2021 Contract Administration Workshop June 7, 2021

Contract Adjustments

2021 Contract Administration Workshop

June 7, 2021

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We would like to know who is participating today.

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Today’s

Agenda

• Supplemental Agreements

• Claims

• Closeouts

Contract Adjustments

But first, let’s talk about SAFETY!

Safety

• May 19, 2021

– Construction worker, on a private project in

Alexander County, was killed when the 10

ft. deep trench that he was working in

collapsed.

Excavation Hazards• Cave-ins are the greatest risk

• Other hazards include:

– Asphyxiation due to lack of oxygen

– Inhalation of toxic materials/fumes

– Water accumulation

– Machinery moving near edge of excavation

causing a collapse

– Severing underground utility lines

– Falls

Trenching & Excavation Safety• 5 feet or deeper require a protective

system

• A competent person must be on site

• 4 feet or deeper requires a means of

egress within 25 feet of all workers

• Surcharge loads must be at least 2

feet from trench edges

• Check for hazardous fumes and

toxic gases

Supplemental Agreements

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What is an SA (Supplemental Agreement)?

• A Supplemental Agreement is a written

agreement between the Department and the

Contractor that amends the contract as

necessary to satisfactorily complete the

proposed construction. The modifications to the

contract may affect:

– The work requirements (104-3)

– Unit prices of an existing contract item (104-5)

– Addition of new work items (extra work) (104-7)

– Contract time(s)

– Other terms of the contract.

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104-3 Alterations of Plans or

Details of Construction• The Contractor shall perform the modified

work at the original contract unit or lump

sum prices unless the character AND the

cost of performing the work materially

changed over that originally anticipated

and bid upon in the contract.

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104-5 Overruns and Underruns of

Contract Quantities• (B) Overruns – Increase in Unit Price

– >15% Major Items and 100% Minor Item

• (C) Underruns – Increase in Unit Prices

– >15% on Major Items. Adjusted price would

be applicable for the entire quantity of the line

item that underruns. No revision for minor

items that underrun.

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104-5 Overruns and Underruns of

Contract Quantities

• (D) Overruns/Underruns – Reduction in

Unit Prices

– The Engineer must make written request.

– This would only apply to work performed

AFTER execution of the agreement.

– If you know an item has a high unit price on a

small quantity, then execute the agreement

PRIOR to the work being performed so that

the item will be paid at the revised unit price

once the threshold has been reached.12

104-7 Extra Work

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• Omission of necessary bid items from the

contract.

• Failure to include a basis of payment in

the contract for work necessary to be

performed under the terms of the contract.

• Necessary plan revisions

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A supplemental agreement is not a contractually binding amendment to the contract.

Contractually binding…

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https://connect.ncdot.gov/projects/construction/ConstManRefDocs/SUPPLEMENTAL%20AGREEMENT%20PRICING%20FORM.pdf

https://connect.ncdot.gov/projects/construction/ConstManRefDocs/SUPPLEMENTAL%20AGREEMENT%20PRICING%20FORM.pdf

Approval

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A Supplemental Agreement (SA) must be executed PRIOR to performing the affected work except as provided in Article 104-8(A). When the affected work is not within the limits established in Article 104-8(A)(1) and it is urgent that the work be begun, electronic copies of the agreement may be executed followed by the original agreement. If the Engineer and the Contractor do not agree to a modification to the terms of the contract prior to the performance of the affected work, neither compensation nor time can be granted by execution of a supplemental agreement.

Approval Authority Limits• Resident Engineer

– Up to $100K and 30 days

– Verbal Approval $25k or less

• Division Engineer

– Unlimited authority under all articles of the

specifications.

• Area Construction Engineer

– Review and make recommendation for all greater

than $100k and over 30 days

• State Construction Engineer

– Review and make recommendation for all greater

than $200k and over 90 days 18

Getting started…

• Ask Yourself- What is the scope of the

proposed work and is it needed to

satisfactorily complete the project?

