United Statea
            Environmental Protection
            Office Of Water
EPA 832-B-83-100
March ^ 983
Management Of
Construction Change Orders

A Guide For Grantees


This guidance is offered to a Grantee for
managing the change order process on a
construction contract under a grant from
the U.S. Environmental Protection Agency
(EPA) construction grants program. The
establishment of a change order procedure
serves to expedite changes that arise
during the construction of a project. Uni-
form procedures reduce confusion and
multiple submissions of data for each
change. Efficient execution of a change
order management procedure can save
both time and money.     -
  The'sections are arranged according to
the order of activities to be followed in
managing the process, from the first claim
or. recommendation for a change tp the
reviewing agency's (EPA  or delegated
State agency) acceptance of .the formal
change order document.. The discussion of
the Grantee's duties and responsibilities
emphasizes the need to decide whether a
change order is actually warranted. Also
given particular emphasis is the negotia-
tion process, the purpose of which is to
develop the terms and conditions for the  ,
formal change order document. The point
is made that the level of detail should be
appropriate to the dollar  amount and com-
plexity of a change order. Typical change
order review procedures used by a
reviewing agency have been included in
the last chapter, since an understanding of-
the review process should help the Gran-
tee to properly prepare the change order
for review and thus avoid delays in
  While this guidance should prove useful
to most Grantees, it was styled particularly
for those who are faced with managing a
grant-assisted construction project for the
first and possibly only time. It is therefore
somewhat general in its presentation,
leaving extensive detail to the many other
available texts on the subject.


 Introduction	   1
 References to Federal Regulations ..		   i
 1981 Amendments to the Clean Water Act.".	   1
 Duties and Responsibilities of the Participants	   2
 Grantee's Responsibilities	   2
 Engineer's Role	  < 2.
 Construction Contractor's Responsibilities.	   2
 Construction Schedule	   3-
 Prior Approval Requirements	   3
 Emergency Changes	._.	   3
 Grant Increases	'..'	;	...   3
 Disputes	:	;	   3
 Conditions That May Warrant A Change Order .'.	   4
 Differing Site Conditions  .....	"	   4
   Contract Documents	  ;4
   Construction Contractor Compliance.	   5
   Subsurface Investigation	;   5
. Errors and Omissions in Plans and Specifications	   5
 Changes Instituted by Changes in Regulatory
 Requirements.	,.,	   5
 Design Changes.		   6
   General ..:	;	   6
   Substitution	;.		   6
  , Relocation of Site	^.	   6
   Additions	   6
   Deletions..;,....,	:	   6
 Overruns/Underruns in Quantities	   7
 Factors Affecting Time of Completion		   7
   Termination for Convenience ...:...	   7
   Termination for Default	,	   7
   Suspension of Work	   8
   Directed Acceleration	..-....:...   8
   Time Extensions	....:.. 	   8
   Constructive Acceleration.	;	   8
 Preparation  of the Change Order		   9
 Preparation for Negotiations ...	•....-,		   9
 Memorandum of Negotiation	.,.....  10
 Change Order	•. i	  11
 No'tice to Proceed	-  n
 Submitting a Change Order to the Reviewing Agency	11
 Reviewing Agency Procedures .	:	:	  12
 Screening Process ...•....,....-	:.,........,..  12
 Prior Approval Requirements	>	;....  13
 Determination of Federal and/or State Funding
 Participation.;			  13
   Review of  the Need for Change	  13
   Reasonableness  of the Method of Accomplishing the  ,
 Objective..'	:....'	,.'.		  13
   Eligibility  of the Change	..,.:..	  14
   Allowability. of the Costs	,'.	:  14
 Grantee Management Review.	  14
 Grantee Notification	;	  14
 Appeal of Allowability Determination	  15
 Documenting the Project File For Change Orders		15


   \ , h.iiuit! order is a written order by the
  i.r.mtri' to the Construction Contractor au-
  •::, r:.-in.u an addition, deletion or revision
  ::i  h<- Cvork and/or the time of completion
  .s: iun tilt; limits of the construction con-
.  -:.i : .ifti-r it has  been executed. It is a
  *;M i ific type of contract modification
  uiiu h iloes not go beyond the general
  M ojic  of the existing contract.  ,  .,' •
    riii- i:hange order management pro-
  , 1-iluri! is used when a need is recognized
  i.ir .1 change in the terms or conditions of
  i-xisting signed contract documents. It
  i>iMii%raliy originates as a claim or a
  recommendation for a change from the
  Const ruction Contractor or as a request-
  lor-proposai from the Grantee, seeking a
  change to existing contract documents.
  The change order is necessary to increase
  or decrease the contract cost or work, in-
  terrupt or terminate the project, revise the
  completion date, alter the design, or in
  general to implement any deviation from
  the original contract terms and conditions.
   The  successful completion of the change
  order management process depends upon
  the successful execution of the responsibil-
  ities of each of the participants: Grantee,
  Engineer, Construction Contractor, and
  reviewing agency (U.S. Environmental
  Protection Agency (EPA) or delegated
  State agency). The Grantee must un-
  derstand that it alone is responsible for
  financing and managing the project to
  completion. Because of this, the Grantee is
  responsible for determining whether a pro-
  posed change is necessary and whether
  the cost of the change is reasonable with-
  out regard to grant assistance. The En-
 gineer  is the technical advisor to  the Gran-
  tee. The Construction Contractor  is
 responsible for preparing and submitting
•the proposal for change and supporting
  documentation to the Grantee. Using the
  proposal, the Grantee negotiates the con-
  ditions of change with the Construction
"Contractor. The Grantee then prepares and
  presents the change order plus supporting
  documentation to the reviewing agency.
                                        The reviewing agency checks the
                                        documentation for completeness and ade-
                                        quacy and the allqwability of costs, so that
                                        grant participation for the change can be
                                        evaluated. A section on typical reviewing
                                        agency procedures for review of a change  •
                                        order has been included to give the Gran-
                                        tee an insight into the responsibilities of
                                        the reviewer.      .              '
                                         The bilateral change, rather than the un-
                                        ilateral change, is one agreed to by both
                                        parties, and is most desirable since it
                                        minimizes disputes at a later date. Should
                                        meaningful negotiations fail, an EPA Gran-
                                        tee, as a Jast resort, has the authority to
                                        make a unilateral change within the scope
                                        of the contract. In order to move the proj-
                                        ect forward, the Grantee can issue a
                                        change order without Construction Con-
                                        tractor agreement under a "changes" con-
                                        tract clause. In this case, the Construction
                                        Contractor must perform the work, but
                                        may elect to dispute the terms and could
                                        recover additional costs from the Grantee
                                        under the same clause. In some cases,
                                        State Law may give the Construction Con-
                                        tractor.specific rights of recovery.
                                         The procedures outlined herein apply to
                                        open, competitively bid, fixed lump sum
                                        or fixed unit price construction contracts
                                        arid have been adapted to the EPA con-
                                        struction grants program. Additional State
                                        and local requirements may also be en-
                                        countered in obtaining change order

