103.02 Contract Revisions

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Construction Contract Modification Process Overview

Subsection 103.02 Revisions to the Contract, of the 2012 Standard Specifications for Construction states:

A. General. The Department reserves the right to revise the contract at any time. Revisions to the contract neither invalidate the contract nor release the surety, and the Contractor agrees to perform the work as revised. The Contractor must not proceed with the revised work until directed to do so by the Engineer, but must continue with all work unaffected by the revision.

Contract modifications are the formal process by which revisions to the contract are formally authorized, approved and incorporated into the construction contract. Contract modifications are to be processed for any revisions to the contract that alters the nature, scope, cost or schedule of the project.

The MDOT contract modification process will no longer differentiate between different item types, quantities and/or monetary revisions in work. Changes, extras, adjustments, time extensions, modified originals, overruns, and all other changes are all to be evaluated in the same manner. To better align former terms, new terms, and changes in the Standard Specifications for Construction, all these various different types of changes to a construction contract modification will be referred to in this document only as “revisions to the contract.” Contract revisions will include all possible work revisions that may be included on a contract modification. Contract revisions may be positive or negative in dollar value, or even have no dollar value associated. The criteria for determining approval requirements of contract modifications will consist of the total cumulative net dollar value change of all contract revisions and previously generated contract modifications with respect to the awarded contract amount.

For example, an awarded contract for $10,000 with a contract modification containing the following contract revision items:

  • Adding more blue house paint +$1,000
  • Deducting yellow house paint -$900
  • Adding new green paint for shed +$400
  • Modifying the application rate for a second coat of red paint (units x rate difference) = +$300

Net Contract Modification Total = +$800

$800 total net cumulative contract modifications / $10,000 original contract = 8 percent

The contract modification would be evaluated as being 8 percent over awarded contract amount requiring Tier II approval.

All contract modifications will be generated and processed in accordance with the tiered approval process described below.

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Contract Modification Development

Once a need has been determined to revise the terms of a construction contract, the engineer will initiate the construction contract modification process per the MDOT 2012 Standard Specifications for Construction, Division 1, and as outlined below.

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Revisions to the Contract

The revision of any contract work shall be identified and processed following the procedures outlined below. The contractor and engineer must come to an agreement on the scope and method of payment of any contract revision prior to commencement of the work. This agreement must follow the procedure of contract term revisions is outlined in subsection 109.05. If there are no existing unit prices to cover the contract revision, and if the engineer does not receive a cost estimate within five calendar days of their request, a contract modification may be generated with an estimated budget and the work may commence under force account procedures.

All force account work (subsection 109.05.D) must require the pre-approval of the region construction engineer prior to commencing the work. This prior approval should be placed in the Contractor Claims and Force Account – 105 folder. Any contract revision that will be paid for using the force account method should have an estimated budget created on a contract modification. Payments to contractors are based only on accepted work that meets subsection 109.05.D specifications and the construction manual force guidance (see [109.05 Payment for Contract Revisions - MediaWiki (state.mi.us)]. Estimated budgets for force account work are expected to be revised and balanced as the work progresses.

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Revisions to Contract Time

Any revisions to the terms of the contract must be made in a contract modification. This includes revisions to the contract time conditions. Any revisions in work that may impact the contract time requirements must be included on the same contract modification. If it is not possible to determine the exact extent of the contract time revisions at the time the contract modification is generated, then any potential impacts to contract time should be noted directly on the contract modification. Contract modifications should indicate one of the following: that there are no contract time impacts, the exact impacts to contract time, or note that revisions included on the contract modification could impact the contract time and a future contract revision may be required to address this.

Sample: It is not currently known at this time if this non-critical path contract revision work will impact the project completion schedule; however, should the work included in this contract revision alter the project schedule, the contractor will be required to submit a revised progress schedule for approval (Subsection 108.05.A.3.b).