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Description of Work

• Detailed description - Narrative form –

What it is, What it includes, Where is it

located…

• First sentence should summarize the

change

• Include Specification reference(s) - Extra

Work, Additional Work, Altered Work, or

Other

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Description• Remember- we are writing a “legally

binding contract” within a contract. Use

specification references where applicable.

Every item needs to be included here!

– General Description (What/Where/When)

– Construction Methods (How)

– Materials to be used

– Measurement and Payment

• Should be written so that those not familiar

with the project can understand it. It

should stand on its own. 22

Description

• Include references to Special Provisions,

Standard Specifications, Plan Revisions,

Attachments, etc.

• DOES NOT INCLUDE JUSTIFICATION!

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Description

• TRUCK MOUNTED ATTENUATORS – This

supplemental agreement is written in accordance with

Article 104-7 of the 2018 Standard Specifications for

Roads and Structures. This agreement provides

compensation for the use of two (2) Truck Mounted

Attenuators (TMAs). All work shall be done in

accordance with Section 1165 of the 2018 Standard

Specifications for Roads and Structures and as directed

by the Engineer. The pricing includes mobilization,

installation, removal, materials, labor, and all other

incidentals necessary to complete the work.

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Justification

• In order to install pedestrian safety fencing along the Old

Chapel Hill Road bridge over I-40 safely, lane closures

will be required to be installed on I-40, as well as, on Old

Chapel Hill Road. Truck mounted attenuators are one of

the required traffic control devices to be installed on

interstate lane closures. The contract did not provide

truck mounted attenuators as a line item.

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Converting to plan quantity Earthwork

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Before moving on past the description and

justification…

• Is the need for the change fully detailed?

• Is the article of the Specifications that allows the change

identified?

• Is the article of the Specifications that pertains to the

affected work identified?

• If the Specifications are not applicable to the work being

performed, has contractual language including

description, materials, construction methods, method of

measurement, and basis of payment been included as

part of the description?

• Have any special conditions pertaining to the agreement

been clearly identified?27

HiCAMS User Guide Resource

• https://connect.ncdot.gov/projects/construc

tion/HiCams/HiCAMS_03_06_Review_Su

pplemental_Agreements_V3.1.pdf

• Can’t remember that? Just google it…

ncdot hicams user guide supplemental

agreements

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https://connect.ncdot.gov/projects/construction/HiCams/HiCAMS_03_06_Review_Supplemental_Agreements_V3.1.pdf

Line Items

• Could be new items or existing items

• May be a reduction/elimination of some

items

• RE should provide an estimate of

quantities to the contractor – may need to

work together

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Time Considerations• Does the SA affect/delay the controlling

operations?

• How does it affect the completion date?

• Should seasonal limitations be

considered?

• Is there delay time that needs to be

considered independently of the time that

may be required to perform the

extra/altered work?

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Types of Time Extensions to be

selected in HiCAMS• No additional time granted

• Time Considered upon Completion of

Work

• Pro Rata

• Set Amount (Time pertaining to performing

the work, NOT delay time)

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Time Extensions

• Be sure to include time extensions on all

applicable ICT’s!

• How to Undo an incorrect Time

Extension?

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Pricing

• RE should provide an estimate of

quantities to the contractor – may need to

work together.

• Prices may not be the same as at bid time

due to inflation, salary increases, materials

price increases.

• Average bid prices – are a good reference

and good place to start but may not be the

final resting place.

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Pricing

• Consult with other units – Technical

Services, Roadway/Structure Design,

Geotech, Signing/Delineation,

Construction Unit, Other SA’s.

• Don’t hesitate to reach out to other

construction offices, as well as, your local

Area Construction Engineer for help

evaluating price proposals.

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Pricing

• Consider Impacts to the schedule.

• Consider the risks involved – The more

information, the lower the risk, the

better the price.

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Pricing

• Materials may be unique.

• Labor may be dedicated to another

project.

• Equipment may be specialized.

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Cost Control

• How to lower the overall cost – look at the

quantities in relation to unit price.

• Contractor should submit the Standard

Pricing Form found in the CM.

• The bottom line- It costs to do

supplemental agreement work.

