The changes clause is intended to provide flexibility in the event alterations in the work are necessary to ensure that the finished project functions as the owner originally intended. But does this clause give the owner unfettered authority to add or delete work as it sees fit? As an appeals court in Georgia decided, the answer is no.

Grey grassy area

In Savannah Airport Commission v. Higgerson-Buchanan, Inc., 519 S.E.2d 475 (Ga.App. 1999), the prime contractor entered into a unit-price contract for expansion of an airport. The prime hired a subcontractor to perform clearing and grubbing of over 500 acres. In its bid, the prime simply took the subcontractor’s unit price per acre and added its markups.

The subcontractor’s bid price per acre was a weighted average of several individually estimated prices because approximately 28% of the clearing area was heavily wooded; 41% was lightly wooded; 13% involved swamp land; and 18% was grassy area. The problem occurred when nearly all clearing except the least-costly grassy area was complete.

The owner apparently did not realize that its engineer had included the grassy areas in the acreage applicable to the “clearing and grubbing” bid item. Accordingly, when viewed in isolation, the price the owner was paying for grubbing the grassy areas appeared excessive. To avoid paying the clearing and grubbing unit price for the grassy areas, the owner relied upon the changes clause to delete the remaining clearing work from the contract and insisted that the grubbing necessary to remove the grass was incidental to excavation work.

The court disagreed with the owner’s position and determined that the changes clause applies only to those changes within the general scope of the original plans and specifications and necessary to complete the work originally contemplated by the contract. More specifically, the court held that the changes clause cannot be used to delete work that is still necessary in order to complete the project.

Owner is not cleared

In this case, the court determined that the owner’s motivation to secure an economic advantage was improper, especially since the inclusion of the grassy area within the total clearing acreage had the effect of lowering the overall contract unit price for clearing. Significantly, the court determined that the owner never intended to delete the grassy area from the scope of the project.

It was merely trying to avoid application of the clearing and grubbing unit price to that area. By doing so, the owner would have denied the contractor and its subcontractor the opportunity to realize the profit they had built into the overall unit price for clearing and grubbing.

When confronted with an owner’s attempt to delete work from a contract, project personnel should read carefully the applicable changes clause to confirm that changes under the clause must be “necessary” or “to satisfactorily complete the project.” Next, they should try to determine the owner’s reason for seeking to delete the work. If the purpose of the change falls outside the scope of the changes clause or is otherwise suspect, project personnel should consult with upper management or legal counsel immediately so that a timely determination can be made whether to challenge the owner’s directive.