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Generating Contract Modifications

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General Contract Modification Information

The following general information is required on each contract modification:

  • “Short Description” – Include a brief description of the contract revisions covered by this contract modification.
  • “Description of Changes” – Address all items below as they apply to the contract modification:
  1. State the original awarded contract amount.
  2. State the current net total contract amount. This total shall include the net sum total of all previously generated contract modifications, including the current contract modification being developed.
  3. State the resulting net total difference between the current net total contract amount and original awarded contract amounts (“B” minus “A” above).
  4. State the resulting total net percentage change in contract amount. This shall be calculated as the total resulting changes to the contract (“C” above) divided by the original awarded contract amount (“A” above) expressed as a percentage.
  5. Indicate if the project is one of the following:
    • Federal Highway Administration (FHWA) Project of Division Interest (PoDI)*
    • FHWA PoDI Full Consultant Construction Engineering*
    • MDOT Oversight
    • MDOT Oversight Full Consultant Construction Engineering
    • MDOT Local Agency Project (LAP)
    • MDOT LAP Full Consultant Construction Engineering
    • Other (Railroad, Aero, MBA)
    *For all PoDI projects state the name of the FHWA area engineer and date of their pre-approval for the work covered on this contract modification. See additional requirements for attaching pre-authorized FHWA Form 1365to the contract modification as detailed in Requirements for FHWA Review.
  6. For all contract modifications bound for a Tier III approval process this section must include a short executive summary of project changes. This summary can and should typically discuss work beyond that contained in the subject contract modification, to more fully describe how the sum of all the contract modifications brought the contract to its current status (i.e., a last minor contract revision may not be the sole reason the entire contract has now reached Tier III status, often work in previous contract revisions contributed to the total project cost increases in a more significant way). The summary should not be overly detailed and just give a general description of how and why the contract has reached the Tier III threshold, when the work was (or will be) completed, funding (if different form regular project items), and any other general information related to the project/contract revisions. This summary description of contract revisions and explanations may be used by external reviewers in their evaluation and approval of contract modifications reaching the Tier III level.

For example, contract modifications will contain summary bullet points in the “Description of Changes” area like:

  1. $100 awarded contract.
  2. $110 current net total contract (including changes in this CM).
  3. $10 net total change.
  4. Total project now 10 percent over awarded contract amount.
  5. MDOT oversight project.
  6. Tier III approval required. Contract has reached the Tier III approval threshold due to several previously approved changes (provide brief overview of specifics) that were required to safely construct the project due to changing conditions caused by the a local festival which required some work items to be performed in different project schedule phases than as originally planned. These changes also required the addition of several additional minor traffic control items needed to maintain traffic mobility through the project area. No additional contract time will be needed to complete the project as scheduled.$100 awarded contract.

A full sample contract modification has been included within this document as Contract Revison Example file.pdf

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Contract Modification Item Type

There are four basic item types used in the FieldManager software. They are described in more detail as:

Original Pay Items:

  • This item code is used for contract revisions that were already included in the awarded contract as a pay item, but which may need to be increased or decreased based on actual field conditions.
  • A detailed explanation (including answering all of items “A” through “E” in the Detailed Contract Modification Information section below) is required for all revisions that increase or decrease the work item in excess of $25,000. (Note this is a general guideline for minimum requirements, additional information may be required on smaller dollar value changes depending upon specific project requirements.)

Modified Original Pay Items:

  • Modified originals are used for contract work that was included in the awarded contract as a pay item, but which may need to be duplicated within the contract for another funding category or job number within the same contract for the same item of work.
  • Provide a detailed explanation (including answering all of items “A” through “E” in the Detailed Contract Modification Information section below) for any modified original contract pay item.
  • Must include the following statement as part of the reason:

“The item code, item description, and unit price for this modified original have been verified against the original contract item and are correct.” One original work item may be used multiple times to establish multiple modified original items. Modified original items are not extra work or adjustments. Extras and adjustments are excluded from this procedure, as they must be established as extra and adjustments to other projects and categories within the respective contract.

Extra Work:

  • This item type is used for any contract revisions that will require the addition of a new pay item of work in FieldManager and were not included in the awarded contract.
  • Provide detailed explanation (including answering all of items “A” through “H” in the Detailed Contract Modification Information section below) for the addition of any extra work item revising the contract.
  • Include any required documentation to support the extra revised contract work.