                                        Reference to
                                        Federal Regulations

                                        This guidance describes a change order
                                        management process which is based upon
                                        a combination of EPA regulations and
                                        good management practices. Where the
                                        EPA' regulations require that certain pro-
                                        cedures be followed, the pertinent regula-
                                        tion has been cited by specific reference to
                                        the Code of Federal Regulations (CFR). It
                                        is important to keep  in mind that each
                                        construction grant is governed by the reg-
                                        ulations in effect at the time the grant was
                                        awarded. Because the regulations have
                                        been revised  a number of times since the
                                        beginning of the EPA construction grants
                                        program, multiple citations are sometimes
given/This guidance will suggest a reason-
able course of action in those particular
cases, but the regulations should be re-
ferred to if there is a question of their
applicability to a particular grant.

1981 Amendments
to the  Clean Water Act
The date of May 12, 1982, is mentioned
throughout this guidance because this is
when an extensive revision of EPA's con-
struction grant and procurement regula-
tions were published in interim final form,
which made them effective for all grants
awarded on or after that date. At the time
this guidance was published, these new
regulations were not yet published  in final
form. The final regulations will apply to
grants awarded on or after their publica-
tion date. These new regulations sub-
stantially streamlined the construction
grants arid -procurement processes, es-
pecially in the area of procurement of
engineering and construction services.
This revision followed  enactment of the
1981 Amendments to the Clean Water Act.
Since the role of the reviewing agency is
lessened by these new regulations,  it is
doubly important that the Grantee un-
derstand and carefully manage the change '
order process on the project.

  Duties  and Responsibilities
  of the  Participants
  The Grantee is responsible for the ad-
  ministration and implementation of the
  project for which EPA Construction Grant
  assistance is awarded. In accepting the
  grant, the Grantee has agreed to pay, pur-
  suant to Section 204(a)(4) of the Clean
  Water Act, the non-federal costs of treat-
  ment works construction associated with
  the project. The Grantee is also financially
  responsible for any additional non-federal
  costs associated with a change. Should the
  reviewing agency determine that the
  change order is not allowable for federal
*  participation, the entire cost would then
•  be considered non-federal costs.
  (40 CFR 33.210; 35.93G-5)

    The Grantee is the one who must agree
  to any change in the conditions of the
  construction contract because it is the
  only party that has entered  into the con-
  tract with th? Construction  Contractor.
  Grantee authority is exercised by the leg-
  islative body through an authorized repre-
  sentative, e.g., mayor, business administra-
  tor, etc. The Grantee should expect  the En-
  gineer to exercise that authority stipulated
  in the agreement for engineering services.
  The Grantee should be aware that the
  reviewing agency has no authority to orig-
  inate changes to contract documents.
    A construction manager is sometimes re-
  tained by the Grantee, particularly when
  its own forces do not have the expertise or
  additional time available to properly man-
  age the additional responsibilities. EPA
  encourages the construction manager con-
  cept, but it should be discussed with the
  reviewing agency before any commitments
  are made. While the construction man-
  ager's role and contractual relationship
  with the Grantee differ from those of the
  Engineer, it is possible for the Engineer to
  assume both roles. The construction mana-
  ger would normally be delegated a part of
  the Grantee's authority through their con-
  tract, so that throughout this guidance any
  mention of the Grantee is generally in-
  tended to include, the construction man-
  ager if one has been retained.
  Once a grant is awarded and construc-
tion is underway, the Grantee should not
presume that the Engineer, Construction
Contractor and regulatory agencies will
oversee the management of the project. In
the best interest of the community, the
Grantee should actively manage the proj-
ect to completion. The resolution of com-
plex and controversial questions cannot be
postponed. The Grantee should stay fully
informed and be ready to act on problems
arising daily from the construction. The
Grantee can expect to be faced with pro-
posals to change the terms of the construc-
tion contract, and may encounter cir-
cumstances requiring it to initiate mod-
ifications. The Grantee should be con-
vinced that a proposed contract change is
necessary and reasonable regardless of
federal participation in the cost. The Gran-
tee is responsible for negotiating fair and
reasonable  cost and time adjustments for a
necessary change and should ensure com-
petent, timely processing of change order


The Grantee is responsible for:
• Determining whether a change  order is
• Negotiating a fair and reasonable price
for required changes, or authorizing the
Engineer to do so.
• Maintaining costing records for the
change including records of negotiation.
• Maintaining current and accurate fiscal
projections of contract and project comple-
tion costs.
• Resolving disputes which may have
arisen as a result of a proposal for a
• Notifying the reviewing agency in
writing of events or proposed changes
which may require a grant amendment.
These include:
—  Conditions which require prior writ-
    ten approval as included in Prior
    Approval Requirements on page 3.
—  Significant changed conditions at the
    project site.
—  Changes which may increase or sub-
    stantially decrease the EPA grant
    needed to complete the project.
;—  Significant delay or acceleration of the
    project schedule. This requires con-
    tinuous monitoring of the Construc-
    tion Contractor's construction sche-
(40 CFR 30.600, 30.700; 30.900; 33.210; 35.930-6;
35.936-5; 35.938-5)


The Engineer will be expected to:
• Act as consultant to the Grantee during
the construction of the project and on
changes that are proposed.
• Provide expert opinion on  whether a
change is appropriate or not,  and if so,
• Prepare a fair and reasonable in-
dependent cost and time estimate on the
proposed change to verify that the es-
timate prepared by the Construction Con-
tractor is fair and  reasonable.
• Negotiate change orders if authorized to
do so by the Grantee.


