doer.
It is caused by project owners, the contractor or the
consultant or the supplier is directly justified for the ef-
fects on delay of the project. Force Majeur will also be
one of the causes for justifiable delay.
Non - Justifiable or Non - Execusable Delays:- are delays
that occurred due to negligence to fulfill contractual
obligation and are within the control of the
contracting parties.

While Justifiable delays can be either compensable or

non compensable; Non -justifiable delays will cause
remedial rights
Compensable and Non – Compensable Delays
Delay damages can involve additional costs incurred
by the contractor as a result of the extended duration
of its performance:-
Examples of the type of additional costs associated
with delays include:
- Extended or Increased management / supervisory
costs
- Additional payment / performance bond premiums
- Additional liability insurance premiums
- Extended equipment / trailer rental costs
- Materials escalation costs
 - Unanticipated weather protection
- Idle labor / equipment charges
- Overhead Cost (Specifically for that project)

N.B;- One of the first factors for determining whether

you can assert a valid claim for delay damages is your
contract.
For example, contract clauses can be in line with:
- No Damage for Delay, :-prohibits recovering of
additional costs incurred as a result of delay, regardless
of the cause in creating the delay.
Conditional Recovery,;- This view limits ability to
recover or make a claim for delay or impact damages, so
that the recovery is very much dependent on causes of
delay and their CPM Network.
Additional Time and Compensation for Delays;-
This view does not inhibit or limit rights to recover due
to delay damages.
 In Evaluating delay claims, five aspects must be taken
into account:
The effective duration of delay
The effect of delay on work intended to be done
The costs attributable to the delay
The nature of costs / expenses
The resources and acceleration / expediting measures
Typical Contractors Delay Damage Components
Include:
(1) Direct cost increased (material escalation) material
that occur during the delay
(2) indirect costs that occurred during the extended
performance period, e.g. project supervision costs, site
overhead cost, insurance, and job site power and
water.
(3) home office overhead that was incurred during the
extended performance period,
(4) lost productivity caused by the delay and
(5) other damages directly related to and attributable
to the delay.
E.g- interest on the claim,
- lost profits on other jobs if it
Generally provisional sum is an amount allocated for a
specialized work by a specialized firm, for which the
details are not available at the time of tender. The
provisional sum amount will be a best guess at the
time of tender by the employer or contractor
depending upon the type of provisional sum. Hence
claim made by the contractor need not necessarily be
the exact amount mentioned in the contract.