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Allowable Mark Ups

• Labor Burden – Force Account typically

allows 35%

• Office Burden – Overhead – typically 5-

25%

• Profit – Typically 10%

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Allowable Mark Ups

• Subcontractors will add markups and then

the Prime will add markups for

administration.

• This is part of doing business.

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Executing the agreement• HiCAMS serves as the OFFICIAL approval

record for the contract change. All

approvals must be obtained prior to the

agreement being executed/signed, and the

work being performed.

• Docusign should be used to electronically

execute the agreement.

• The project teamsite should house the

executed agreement and ALL of the

backup documentation.41

Distribution of the SA

• The contractor can download their official copy

via DocuSign.

• RE staff should distribute an email .pdf and/or a

link to the project team site notifying internal staff

of the executed agreement, subsequently

loading it into SAP.

• This should be directed to the DCE/ACE. The

State Construction Engineer should only be

copied if they had specific input on the

agreement.

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• What is a good resource to find valuable

information regarding supplemental

agreements?

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Questions?

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Construction Claims Process

Wiley W. Jones III, PE

Assistant State Construction Engineer – Eastern Region

June 7, 2021

Construction Claims

2021 Contract Administration Workshop

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• Review of Basic Claim Situations

• Follow Current Procedures

• The Different Types of Construction Claims– Active Claim

– Final Claim

– Verified Claim

• Approval / Denial Authority Limits

• Expected Claim Response Timeframes

• Project Closeout Conferences

• Reducing Claim Exposure

Follow Current Procedures

Resident Engineer Record Reviews

• Are you doing what you said you were going to do?

– Review our Policies and Procedures

– Review Actual Case Studies

– Highlight or Draw Attention to Differences

– Provide Recommendations for Improvement

– Follow up to Ensure Improvement Occurred

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Where do you find the Current

Procedures?• Construction Manual

• Reach out to your Area Construction Engineer

• Regional Bridge Construction Engineer

• FHWA Oversight Agreement

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Active Claims

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• Active Claims are the contractor's way of expressing entitlement while the

work of the contract is ongoing.

• Active Claims

– Additional Compensation

– Additional Contract Time

• Active Claims should not be viewed as personal attack on the Contract

Administrator or their staff, but rather a formal protection of Company’s

contractual interests.

Active Claims

Additional Compensation

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Active Claims

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• The Contractor is required to give written notice of intent to file a claim for

additional compensation under the provisions of Article 104-3 and Article

104-7.

• The provisions of Subarticle 104-8 – COMPENSATION AND RECORD

KEEPING shall be strictly adhered to.

• If the Contractor elects to file a written claim or requests an extension of

contract time, it shall be submitted on the Contractor Claim Submittal Form.

– Article 104-3 (Alterations of Plans or Details of Construction)

– Article 104-4 (Suspensions of Work Ordered by the Engineer)

– Article 104-7 (Extra Work)

Section 104 – Scope of Work

Article 104-3

• Change in cost and

character of work

• Contractor paid in

accordance with

Subarticle 104-8(A)– Supplemental

Agreement

– Force Account Notice

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Article 104-3

• Contractor believes

change in work

materially changes

character and cost of

performing the work.

• Notify Engineer before

performing such work.

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Article 104-3

• Engineer investigates

and notifies Contractor

of determination.

– Agree, write SA or FA

– No additional

compensation will be

provided.

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Article 104-3

• Contractor to notify

Engineer of intent to file

claim before performing

work.

• Engineer responds and

advises to 104-8(B)

strictly followed.

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Article 104-3

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Questions?

Comment?13

Article 104-7

• Extra work ordered by the Engineer

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Article 104-7 (A)

• Extra Work

• Don’t begin until

authorized

• Engineer Agreed

additional compensation

is warranted

– Supplemental Agreement

– Force Account 15


Article 104-7 (B)

• Contractor believes he

is required to perform

extra work

• Contractor notifies

Engineer in writing

before performing such

work.

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Article 104-7 (B)

• Engineer investigates

and notifies Contractor

in writing of

determination.