In order to expedite the processing of a
change order, the  Construction Contractor
will be expected to:
• Furnish and certify the correctness of
sufficient cost and pricing data to enable
the Grantee to determine  the necessity and
reasonableness of cost and amounts pro-
posed, and to enable the reviewing agency
to determine the eligibility and allowabil-
ity of costs proposed.
•  Submit change  order proposals within
the time allowed by the contract and enter
into meaningful negotiations on a neces-
sary contract change.
•  Comply with the record keeping and
accounting requirements  set by EPA reg-,

  illations appropriate to the dollar amount
  of the change order.
  • Maintain a current construction sched-
  ule, such as a critical path diagram as de-
'  scribed below, with the level of detail
  based on project size and  complexity.
* (40 CFR 33.1030, Clause 8: 35.938-5; Part 35. Subpart
  E. App. C-2, Clause 11)

* Schedule
  Among the scheduling techniques used by
  the Construction Contractor, one frequent-
  ly, used is called the Critical Path Method
  (CPM). This is a system where all the con-
  struction operations which have to be
  done in sequence are shown on a line dia-
  gram. The  diagram shows the sequence
  and length of time it takes to complete
  each  operation by representing each opera-
  tion with ,an arrow. By tracing along the"
  various paths of the series of arrows, the
  Construction Contractor can determine
  which path establishes the minimum time
  to complete the work. That path is called
  the Critical Path and changes in the timing
  of operations along it normally affect the
  time  of completion. Construction contracts
  often require the use and  periodic up-
  dating of the CPM diagram to control  proj-
  ect progress and analyze the effect of de-

  Prior Approval
  In order to obtain change'order approval,
~ written approval from the reviewing agen-
  cy is in some cases required prior to the
  start  of work associated with the change,
  because of the significant effect on per-
  formance or cost of the project. Conditions
  which require prior written approval
.  (which is always a formal grant amend-
  ment on grants awarded oh or after May
  12, 1982) include the following: .  .
  * Project changes whteh
  — Alter the project scope or project per-
     formance standards.
  — Alter the type of treatment to be pro-
     vided.,1                    : '
  *— Substantially alter the facilities plan,
     design drawings and  specifications, or
     , the location, size, capacity, or quality
     of any major part of the project.
  — Increase the EPA grant needed to
•    complete the project.
  —  Significantly delay or accelerate the
      project schedule. _
» •. Contract changes involving dollar
  amounts of $100,000 or more on grants
  awarded before May 12, 1982, if
  —  any single item (additive or deduc-
      tive) exceeds $100,000.
—  no single item has a value of      ,
    $100,000, but the total price of the
    change order is over $100,000.
—  the total of the additive items of work
    in the change order exceeds $100,000,
    or the total of the deductive items of.
    work in the change order exceeds
    $100,000 even though the net value of
   . the change order is less than
    $100,000.    , . .             ,
• However, related w.ork must not be split
into two or more amendments or change   •
orders merely to keep it under $100,000
and avoid the need for prior approval.
• For grants awarded on or after May  12,
1982, the reviewing agency may review
proposed change orders over $100,000 if
the Grantee has not self-certified its pro-
curement system. Under these circum-
stances, the Grantee  should request prior
review;                      '
  Prior approval is not required for
changes to correct minor errors or minor
changes not addressed by the above men-
tioned prior approval requirements. It is'
also not required for emergency changes
as defined below.  /
. It should be noted that the reviewing
agency will respond to requests for prior
approval as promptly as possible in order
to avoid undue project delays. Therefore,
the approval may only coyer the concept
of the change, even though certified cost
and pricing data must be furnished when
prior approval is required because the
amount,of the 'change is $100,000 or more.
Because of this, the approval could be   '•-
subject to revision based on later review of
the necessity and reasonableness of quan-
tities, cost/price analysis, and allowability
of costs.
'(40 CFR 35.935-11; 35.938-5; 35.2204)

An emergency may be, described as an un-
• foreseen combination of circumstances
leading to a hazard to life or health which
can only be alleviated by immediate ac-
tion.  Although  prior approval  is not re-
quired for emergency changes, the
reviewing agency should be notified as
soon  as possible after the emergency has
been  put under control if the work would
otherwise have required prior approval.

 It should be noted that approval of a proj-
 ect change or change order does not obli-
 gate EPA to any increase in the amount of
 the grant or grant payments unless an
 amendment to  increase the grant is also
 approved. This is further explained in
 Grantee Notification on page 14.
 (40 CFR 35.930-6: 35.935-11; 35.2204)
Many of the delays and mis-
understandings surrounding ithe modifica-
tion process can be avoided by effective
and frequent communication between the
Grantee and the Construction Contractor.
The Grantee bears the entire responsibility
to settle Construction Contractor claims.
When a claim is submitted, the Grantee
should request and obtain a change order
proposal from the Construction Contractor,
investigate the circumstances promptly,
reach a tentative decision on the merits,
and notify the Construction Contractor  of
that decision,  justifying the position based
upon the plans, specifications, and other
contract documents.  In reaching  that deci-
sion, the Grantee may find it advisable  to
obtain legal advice or to consult  with rep-
resentatives of the reviewing agency.
  If the Grantee determines that  a change
order proposal is meritorious, it should be
negotiated and settled through a
bilaterally-executed change order. If the
Grantee determines that a change order
proposal is unmeritorious, the Construc-
tion Contractor may  decide to pursue the
claim through litigation, arbitration, or
other form of dispute resolution. In that
case, the Grantee may request the
reviewing agency's advice arid assistance
prior to assessing and/or" defending against
the claim. Reviewing agency technical  and
legal assistance can also be requested for
the administration and enforcement of
construction contracts, especially where a
dispute may jeopardize completion of the
project. The following chapter, entitled
Conditions that May Warrant a Change
Order will be of assistance in judging the
merit of a change order proposal. Prompt
action to resolve disputes cannot be over-
emphasized, since efficient .execution of
the entire change order management proc-
ess can save both time and money.
(40 CFR 33.210; 35.936-5;  35.938-5; 35.970; 35.2350)

 that  May Warrant
 a Change  Order
  A change order is issued in writing from
  the Grantee to the Construction Con-
  tractor, stating that it represents a change
  to the contract. This is normally done after
  the Grantee determines that a proposed
  change is necessary. The change order
  proposal may have originated from either
  the Grantee's own perception of the situa-
  tion or from a request by the Construction
   The following are common categories of
  conditions which generally give rise to a
  need for contract changes:
  • Differing  site conditions
  * Errors and omissions in plans and
  • Changes instituted by regulatory
  • Design changes
  • Pverruns/underruns in quantities
  • Factors* affecting time of completion

