109.05 Payment for Contract Revisions
See Section 103.02 Contract Revisions for information regarding payment for Contract Revisions.
DOCUMENTING PRICE NEGOTIATIONS
Title 23 Code of Federal Regulations (CFR) 635.120, titled Changes and Extra Work requires that MDOT performs and adequately documents a cost analysis of each negotiated contract change. Payment is to be based on the following methods detailed in Subsection 109.05 of the Standard Specifications for Construction:
Contract Unit Prices (109.05.B)
The Engineer will first attempt to price revised work using contract unit prices/items of work. This justification is based on similar work and pay items in the existing contract.
Negotiated Prices (109.05.C)
If contract unit prices cannot be used, the contractor and engineer will negotiate the price (unit price or lump sum) of a contract revision per subsection 109.05.C. When negotiating price(s), the engineer should include one or more of the following applicable details during the analysis and justification:
- Comparison with unit prices on other projects in the area, weighted average unit prices, and/or historical prices for similar work.
- Consider similar quantities of work on the project and/or similar items of work on other projects.
- Consider impacts of scale and small quantities on unit prices as smaller quantities tend to have higher prices.
- Consider any unique factors affecting unit prices (mobilization, weather, mobility, procurement, staging, restrictions, expedited schedules, etc.) and their potential impact upon unit prices.
- When considering a lump sum price and unit prices (other projects, weighted average, or historical) are used for justification of the lump sum additional details may be required to clarify the comparison.
- Cost analysis based on planned labor, equipment, and materials to be used for the work.
- If the engineer requests a detailed cost estimate per subsection 109.05.C, the contractor must provide the detailed estimate within 5 calendar days. A detailed cost estimate is recommended for justification of complex or unique situations or when the work has the potential to escalate a contract modification into a higher tier of approval.
- The engineer should evaluate the quantity of work to be completed; equipment required to complete the work, materials, and other items detailed in the contractor’s estimate. Other items to consider may include the impacts of weather, procurement, mobilization, mobility, staging, restrictions, expedited schedules, etc. which may impact pricing.
- Use of production rates, estimating manuals, and/or national cost estimating publications can also be used to help support the cost analysis.
It is the engineer’s responsibility to ensure all cost negotiations are complete and mutually agreed to prior to the start of work, or default to approval of a work plan and properly track associated costs according to subsection 109.05.D. Force Account and this Construction Manual. The purpose is to have meaningful negotiations, collaborative cost agreement, and reasonable allocation of risk prior to the start of work. If at any time a negotiated price is not used, proper force account procedures must be immediately followed in accordance with subsection 109.05.D.
The preceding information and cost justification are to be noted in the reason section for extra work items on contract modifications with supporting documentation both noted on the contract modification and placed in the project file.
After mutual agreement is reached between the engineer and contractor on pricing the extra work from unit price or negotiated price methods, the engineer should prepare a contract modification to document the agreement and begin the payment process per the guidance in Contract Modification Development.
Force Account (109.05.D)
When the previous two methods do not provide an agreement or any time work starts prior to a price being established, then force account procedures shall be used. The Work Plan and daily reconciliation forms are required any time work commenced prior to price being established. Furthermore, when work commences under the force account method but is then later negotiated by the engineer and contractor to be a lump sum item of work (pay item 1090003 Negotiated Force Account), the force account records under which work started must still be retained within the project files.
Also see Force Account Work