Changes and alterations in the work are a necessary evil in heavy-highway construction work. For this reason, public and private owners expressly reserve the right to make changes in their contracts via changes in the work clauses. A question I am frequently asked is whether an owner’s right to make changes under a changes clause is unlimited. The short answer is no. Unfortunately, the line of demarcation between permissible and impermissible changes is a gray and meandering one.
Backfilling backfiring
Within the federal contracting arena, the Cardinal Change doctrine has developed. The black-letter definition of a Cardinal Change is one that is “outside the scope of the contract.” My favorite Cardinal Change case is Peter Kiewit Sons’ Co. v. Summit Constr. Co., 422 F.2d 242 (8th Cir. 1969), which involved an excavation subcontractor responsible for backfilling 150 underground missile silos constructed by the prime contractor. Knowing that a significant amount of piping would be installed by other subcontractors on the exterior of the silos, the subcontractor negotiated into its subcontract a provision ensuring that it would not be responsible for backfilling or working around the piping. That provision specified that the first stage of backfill would be installed to an elevation immediately above the highest piping and, after other subcontractors installed and backfilled their piping, the subcontractor would finish the remainder of the backfill.
The dispute arose when the prime required the subcontractor to perform the backfill in several stages rather than two and to work around and backfill for piping that was installed by others. Eventually, the subcontractor refused to continue its work, and the prime contractor terminated the subcontract.
In determining whether a Cardinal Change occurred, thereby justifying the subcontractor’s refusal to perform, the court noted that the number of changes alone is not determinative and the point at which a change becomes too substantial “is really a matter of degree.” This “matter of degree” is a judgment that each court must make based upon the facts and circumstances of the case. By virtue of the subjective nature of this inquiry, court decisions are often inconsistent and conflicting.
The Kiewit case represents one end of the spectrum of Cardinal Change decisions. The court determined that the changes went beyond the scope of the subcontract and cited a $1.4 million increase in the subcontractor’s estimated backfill cost of $600,000 as a significant factor in its decision.
Self-help guidance
Although many states do not recognize the Cardinal Change doctrine, the Abandonment of Contract theory is quite similar and is widely recognized. However, these cases similarly involve subjective judgments based upon the facts and circumstances of each case and, therefore, produce widely varying results.
Contractors confronted with significant project changes should consider whether they have a legitimate claim for Cardinal Change or Abandonment of Contract. However, because of the uncertainty and unpredictability inherent in the case law, the self-help remedies of refusing to perform or terminating the contract should be considered only in the most egregious circumstances.