   It is possible that some change order
  proposals may fall outside of these cate-
  gories. However,  others commonly have
  characteristics similar to the categories
  mentioned.  Therefore, they can be related
  to the reasoning process developed in one
  or more of these six mentioned categories.
   To make the decision as to whether a
  change order is warranted, the Grantee
  should first determine  if there is any basis
  for questioning the existing plans  and spe-
  cifications. If there is, then it should be
  decided whether any action is needed to
  insure that the work will be completed to
  meet the intent of the project. The next
  step is to determine whether the situation
  can be resolved by clarifying  the part of
  the plans and specifications over which
  there is disagreement, rather than au-
  thorizing a change. If it is then mutually
  agreed between the Grantee and Construc-
  tion Contractor that a change order is
  needed, it should be expeditiously pre-
'  pared.
    In contrast to the mutually recognized
  need for a change, certain acts or failure to
act by the Grantee which increase the
Construction Contractor's costs and/or
time of performance may also be consid-
ered grounds for a change order. This is
termed a constructive change and must be
claimed in writing by the Construction
Contractor within the time limit specified
in the contract documents in order to be
considered. The Grantee should evaluate a
change order proposal based on such a
claim fairly and can use the same
reasoning process as  any other proposal.

Site Conditions

A "differing site  conditions clause" or its
equivalent in an EPA grant-assisted con-
struction contract will describe differing
site conditions as:
•  Subsurface or  latent physical conditions
at the site differing materially from those
indicated in the contract, or
•  Unknown physical conditions at the
site, of an unusual nature,  differing mater-
ially from those ordinarily encountered
and generally recognized as inherent in
work of the character provided for in the
  The premises on which a differing site
conditions clause in  an EPA grant-assisted
construction contract rests may be de-
scribed as follows:
•  Each bidder is not expected to perform
an independent subsurface site investiga-
tion prior to submission of bid. However,
bidders are generally advised  by the con-
tract documents  to make a site inspection.
•  The contract bid price is proportional to
the degree of risk the Construction  Con-
tractor must provide for in its competitive
•  The most cost effective construction is
obtained by accepting certain risks for la-
tent or subsurface site conditions.
   It should be noted that other clauses of
the contract documents may impact upon
the resolution of a change  order which
was originally initiated under a "differing
site conditions"  clause, such as. for ex-
ample: a requirement to make a site in-
spection prior to bidding.
Considerations for Evaluating
Need for a Change
Contract Documents
—  What is the differing site condition?
—  What is the site condition shown on
    the plans?
—  What sections of the specifications are
—  Do the parties have the latest revised
    issue of plans and specifications?
—  Have the parties checked all the plan
    references? Plans are usually segre-
    gated by specialty: architectural, site,
    plumbing, mechanical, structural,
    electrical, special and  standard de-
    tails. A critical note or dimension on
    one of the specialty drawings may
    solve the whole puzzle of need and
—  Does the Grantee have all the avail-
    able data describing actual field con-
    ditions: Inspector reports, sketches,
    dimensions, photographs (before and
    after construction)? Even, if the Gran-
    tee went into the field to see the prob-
    lem, it may riot be possible to observe
    critical differences in  conditions.
—  Has the inspection staff provided
    adequate data? If not,  correct that
    situation immediately. The next
    "claim" could be much larger.
—  Why was the condition shown dif-
    ferently in the design?
—  Was provision made for this situation
    in the contract documents?
—  Did the Construction Contractor
    encounter unstable soils, rock excava-
    tion, or subsurface structures where
    no careful prebid site  inspection and
    contract documents could  have pre-
    dicted their existence?
—  Was the Construction  Contractor
    forced to employ unusual construc-
    tion techniques and equipment to
    overcome the obstacles encountered?
—  Can the Construction  Contractor's per-
    formance, selection of construction
    procedures, and response to site con-

       ditions be evaluated by the Engineer
       (or possibly a third party) experienced
       in modern construction techniques?
   Construction Contractor Compliance
   —  .Did the Construction Contractor prom-
'•*      ptly and before such conditions
       were disturbed comply with Grantee
       notification  requirements?
 ,.  —  Does tthe Construction  Contractor have
       appropriately trained and experienced
       personnel; have adequate modern
       equipment where needed; use
       methods and techniques  consistent
       with accepted practice?
   —  .Did the Construction Contractor make
       a site inspection'and evaluation of,-
       conditions prior to bidding?
   —  -Is the construction layout correct?
       Who made the stake-out;1 who checked
       the stake-out?
   —  Did utility companies respond and lo-
       cate their facilities? Did the Construc-
       tion Contractor protect or obliterate
       utility  mark-outs and use suitable con-
       struction techniques to protect struc-
       tures and utilities?
   Subsurface Investigation          -.
   —  Were borings made or  test holes dug;
       displayed correctly; available to all
       bidders; of proper kind and depth;
       spaced at reasonable intervals?
       Contract documents often have  dis-
       claimers regarding differing sub-
       surface conditions, but these are not
       always as enforceable as  they appear.
   —  Was the overall subsurface investiga-
       tion in proportion to the  type'and
       magnitude of the  project?
   —  Was the geologic  history  of the  site in-
       corporated into the subsurface in-
       vestigation data displayed in the con-
       tract documents?
   —  Although not part of the  evaluation,
       the Grantee  should consider whether
       additional subsurface investigation
   ,,,  should be initiated immediately to  '
       . minimize future claims and delays.
     Once the information on differing site
   conditions is assembled, the Grantee
   should be in a position to determine if the
   site conditions differ materially from those
   indicated in the  contract or those ordinari-
   ly encountered and whether this will
   cause an increase in the Construction Con-
,  tractor's cost or the time to complete the
   work. If the, Grantee determines that a
   change  order is needed, it should provide
   supporting documentation including re-
•  ports, pictures, plans  and whatever is
   appropriate to demonstrate where and
how actual conditions deviated from the
plan or from conditions that should have
been anticipated.    .
(40 CFR 33.1030..Clauses 3 and 4: Part 35, Subpart E.
App. C-2, Clauses 2 and 3)         .    '     '..