  • This category is for contract revisions that require adjustments to work items. Adjustments are defined as “a monetary revision to a contract unit price or to the entire contract.” Examples: incentive, liquidated damages, HMA quality adjustment, concrete quality adjustment, traffic control quality and compliance adjustment, soil erosion and sedimentation control adjustment, prompt pay violation adjustment, delinquent payroll adjustment, significant changes (i.e., 103.02.B for major items of work ± 25 percent), etc.
  • Document the details of the contract revision adjustments and all associated impacts to the project. Provide detailed explanation (including answering all of items “A” through “H” in the Detailed Contract Modification Information section below) for any contract adjustment item.
  • The unit used for adjustments will be “DLR” (dollars) and the quantity can be ±.
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Detailed Contract Modification Information

The following detailed information is required for all contract modifications according to which item type (above) is used.

  • Bulleted list item

Document the details of the contract revision work including responses to all applicable items listed below:

A. What was done?

B. Why was it done?

C. Are there any offsetting items?

D. Is the work expected to impact contract time or open to traffic date(s)?

E. Is this a design error or due to changed conditions?

(Potential errors and omissions that are related to design efforts are to be discussed with the MDOT Design Project Manager and TSC Manager. Potential errors or omissions for construction engineering, inspection, and/or testing work are to be discussed with the TSC Manager. Please see the Premium Costs for Design and Field Issues section below for more information. Any questions can be directed to the CFS Construction Contracts Engineer.)

F. Who else has reviewed the proposed contract revisions (FHWA area engineer, region construction engineer, etc)?

G. How was the price established? Document how the cost was determined and justified either by negotiated prices or force account use.

For example:
  • Unit price compared to a similar project or similar items on the existing contract.
  • Quoted price appears to be reasonable when compared with weighted average item prices – reference year.
  • Force account was the only logical method due to variables/unknowns.

H. Include and attach any/all supporting documentation for the contract revision.

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Premium Costs for Design and Field Issues

If a Construction Engineer believes that a design issue has caused premium costs to be incurred, then the issue must be discussed with the MDOT Design Project Manager and the TSC manager. On projects that are designed by a consultant the dispute resolution process for design issues may be engaged.

Premium costs are defined as dollar amounts paid to a Contractor for non-value added work. Delays, inefficiencies, rework, or extra work as shown below other than those caused by the Contractor and/or any subcontractors or suppliers will be considered as non-value added work. Non-value added work can occur in three distinct situations:

  1. Work delays or inefficiencies. In this situation, premium costs are the total delay/inefficiency damages paid to the Contractor.
  2. Rework. Premium costs are the dollar amount of the original items of work that have to be removed and the costs to remove these items.
  3. Extra work. In this situation, premium costs are computed as the amount paid to the contractor in excess of the bid item costs and/or the average unit price for the work when analyzed with the geographic location, quantity of work, transportation costs, and scope of work. It is strongly recommended to contact the CFS Construction Contracts Engineer for assistance in determination of extra costs due to extra work.

All extra work does not necessarily result in premium costs. All extra work that is determined to be the result of design errors or omissions does not necessarily result in premium costs. Contract increases due strictly to overruns of contract pay items are not premium costs, unless those contract pay item overruns are associated with re-work.

Field issues due to the efforts or omission of a consultant hired for construction engineering, inspection, and/or testing will follow the same procedure noted above. If a Construction Engineer believes that a construction issue has caused premium costs to be incurred, then the issue must be discussed with the TSC manager.

If the Construction Engineer believes that a fraudulent act has been performed by a consultant or a contractor, they should immediately contact their TSC Manager and the CFS Construction Contracts Engineer.

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Balancing Quantities

Work items should be balanced as soon as they are completed and not delayed until project finaling. Balancing quantities must be submitted as soon as the work items are completed, measured, and checked.