– Not Extra Work

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Article 104-7 (B)

• Contractor to notify

Engineer of Intent to File

claim in writing before

performing work.

• Engineer responds and

advises to 104-8(B)

strictly followed.

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Article 104-7 (B)

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Questions?

Comment?20


• Subarticle 104-8 (A)

Compensation for Articles

104-3 or 104-7

– Supplemental Agreement

– Force Account Notice

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Subarticle 104-8(B) Claim for Additional Compensation

Articles 104-3 and 104-7

• Contractor must provide:

– Written notice of Intent to File Claim for additional

compensation

– Cost records in accordance with Article 109-3 (Force Account)

– Weekly cost records and supporting data of disputed work to

Engineer for review

– Separate the cost of any work for which payment has been

made

– Submit Weekly cost records to the Engineer within 7 calendar

days after the end of a given weekly period.22

Subarticle 104-8(B) Claim for Additional Compensation

Articles 104-3 and 104-7

• Contractor must decide whether to submit a Written Claim

for Additional Compensation within 120 calendar days of

completion of disputed work.

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• Subarticle 104-8(B) Claim

for Additional Compensation

– Articles 104-3 and 104-7

– Intent to file claim must be in

writing

– Keep accurate records in

accordance with Article 109-3

– Prepared and submitted

weekly

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Article 104-8 Compensation and Record Keeping

– Clearly indicate the cost of

performing work in dispute

– Separate the cost of any

work for which payment

has been made

– Engineer given opportunity

to review records

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Article 104-8 Compensation and Record Keeping

– Cost records prepared

weekly for each written

intent

– Cost Records given to

Engineer within 7 days

after end of weekly period

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Subarticle 104-8 (B)

Claim for Additional Compensation

• Subarticle 104-8 (B)

Claim for Additional

Compensation

– Once disputed work is

complete, submit written

claim within 120 days after

completion of the disputed

work.

– Summarize cost records

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Subarticle 104-8 (B)

Claim for Additional Compensation



Compensation

– Describe justification for

adjustment in

compensation under terms

of contract.

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Compensation

– Certified true and accurate

by officer of company or

person authorized to

execute SA.

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Article 104-4

• Suspension of work ordered by the Engineer

– Should be made in writing

– Describe the operation being suspended

– Should be lifted in writing once available again

• Alleged Suspensions

– When suspension are not made in writing by Engineer

– Not caused by weather

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Article 104-4

• No adjustment in compensation is allowed when

– Duration is < 24 hours

– Performance would have been suspended by other cause

– Suspension is due to fault or negligence of Contractor

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Subarticle 104-8(C) Compensation for Article 104-4

(Suspension of Work Ordered by Engineer)

• Contractor must provide:

– written notice of Intent to File Claim for additional compensation

within 7 calendar days after Engineer suspends work

– written notice of Intent to File Claim for additional compensation

for alleged suspension of work.

– Detailed records of alleged idle equipment and idle labor.

– Weekly cost records to Engineer for review for each notice of

intent

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• Contractor must:

– Decide whether to submit a Written Claim for Additional

Compensation within 14 calendar days of notice to resume

work.

– Summarize previously submitted cost records and

– Clearly describe the justification for adjustment in

compensation under terms of the contract.

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• Resident Engineer will:

– Evaluate the Contractor’s Request

• If agree, make adjustment on actual verified cost

– Idle equipment

– Idle labor

• If not in agreement,

– Notify the Contractor in writing of determination

– Within 120 days after receiving complete request.