Errors and Omissions
in Plans and

Errors and omissions are- usually design of
drafting deficiencies in the plans and spe-
cifications. Errors on plans and specifica-
tions are items which are  sriown in-'
correctly, while  omissions are items which
are not shown at all.               , ''
   Errors and omissions in plans and speci-
fications may be expected on. any large
complex project and are" usually brought
to the attention of the Grantee through  the
Engineer, Construction Contractor or sup-
plier. Many errors are corrected by .alert
inspectors before incurring unnecessary
additional costs. However, some errors
may lead to disputes between the Engineer
and Construction Contractor. The Grantee
is responsible for resolving the dispute
and may have difficulty in assessing the
situation, since the Engineer may have
also been the designer and may strongly   .
feel that the design was adequate. Moreov-
er, there may be no clearly discernible  line
between design errors and faulty materials
or installation by the Construction Con-,
tractor. The Grantee may seek opinions
from independent third.parties ex-
perienced in modern design practices to
aid in the more  complex decision making]
but should request prior approval from the
reviewing agency before contracting with a
third party.
   The terms of an EPA-grant assisted de-
signer's contract require the correction  of
errors/omissions in the drawings or speci-
fications without additional compensation.
   Time spent negotiating an Engineer/
Construction Contractor dispute'should
not extend the time of completion.  ,,
However, a finding of design deficiency
may be grounds for time extension equal
to that delay caused  by the error itself.
Considerations for Evaluating
Need for a Change   ,
— What is the error or omission?
— Where are.all the pertinent references
    in plans and specifications?
— Is the intention of the pertinent refer-
    ences obvious .and will they result in
    meeting project  objectives? '
-=- Did the error/omission lead to in-
    creased Construction Contractor costs?

   Essentially, a change order in this cate-
gory is necessary when some part of the
 project will hot operate properly without
 that change to the extent intended if the
 error or omission had not occurred.
   The Grantee should evaluate these re-
 quests carefully, since not all errors or om-
. issions necessitate a change to the contract
 price and/or time. While the Construction
 Contractor is entitled to ah equitable
 adjustment, it may have incurred no addi-.
 tional expense and may have no right to a
 claim even though an error or omission
 has occurred. If expense was decreased, a
 credit could be due the Grantee. The Gran-
 tee should pursue the available remedies
 against all parties who are responsible for
 the added costs of a change to protect it-
 self against vicarious liability for the im-
 proper actions of others. :  ~
 (40 CFR, 33.1030, Clause 13: Part 35, Subpart E. App.
 C-l, Clause 2)         >

 Changes Instituted
 by Changes in              .
 Regulatory Requirements

 Compliance to changes in the law or in
 the requirements of government agencies
 may necessitate a change order. Typical
 examples are: changed requirements for
 protecting historical or archaeological ob-
 jects, revisions to building codes, or re-
 vised road construction plans. The need
 for .this type of change should be .well
 documented with sources and dates. Jus-
 tification for change should include cor-
 respondence, records and notes demon-
 strating that the requirements could not
 have been incorporated into the contract
 documents prior to bid 'date.
 Considerations for Evaluating
 Need for a Change
 —  Is this a change or more stringent en-
     forcement of an  existing law or regula-
     tion?                      ,
 —r  Should the Construction Contractor
     have provided for this in its' bid: "e.g.,
     maintenance of traffic, providing fill
     materials, waste disposal,  environ-
   '  mental protection, construction safety,
 — Is  the proposed modification actually
     a change in the work or does it actual-
     ly fall into the category of accepted
     minimum standards of workmanship
     implied if not defined jn any contract
       Grantee should review the
 documentation for this kind of request
 carefully to demonstrate that this is in-
 deed a change.      .