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Approval Thresholds

The required approval path of contract modifications will be based on the sum of the original awarded contract, the net sum of all previously generated contract modifications, and the current proposed contract revisions compared to the original contract award amount. As shown in Figure 1, if the net total contract amount is less than or equal to 5 percent then the contract modification approval occurs at the Tier I - TSC level; if the net contract amount exceeds 5 percent of the original value but is less than or equal to 10 percent then the contract modification requires both Tier I - TSC and Tier II - Region approvals; and if the contract modification exceeds 10 percent of the original contract value then the contract modification requires Tier I - TSC, Tier II - Region and Tier III - Bureau of Field Services approvals. Contracts at the Tier III - Bureau of Field Services level may also require approval of other entities and may take longer to approve. Please note that approval of the State Administrative Board will not be required if the contract modification is approved in accordance with all the instructions included within.

Figure 1 - Approval Thresholds

If a level of approval is reached and then subsequent contract modifications decrease the contract value to below the threshold, then the later contract modifications under the threshold can be approved with only the lower relevant approvals.

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Authorization Path


The “prepared by signature” block of the contract modification will contain the name of the technician, project engineer, consultant or other staff that prepared the contract modification document. This signature block is considered optional and the use of this signature block will depend upon transportation service center (TSC) or consultant office policies. The preparer of the contract modification is responsible for completing all content, including all required information, determining all signatures required, routing the document to required approvers, and for determining the approval threshold requirements. Due to varying approval times, non-sequential numbered contract modifications and other issues, the threshold net contract budget amount determination will be determined by the preparer at the time of contract modification generation. The preparer shall account for both the current contract modification and all previously “generated” contract modifications (regardless of final approval or not), but shall not include any draft contract modifications that have not yet been generated for signatures.

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Consultants (MDOT Trunkline Contracts)

When consultants are managing construction projects, they must complete the signature block for “consultant project manager” by having the consultant’s licensed project engineer assigned to the project sign in this signature block. Consultants must then send the contract modification to the contractor for signature.

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Once the engineer, local agency, or consultant generates the contract modification, it will be sent to the contractor for signature. The contractor shall sign and return the document to the sender within ten calendar days of transmittal. The above approval timeline is the general guideline for most contract modifications, however, for complex or large balancing modifications that may require additional time to review, the contractor may take up to a maximum of 21 calendar days to return the document. After this maximum timeframe, or if the contractor refuses to sign and return the contract modification, the engineer may then process the contract modification with “contractor failed to sign and return” noted in the contractor signature area.

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Requirements for FHWA Review

Approval by the Federal Highway Administration (FHWA) is necessary on all contract modifications on projects overseen by their agency in accordance with FHWA’s Oversight Project Contract Modification Procedure as outlined below. The FHWA has changed the term “FHWA Oversight” to “Projects of Division Interest (PoDI)”.

The MDOT Construction/Project Engineer is responsible for completing form FHWA-1365, Record of Authorization to Proceed with Major Contract Revision (available on MDOT’s internal form page). The form is to be electronically submitted with any applicable document(s) to the respective FHWA Area Engineer that is overseeing the project to obtain the necessary approvals. Detailed instructions for completion of FHWA Form 1365 are attached. Consultant project engineers are not permitted to submit FHWA Form 1365 directly to the FHWA.

Prior approval from FHWA is required for all major changes in work before the work commences. This approval is obtained by electronic submission of FHWA Form 1365to the FHWA Area Engineer that is overseeing the project. The area engineer will approve or comment on the submitted form and electronically transmit the form to the MDOT TSC Construction Engineer for inclusion in the project files. The completed form must be attached to the contract modification that processes the contract revisions for the major change. FHWA will typically respond within 5 working days.