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Subarticle 104-8(C)

(Article104-4 Suspension of Work)The Contractor shall:

• Provide Notice of Intent

to File Claim must be in

writing within 7 days of

suspension

• Keep accurate records

– Idle Equipment

– Idle Labor

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Subarticle 104-8(C)

(Article104-4 Suspension of Work)The Contractor shall:

• Justification why idle

equipment/ labor cannot

be absorbed into

unaffected work

• Engineer ability to review

• Prepared weekly

• Submitted weekly

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Subarticle 104-8(C)

(Article104-4 Suspension of Work)Once suspension is lifted,

submit written claim within

14 calendar days

– Summarize previously

submitted cost records

– Justify adjustment under

terms of the contract

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Subarticle 104-8(C)

(Article104-4 Suspension of Work)• Evaluate the claim

– Was the cost of work

directly associated with

suspension

– Not caused by weather

– No profit included in cost

– Paid verified actual costs

of idle equipment and idle

labor

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Time Extensions

To be a valid cause for an extension of the completion date, there

are four basic criteria which must be met.

1. The current controlling operation must have been delayed

2. The delay to the controlling operation must have developed from

circumstances originating from the work required under the

contract.

3. The Contractor must have pursued the work (Article 108-1)

4. Any delay must have been caused by circumstances beyond the

Contractor’s control and without his fault or negligence.

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Subarticle 108-10(B)

Time Extensions1. Pro-rata extensions

2. Extensions Allowed by Supplemental Agreements

3. Delays to the Controlling Operation

4. Changes in time due to elimination of work.

5. Winter weather extensions

*When all work is complete except for items precluded by

seasonal limitations, the engineer may waive assessment of

liquidated damages.

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What should you do when you receive a

Notice of Intent to File a Claim?• Review the validity of the Contractor’s request.

• Respond in writing acknowledging receipt of the notice of

intent to file a claim

– Highlight to the contractor the numbered items which shall be a

bar to recovery if not followed.

– Examples letters can be found in the Construction Manual

• Advise the inspection staff to properly document

equipment, labor, and materials for the disputed operation

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How should a Contractor file a claim?

• Claims for additional compensation have to be in writing

before the work is performed.

• They shall use the Contractor Claim Submission Form

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Contractor Claim Submittal Form

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• Enter project

information

• Identify what

they are seeking

– Time

– Compensation

– Both

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• Signed by

Authorized

Representative

who has

authority to sign

supplemental

agreements for

the Contractor.

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Controlling Operation

• Any operation or

operations, as

determined by the

Engineer, that if

delayed would delay

the completion of the

project.

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Example : Department

added extra work to

the contract via

supplemental

agreement. Time to be

Considered upon

completion of work.

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If any of the boxes are

marked “No”, then a

case could be made

that there is a bar to

recovery of the

additional

compensation.

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• 1(a) Suspensions

ordered by Engineer

• 1(b) Alleged

Suspensions

• Notice the

timeframes are

slightly different than

for Article 104-3.

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• 1(a) Suspensions

ordered by Engineer

• 1(b) Alleged

Suspensions

• Notice the

timeframes are

slightly different than

for Article 104-3.

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Engineer requests to

remove or uncover portions

of the finished work as

directed.

If found to be acceptable,

the cost for uncovering or

removing, and replacing of

the covering or making

good of the parts removed.

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notice of intent to file a claim?• Respond in writing and inform the Contractor to follow

Article 104-8(B) or 104-8(C)

• Example letter is in the Construction Manuals

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notice of intent to file a claim?• Refer them to the Contractor Claim Submittal Form

• Check the weekly records

– Notify them of any deficiencies.

– Notify them if they are late.

– Just receiving them does not mean we agree with their position

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Subarticle 104-8(B)

• Claim for Additional Compensation

• Contractor’s notice of intent to file a claim for additional

compensation under 104-3 and 104-7 shall be given to

Engineer in writing.

• Records kept in accordance with Article 109-3

• Must be checked by Engineer

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Claim Approval/Denial Authority Limits

Active Claims

• Resident Engineer

– $100,000 and 30 days under all Articles of Specifications

– Cannot deny any active claim

• Division Engineer or delegate

– Unlimited under all Articles of Specifications


– Review all active claims over $100,000 or 30 days

• State Construction Engineer

– Review all active claims over $200,000 or 90 days56

Expected Claim Response Time Frames

Active Claims up to $100,000 or 30 days

• Resident Engineer review – If approved, within 10 Days

– If recommends denial, forward to Division Engineer within 10 Days

• Division Engineer– Reviews recommendation of RE, and approves or denies the claim within