    A design change is a modification to an
    existing design which can be constructed
    arid will operate properly without mod-
    ification. In order to warrant considera-
    tion, it should meet one or more of the
    following conditions:
    • Be cost-effective. That is, offer a savings-
    in excess of all costs associated with the
    change order including future operation
    and maintenance costs.
    * Respond to a proposal based on a con-
    sujictiqn incentive contract clause.
     Design changes usually originate as
    proposals volunteered by the Construction
   Contractor, recommended by the Engineer
   or requested by the Grantee. The Grantee
   may see certain benefits such as reduced
   operating costs or improved operating
   efficiency. However, any such proposal
   deserves particularly careful analysis be-
   cause the plans and specifications have
   already been determined to be adequate
   for project purposes by the reviewing
     The Grantee must receive prior written
   approval from the reviewing agency before
   authorizing changes which substantially
   alter the design, scope, type of treatment,
   location, size, capacity, quality of any
   major item of equipment or time of project
   completion. This category of change is  *
   likely to require prior approval  because it
   often changes project scope or performance
   standards, so that the Grantee may wish to
   consider submitting all proposed changes
   under this category for prior approval by
   the reviewing agency.
   Considerations for Evaluating
' !•  Need for a Change
   Considerations relating to design changes
   fall into five categories: general, substitu-
   tion, revised site location, additions and
   —> Who originated the proposal?
   — How will it differ from the original
   —  Whesn will an answer be needed?
      (Some design changes require prior
   —  Why was the alternative not consid-
      ered during design? Is this the most
      cost effective alternative? Are there
      others?	"_        .  '     ,.~\
   —  Who will guarantee the design
      change? (A Construction Contractor
      normally guarantees its work for a
      period of one year after it is accepted
      by the Grantee. The designer may be
      held liable for its own design for
      many years by state statute.)
 —  Does the change affect the timing or
     cost of other contracts?
 —  Will the change affect operation and
 —  What are the secondary effects?
 Substitution is the exchange of specified
 equipment, material, or construction tech-
 nique for another of equal, better, or lesser
 quality. The substitution may require a
 different installation technique from the
 design, with a resulting change in installa-
 tion costs which far outweighs differences
 in material costs.
 —  Why can't the  specified equipment or
     materials be supplied? On time?
 —.  Is there  a purchase contract? If so,
     when was it authorized? What written
     guarantees did the supplier make con-
     cerning performance? How does the
     supplier respond to charges of non-
     performance? Will the supplier be li-
     able for  liquidated damages assessed
     by the Construction Contractor? Has
     the Construction Contractor expedited
     delivery? Who  assumed risk for timely
     delivery or performance?
 —  Will the specified item be available
    from other suppliers? Within the time
     limitations.? Who checked availability?
    What other suppliers were contacted?
    Give firm, date, and telephone num-
    ber, name and  title of persons con-
    tacted. Can the non-availability of an
    item be fully documented?
 — Do the contract documents specify
    something impossible or a sole
 — Why was this not questioned prior to
    bid and award? A  responsible bidder
    would be expected to check availabil-
    ity of major materials and equipment
    when preparing a bid  submittal.
 — Will the  proposed substitute be equal
    in all salient  respects and compatible
    with other equipment and facilities?
    The Engineer should give a written
    opinion on this.
— Was the substitution proposal pro-
    moted as a result of some design,
    fabrication, or construction failure?
— Does the proposed substitute  circum-
    vent the grant and statutory restric-
    tions concerning non-restrictive speci-
—  Will the change relax the specification
    to permit use of less expensive mate-
    rials and methods? How will EPA and
    the Grantee benefit? Will there be a
    fair credit? Will the relative order of
    bidders be changed?
—  Will the proposal violate EPA's "Buy
    American" clause?
 Relocation of
 Relocation of site is" a highly undesirable
 circumstance, since it opens Pandora's box
 to Construction Contractor claims, es-
 pecially when done hastily in response to
 some unforeseen conflict. The Grantee
 should consider all secondary effects and
 be assured that a site relocation is the only
 feasible alternative.
 —  Why change the location? Was there a
     design error?  Will it ease the Con-
     struction Contractor's task? Is the
     Grantee  unwilling or unable to ex-
     ercise eminent domain? Is  there some
     benefit to the property owner?
 —  Are there environmental con-
     siderations? Does the change necessi-
     tate additional environmental and
     archeological  review by municipal,
     state or federal agencies?
 The Grantee  should insure that proposed
 additions are within contract scope and
 project scope.
 —  Will the proposed item improve main-
     tainability of the new grant-funded
     facility or existing facility? If both, in
     what proportion?
 —  For existing waste treatment facilities,
     will the  change constitute normal
     maintenance for which the Grantee is
     solely responsible? Improvements to
     existing  facilities to make the total
     system work are limited to those out-
     lined in  the Grant Agreement.
 —  For collector and transportation pipe-
     lines, will the proposed redesign con-
     form to the Grant Agreement? Is there  .
     any public funding restriction (private
     connections, location, size and depth
     to serve  future development)?
 —  Is this work considered restoration
     and is it  outside the Construction
     Contractor's designated "work area"?
 Major deletions should not be accepted at
 face value. Often a careful review will re-
 veal very extensive costs and secondary
 —  Why was it initially in the design?
     Will the  quality of the work be low-
     ered by deleting the item?
— Is another item necessary to replace
    this one? Will the deleted work need
    to be done in the future, possibly at a
    higher cost than the proposed credit?
— What is the impact to the contract?
    Deleting  an  item which was priced
    too low may be of substantial benefit
    to the Construction Contractor.
  Thus, the Grantee should evaluate the
request  for design changes to determine
whether the, proposed change will be cost

   effective or respond to a proposal based
   on a construction incentive contract
   clause. It should be emphasized that con-
  , siderable effort was expended in prepara-
   tion and. review of the existing adequate
   plan and there must be good  reason to
'3  duplicate this effort.
   (40 CFR 33.255; 33.710; 35.935-11; 35.936-13: 35.2204)

i Overruns/Underruns
  in Quantities

  Overruns/underruns occur whence differ-
  ence develops between the quantity es-
  timated in the bid schedule and the quant-
  ity actually required to complete the bid
  item. These differences occur only in con-
  tracts which are formulated as a series of  .
  bid unit prices for each unit (cubic yard,
  linear foot, etc.) .of that item installe.d.
  They do not affect lump sum firm fixed
  price bids. When the differences are con-
  siderable, it can result in an unreasonable
  loss to either the Grantee or the Construc-
  tion Contractor. The Grantee and Engineer
  should be alert to identify significant
  overrun/underrun trends as early as possi-
  ble and avoid obligating funds which are
  not available.
    When change orders increase or de-
  crease the quantity of original contract
  items, the Grantee may need to review the
  unit price to allow for reasonable adjust-
  ment if there is a contractual  "variations"
  clause where:
 . • The Grantee incurs unreasonable  ex-
  pense when an-itern priced too high has
  heavy overruns.
  • The Construction Contractor  sustains
  loss due to heavy overruns in an item
  priced too'low.
  • The Construction Contractor  must
  absorb expenditures of general overhead
  costs which were included in the unit
  price for an item that was only  partially
    Most contracts contain provisions for
  significant differences in the "as built"
  quantities when compared with the  es-
  timated quantities. A provision required
  by EPA until  May 12, 1982, states that
  should the final quantity differ  from the
  original bid quantity by 15 percent or
  more-, (less  than 85  percent - more than
  115 percent) the Grantee should consider
  negotiating new unit prices. The Grantee
  may negotiate an equitable adjustment in
«  the unit price for that differential which
  exceeds the 15 percent margin.
    Engineers are not always able to predict
  contract quantities to plus or minus 15
9  percent in advance. Realizing this, Con-
  struction Contractors sometimes speculate
  by entering high unit prices on  those
  items they expect will overrun and low
  unit prices on those items which may un-
  derrun significantly. The technique  is re-
ferred to as an unbalanced bid. The result
may be unbalanced unit prices or prices
which are not proportional to the es-
timated construction costs. However,
where the Construction Contractor has
large overruns in units where unit prices
were underbid and there is no variations
clause in the contract, a proposal to mod-
ify those unit prices may be developed. It
should be evaluated on the basis of the
foregoing discussion.
  Additional clauses may have been in- '
eluded in the contract to minimize in-
centive for speculative bid unit prices
such as'to:  •'"•'.'•
• Consider overruns/underruns for
renegotiation only on major items (e.g.,
unit price multiplied by quantity equals or
exceeds 10 percent of contract dollar
amount) or high risk items (foundation ex-
cavation). The\Construction Contractor's   "
competitively bid unit prices are pre-
sumed sufficiently balanced that only
large changes to major items will create an
unfair hardship to either Construction
Contractor or Grantee. From another point
of view, the increased cost (or savings)
resulting from an unbalanced unit price
may be presumed distributed over the
other contract items.     ,
• Place a ceiling or maximum permissible
change allowable in the unit price, e.g., 25
•• Establish a minimum amount payable
under the jtem to cover fixed costs.
Considerations for Evaluating
Need for a Change
—   Where did the difference in' quantity
     occur when compared to the design
     estimate? Why did it vary?
'•—   Does the "as built" quantity use the
     same method of measurement as spe-
     cified quantity? Are there differing
     payment limits? Which method is spe-
—   What documentation is available  (e.g.,
     field measurements, survey data,  load
     slips, measurements of  carrier, weight
—   Is the variation in quantity caused by
     a different use of materials? Is this dif-
     ferent use more a design change than
     an overrun?
—   Is this excess included  in the cost of
     some other item of construction in the
—   Were quantity measurements made
     under  conditions described in the
     specification? The density, and thus .
     the volume, of soils depends on
     whether they are measured in the na-
     tive; loose, or compacted states.
—   Was the design estimate reasonable?
-—   Should more effective monitoring and
     measurement of quantities be in- /
     stituted immediately?
   A summary change order to establish
 the final quantities ori a unit price con-
 tract is accepted practice. However, the
 Grantee should recognize the purpose and
 application of contract clauses which 'were
 intended to minimize unfair advantage
 and expense to the Grantee or the Con-
 struction Contractor caused by' significant
 differences. These clauses are not neces-
 sarily justification for a change in price.
 (40 CFR 35.938-5)  ',