Major Changes or Major Extra Work
All major work performed prior to obtaining documented pre-approval from FHWA will be considered non participating. However, when an emergency or unusual conditions justify expediency, the area engineer may provide verbal pre-approval of the change and immediately follow-up such verbal approvals with a formal written approval. Major changes or major extra work are defined as any change that will significantly affect the cost of the project to the federal government, alter the termini, character, or scope of work.
FHWA’s Michigan Division has further clarified the definition of major changes as noted below:
  1. Any construction field issue (contract modification) that results in extra (new) work items and/or existing (original) work items that equal or exceed $50,000 in value. This includes increasing original pay items unless it is for interim or final balancing as noted below.
  2. Any change to the termini, character, or scope of the project, regardless of the amount. Examples of these types of changes are as follows: changes in materials, changes in pavement marking types/materials, or any changes resulting in a plan revision per the MDOT Road Design Manual.
  3. All extensions of time (interim, open to traffic, final, etc.)
  4. Any changes to incentive requirements, liquidated damages, A+B provisions, or warranties.
  5. Any Value Engineering Change Proposals (VECP), regardless of amount.
Contract revisions (contract modifications) that do not meet the threshold criteria noted above should still be discussed with the respective FHWA Area Engineer, prior to work commencing.

Non-Major Contract Modifications
Non-major contract modifications also require formal approval from FHWA, although approval in advance and completion of FHWA Form 1365are not required prior to the work being performed.

FHWA Form 1365 is not required for contract modifications of any amount that only balance pay items to field measured quantities (interim and final balancing contract modifications). These balancing contract modifications must not contain any pay items or work that is part of a major change as defined above.
Once an extra work item is approved, the balancing of the extra work item does not require FHWA pre-approval.
Projects classified as PoDI must have FHWA approval of all (except as noted below) contract modifications and keeping your FHWA Area Engineer informed of any unusual issues early will help ensure more efficient projects and faster contract modification approval. All discussions and pre-approvals should be noted on the contract modification.
Extra work items and adjustments that are 100 percent state funded do not require FHWA approval unless the work constitutes a change in the scope of work. These items are to be placed on separate contract modifications.

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Tier I - TSC Approval

Once all external non-MDOT signatures have been completed, the contract modification will go through Tier I - TSC level approval. For all electronic signature contract modifications, the document must be placed in the correct job number and folder within the MDOT ProjectWise system for further MDOT approvals. Non-electronic signature documents will be physically routed and mailed with all government approval timelines tripled. TSC approval must consist of at least two licensed engineer signatures and these two signatures are mandatory for every contract modification without exception. The “Recommended by” signature must contain the printed name of the construction/project engineer in responsible charge of the project. The “Authorized by TSC manager” signature block must contain the name of the TSC manager. When the contract modification is returned to the TSC office from the contractor, or consultant, the construction/project engineer (or designated alternate/backup) must review and approve the contract modification within four business days of receipt. The TSC manager (or their designated alternate/backup) must also review and authorize the contract modification within four business days of the construction/project engineer signature.

For all MDOT construction contract modification documents, signature authority is allowed to be designated to a pre-established backup or alternate signer as required. Designated backups or delegated signature authority must be to a pre-established person that is an equivalent level or higher. However, even if a backup or designated alternate review and sign the document, the name on the signature block will still contain the printed name of the required approver. In this case, the construction/project engineer and TSC manager will be named as the owners of these two signature blocks and they will ultimately be responsible for the accuracy and content of the contract modification regardless of who signed. It is never acceptable to have the same person sign multiple signature blocks on the same contract modification. If a designated backup signs for a responsible party, then they must indicate so by signing and printing their name along with adding the words “for [name of person]” in the signature area. If using electronic signatures, the backup or alternate signer must enter this same text in the signature reason area as they enter their digital electronic signature.

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Tier II - Region Approval

Contract modifications meeting Tier II - Region approval threshold level must first obtain all lower level Tier I – TSC approval signatures as outlined above. After receiving these approvals, the contract modification will then be submitted to the region construction engineer for their review and approval. The region construction engineer must respond within four business days of receipt of the contract modification from the TSC. Backup or alternate signers for the region construction engineer will also be pre-established.