10 days

Overall process complete within 1 Month

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Active Claims between $100,000 and $200,00 or up to 90 days

• Resident Engineer– Reviews and sends recommendation to Area Construction Engineer within 20 Days


– Reviews and forwards to Division Engineer with comments within 5 days

• Division Engineer– Reviews recommendations and approves or denies the claim within 5 days

Overall process complete within 6 Weeks

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Active Claims over $200,00 or over 90 days

• Resident Engineer– Reviews and sends recommendation to Area Construction Engineer within 30 Days

• Area Construction Engineer and State Construction Engineer – Reviews and forwards to Division Engineer with comments within 10 days

• Division Engineer– Reviews recommendations and approves or denies the claim within 10 days

Overall process complete within 2 ½ Months 59

Closeout Conferences

• Scheduled after the contractor has had time to review the

final quantities letter

• Opportunity to verbally discuss any previously denied

active claims.

• Opportunity to reach an agreement to closeout the

project.

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Closeout Conference

• Area Construction Engineer leads the discussion for

Centrally Let projects

– Explanation of purpose of meeting

– Notify Contractor of next steps in the closeout process

– Discuss any pay record quantity disputes

– Give Contractor opportunity to verbalize his positions on

entitlement for additional contract time and/or additional

compensation

– Division and Construction Unit have to be in agreement before

any settlement closeout offer is made. 61

Closeout Conference

If agreement is not reached, contractor to submit Final Claim to the State

Construction Engineer, detailing all requests for additional contract time

and additional compensation, as if any offer extended to reach

settlement during the closeout conference did not occur.

• If satisfaction not received in Final Claim, then contractor can pursue

Verified Claim by submitting to Chief Engineers office

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What are Contractor’s next steps if an agreement

cannot be reached at the Closeout Conference?

• Contractor will need to submit a Final Claim to the State Construction

Engineer, detailing all requests for additional contract time and

additional compensation, as if any offer extended to reach settlement

during the closeout conference did not occur.

• If satisfaction not received in Final Claim Process, then contractor may

submit a written and Verified Claim in accordance with Article 107-24

and NCGS 136-29, to the Chief Engineer within 60 days of payment of

the final estimate. (Lawyers are involved at this level)

• If unsatisfied at Verified Claim Process, then Contractor may institute a

civil action

• Court Ordered Mediation

• Civil action in Superior Court, tried by the judge, without a jury.63

Final Claims

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• Central Let Projects

– Submitted from the Contractor directly to the State Construction Engineer

– State Construction Engineer will review and respond as part of the Final Estimate

Process

• Division Let Projects

– Submitted from the Contractor directly to the Division Engineer

• For claims > $100,000 or 30 days, Division Engineer should forward recommendation to the Area

Construction Engineer.

• For claims > $200,000 or 90 days, Division Engineer should forward recommendation to the State

Construction Engineer.

– Division Engineer, after consultation, will respond to the Contractor as part of the Final

Estimate Processing

Verified Claims

Article 107-24 – Right of the Contractor to File Verified Claim

• When Contractor fails to receive settlement as he claims to be

entitled to under the terms and provisions of the contract

• Submit a written and verified claim for such amounts he deems

himself or subcontractor entitled

• Written notice of intent to file a claim, keeping and submission of

cost records and the initial submission within the specified time

period.

• Submitted to the Chief Engineer within 60 calendar days from the

time the Contractor receives the final estimate as defined by

Section 101 and submitted in accordance with NCGS 136-29. 65

Reducing Claim Exposure

• Utility Workgroup

• Railroad Work Group

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• Keep Lines of Communication Open

• Timely Responses to Issues

– Forced Acceleration

• Engage Area Construction Engineers

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• Public Record Requests

– Use Technical Writing Skills

– Project Diary Entries

– Email Correspondence

• Documentation can assist

– Pictures

– Correspondence showing engaged

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Questions?

Comment?69

Documents

2021 Contract Administration Workshop June 7, 2021