 Factors Affecting
 Time of Completion

 Six conditions impact time of completion,
 which is  equally as important as costs:  ter-
 mination for convenience, termination for
 default, suspension of work, directed
 acceleration, time extensions and con-
 structive  acceleration. It should be pointed
 out that termination and suspension are •
 not common actions on  public sector con-
 for Convenience
 A clause  of this type reserves the Gran-
 tee's right to terminate any or all portions
 of the contract work at any time during
 the course of the project, even though
 neither party has violated the contract or
 failed to perform. The Grantee must follow
 a prescribed course of notification and
 assumes control and ownership of facili-
 ties constructed to  date. The Construction
• Contractor is entitled to  an equitable
 adjustment. EPA-required contract pro-
 visions or model subagreement clauses  re-
 serve this right to the Grantee and provide
 a detailed procedure for evaluating the
 equitable adjustment when preparing the
 change order.
 Termination •   .              -  .  .  •
 for Default
 If the Construction Contractor fails to per-
 form all or portions of the work with suf-.
 ficient diligence to ensure completion of
 the contract within the allotted contract
 time  plus time extensions, the Grantee
 may terminate the Construction  Con-
 tractor's right to procee'd. The Grantee
 assumes ownership, of facilities con-
 structed to date, and can complete the
 project with its own forces or by using an-
 other contractor. The Construction Con-
 tractor is  entitled to an equitable adjust-
 ment which includes: payment for work
 done and materials supplied to date, de-
 duction of any additional cost over and
 above the contract amount which the
 Grantee incurs to complete the project,
 and deduction for damages sustained by
 the Grantee due to  the Construction Con-
 tractor's default. EPA-required contract
 provisions or model subagreement clauses
 provide details for calculating this adjust-
 ment when preparing the change order.

      Grantee must observe the contractual
  rights of the Construction Contractor's
  bonding company or other surety to pro-
  tect its right to have the project com-
  Suspension of Work
  EPA-required contract provisions or model
  subagreement clauses contain a clause
  which reserves the Grantee's right to
  temporarily suspend or interrupt portions
  or all of the  work for an appropriate per-
  iod of time at the convenience of the
  Grantee. In a few cases, the Construction
  Contractor may be entitled to an equitable
  adjustment for any additional costs caused
  by this suspension particularly if the sus-
  pended work is on the critical path of the
  project schedule.
  The Grantee may determine that portions
  of the work  or the entire contract must be
  accelerated from the original contract
  schedule. While directing acceleration of
  the work may be procedurally similar to
  ordering a temporary suspension, the Con-
  struction Contractor is less able to change
  the work schedule without additional cost.
  The Grantee, after determining the facts,
  may grant a time extension to the  Con-
  struction Contractor for good cause. Other-
  wise, the Construction Contractor  could be
,  liable for contractual penalties, if any,
  resulting from failure to perform within
  the allotted time. A commonly used mech-
  anism for controlling unjustified delays in
  contract completion is a liquidated dam-
  ages clause  in the contract. The clause
  generally assesses a dollar amount to be
  paid to the  Grantee from the Construction
  Contractor for each day that the time re-
  quired to complete the project exceeds the
  contract time. The amount is based on es-
  timated damages which would be sus-
  tained by the Grantee. This clause is in-
  voked only if the Construction Contractor
  has failed to complete the work by the de-
  signated time or fails to justify and obtain
  approval of time extensions. Since the
  Construction Contractor will generally
  provide a justification, the Grantee should
  keep complete time-related records in
  order to enforce this clause.
Acceleration               /
The Grantee should not ignore a justifiable
request for a time extension since this can
result in a Construction Contractor claim
for constructive acceleration. This occurs
when a Construction Contractor sustains
additional costs by increasing forces or
otherwise incurring added expense to
overcome lost time which occurred
through no fault of its own in order to
avoid assessment of liquidated  damages.
Considerations for Evaluating
Need for a Change
— Was the cause of the delay beyond  the
    Construction Contractor's control? Did
    the Construction Contractor fail to
    take normal precautions?
— Was the Construction Contractor
    ready and able to work?
— Did the Construction Contractor sub-
    mit a detailed schedule projecting
    completion within the allotted time?
    Updated regularly? Did the updated
    schedule justify an extension?
—  Did this schedule contain  a "critical
     path analysis" or equivalent?
-J-  Has the Construction Contractor main-
     tained sufficient forces in  those op-
     erations along the critical  path where
     needed to meet target dates?
 —  How have causes other than normal
   ,  weather beyond the control and with-
     out the fault or negligence of the Con-
     struction Contractor affected target
     dates along the critical path? Ex-   •
     amples of these include acts of God,
     acts of the public enemy,  acts of the
     Grantee, acts of another contractor in
     the performance of a contract with the
     Grantee, fires, floods, strikes, or un-
     usually severe weather (e.g., A carpen-
     ters' strike lasting ten days may have
     only delayed the total project three
  —  Has the Construction Contractor pro-
     ven "unusually severe weather" with
      such information as climatological
      data, return probability of severe
      storms, or flood depth data? Did the
      weather phenomenon actually delay
      operations along the critical path  or
      secondary operations? Was the Con-
      struction Contractor shut down for
      other reasons?
   Terminations, suspensions  and ex-
  tensions of time will necessitate pro-
  cessing a change order. Terminations for
  convenience or default are usually very
  complex and may require evaluation of
  the entire project. Other contract pro-
  visions in addition to EPA-required con-
tract provisions or model subagreement
clauses can affect the outcome. Extensions
of time should be fully evaluated and jus-
tified. The Grantee is cautioned against
awarding unwarranted time extensions, so
that liquidated damages may not be un-    v
necessarily forfeited.
  Whenever time factors are part of a
change order, they should be negotiated
together  with the other factors, not de-
ferred  or separately negotiated. In this
way, claims for associated costs such as
additional overhead during time ex-
tensions can be largely avoided.
(40 CFR 33.1030, Clauses 5 and 6; Part 35, Subpart E,
App. C-2, Clauses 4, 5 and 6) -