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Tier III - Bureau of Field Services Approval

Contract modifications reaching the Tier III - Bureau of Field Services approval threshold, must first obtain all Tier I - TSC and Tier II - Region level signatures, and then be routed to the Construction Contracts engineer at the Bureau of Field Services for review and processing. Contract modifications, with supporting documentation, reaching this level may also be sent to the Office of Commission Audits (OCA) and the Attorney General’s Office for review and concurrence prior to authorization. Contract modifications may be indentified by OCA to be further explained. (Contract modifications at this level that do not conform to all the requirements established herein may have to also be submitted to the SAB for approval.) Estimated approval time from initial receipt of the contract modification at the Bureau of Field Services through approval will likely be in the 30-45 day time frame with all required reviews. Contract modifications reaching this threshold should be submitted promptly to begin the approval process due to the lengthy timeframes involved. Upon authorization by the Bureau of Field Services, the contract modification will be sent back to the designated contact for the construction/project engineer.

Engineers at any level of the construction contract modification approval process always have the option to contact higher level approval engineers for advice or consultation on unusual contract modifications regardless of threshold levels. The same holds true for the advice or consent of other services available to engineers through the Bureau of Field Services Construction Contracts Unit in Lansing, FHWA area engineers, the Attorney General’s office and/or the Office of Commission Audits. These resources can provide a great deal of expertise to engineers which can help avoid potential contract issues. Inquiries to these areas should be routed through the region construction engineer and/or the Construction Contracts Unit to facilitate potential correlation of similar issues and/or possible statewide guidance to other engineers.

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Records Retention

Electronic records of all construction contract modifications will be stored in the MDOT ProjectWise system to ensure proper records retention criteria for document backup, archiving, and disposal schedules can be met. Consultant generated contract modifications will also be stored in the ProjectWise system by the TSC point of contact after MDOT signatures have been obtained and an electronic copy will also be emailed back to the consultant for their records and electronic storage. The use of electronic signatures changes the standard MDOT records process, as the electronic file with the digital signatures embedded is legally considered the original document and it must be properly retained. Questions on records retention or digital electronic signatures should be referred to the MDOT Construction Contracts Unit.

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Contract Revisions - See Also

FHWA Approval

FHWA Interaction in MDOT Project.

Approval Path Flow Chart

Appendix A - Approval Path Flow Chart.pdf

Sample Contract Modification

This is the entire example Contract Modification in one PDF file. Appendix B - Sample Contract Modification

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LAP Project Considerations

The LAP Project Construction Contract Modification Process is the same as described in 103.02 Contract Revisions, with the following exceptions:

  • It is highly recommended the local agency contact the DR prior to processing any contract modification so the DR can provide direction regarding item eligibility and participation based on the current LAP Federal Eligibility Guidelines. It’s a best practice to provide a draft contract modification to the DR for review.

Failure to keep the DR appraised of contract modifications may result in delays in processing the modification, jeopardy of item funding participation, and jeopardy of project funding participation. Depending on content, NEPA clearances may need to be reviewed as well.

  • General Contract Modification Information, item E. must state ‘MDOT Local Agency Project (LAP)’
  • FHWA does not support participation in Premium Costs for Design and Field Issues. The LPA must discuss all potential premium costs with the DR.
  • If the LPA believes a fraudulent act has been performed, they must immediately contact their DR who will inform the TSC Manager, CFS Construction Contracts Engineer, and Statewide Local Agency Construction Engineer.
  • If the project requires FHWA Form 1365 due to a Major Change or Major Extra Work (link) or as identified in the PoDI plan, the LPA must prepare and submit said form to the DR. The LRC must sign off on the form. The DR will forward the form to the FHWA Local Programs Manager all will serve as the primary contact for communications with the FHWA. Contract modifications containing 100 percent locally or state funded items do not require FHWA approval, unless the work constitutes a change in the scope of the work. These items are to be placed on a separate contract modification.
  • All contract modifications must be signed by:
    • LRC in the ‘recommended by local agency’ signature block
    • MRC in the ‘construction engineer’ signature block
    • TSC Manager (or designated alternate/backup) in the ‘managing office’ signature block
    • Appropriate parties in the ‘Region Construction Engineer’ and ‘Bureau of Field Services’ signature block based on Tier II and III approval threshold requirements
    • FHWA Local Programs Manager, if project is a PoDI, and signature requirement is part of the PoDI plan, or if the project contains Major Changes or Major Extra Work (link).
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