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Joint Check Agreements Deductive Changes And The Contract Price

Thursday, May 04, 2006 10:51 am

Joint Check Agreements Deductive Changes And The Contract Price

When the contractual scope of work is reduced by a deductive change order, the pricing of the resulting credit can be quite contentious. The standard rule is that the credit should be the difference between the cost of performing the contract prior to the change and the cost of performing the contract after the change. In other words, it is the contractor's cost savings.

The problem, of course, is putting a price on work which has not been performed. The actual cost savings may be difficult to calculate. Sometimes the contract itself will resolve the matter. But surprisingly, in the majority of cases, the price structure in the contract is not determinative.

Unit Prices and Pass-Throughs

One situation where a contract price does determine the amount of a deductive credit involves unit pricing. If a contract includes unit-priced items which were not incorporated into or superseded by a unitary, fixed-price scheme, deletion of those items results in the nonpayment of the contract unit price. That price has been stipulated in the contract, so cost savings become irrelevant. Appeal of Oneida Construction, Inc./David Boland, Inc., J.V., ASBCA No. 47914 (December 8, 1994); CCM February 1995, p. 4.

One subcontract stated that if the project owner deleted work which affected the subcontract, the credit taken by the owner would be passed through to the sub [...]

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