  Preparation  of
  the  Change  Order
 The preparation of the change order by the'
 Grantee requires familiarity with .contract
 documents, assembling of pertinent in-
 formation, negotiation, and careful
 documentation of the proceedings. The
 change order may  be initiated by a request
• for proposal from the Grantee or as a
 claim or recommendation for change from
 the Construction Contractor. A claim is
 basically a request for relief because some
 action or inaction by the Grantee or a mis-
 representation in the contract documents
 is alleged to have caused an involuntary
 change in the cost or time of performing
 the contract. It differs from the other
 methods of initiating the change order
 process, since the circumstances already
 exist and the Construction Contractor has
 announced the  intention of pursuing an
 increase in the contract price or time.
    While a request for proposal or a claim
 are general in nature, the change order
 proposal sets forth a full development of
 costs and work. It  is a written offer by the
 Construction Contraqtor to perform or de-
 lete stated work in return for ah adjust-
 ment for a certain  amount of money or
 contract time (if needed).
    The  Grantee should examine a proposal
 very carefully to determine by reference to
 the appropriate section in the specification
 those items which are included, and  those
 which are omitted. However, timely action
 on the proposal is  equally important, since
 delays could increase the Construction
 Contractor's costs and possibly lead to
. secondary  effects on project cost and com-
 pletion time.                 •         .  -
    Before entering negotiations, the Grantee
 should be totally familiar with the options
 and incentives provided by the contract
 documents. Application of these tools can
'encourage  the Construction Contractor to
 negotiate meaningfully.
    The  bilateral  change order is the more,
s common type, it is one agreed to by both ,
 parties, and it minimizes cause for dis-
 putes and claims at a later date. Should
 meaningful negotiations fail,  the Grantee
 may issue a unilateral change based on the
 authority provided it by the EPA-required
 contract provisions or model subagree-
 ment clauses. For a unilateral change, the
 Construction Contractor, whose con-
 currence is not required, is entitled to an
 "equitable adjustment" for any difference
 in cost resulting from, that change. Many
 contracts provide a formula for computing
 the adjustment. The threat of the use 'of
 the unilateral change plus other options
 provided for by contract can expedite
 meaningful negotiations.
  ' Other options include deletion of the
 work covered by the change and perform-
 ance of that work fay the Grantee's own
 forces (which should be approved  by the
 reviewing agency before starting work), or
 performance under a separate contract
 awarded to another construction con-
 tractor. However, a proposal deleting ,the
 changed work may entitle the Construc-
 tion Contractor to an equitable adjustment
 for partt but not necessarily a prbrata
 share, of the overhead and profit allocable
 to the changed work and not recovered
 elsewhere. The unilateral change should
 be invoked with caution since control over
 costs and time may be lost, the quality of
 the work may suffer and control of the
 contract may suffer.
  Contract documents .generally provide
 time limitations which the Construction
 Contractor must satisfy  in order to be enti-
 tled to an adjustment. Likewise, the Gran-
 tee should respond in a timely manner,
 particularly in the case  of a claim for ex-
 tension of time. Failure to respond may be
 construed as a denial and, if the Construc-
 tion Contractor fulfills the conditions for
 constructive acceleration, may recover
 damages from the Grantee..
  Convinced of the need for a change
 order, the Grantee's next step is to negoti-
 ate the conditions of that change with the
 Construction Contractor and prepare the
 change order. Effective negotiation is a'vi-
 tal function of contracts administration.
 The Grantee should, as  good business
 practice, prepare for negotiations with the
 same thoroughness as the Construction
 Contractor. There should be an exchange
 of background information,  clarification of
. the scope-of change, consultations with
 regulatory agencies where necessary, ex-
ploration of alternatives and secondary
effects and cost and time considerations.
Each party should formulate certain
negotiable objectives of performance,
price, and time.
(40 CFR 33.1030 Clause 3; Part 35, Subpart'E, App. C-
2, Clause 2)

Preparation For

The Grantee is responsible for negotiating
fair and reasonable cost and time for a
necessary change order. Preparation for  •
negotiations should include consideration
of quality control, cost, alternative
methods, secondary effects, and time. The
Engineer's advice is normally sufficient for
this preparation.
  However, where the.Grantee is faced
with an unusually substantial and com-
plex claim, it may wish to use an in-
dependent third party to prepare an
assessment. This third party should pro-
vide .whatever engineering and construc-
tion, financial, and legal expertise is
needed to clarify the Grantee's position
regarding costs, share of liability and
amount at risk. By comparing the assess-
ment to litigation/arbitration cost estimates
'and the Construction Contractor's poten-  .
tiaLsettlement offer, the Grantee may find
the claim close to resolution. It should be
noted that written prior approval by the
reviewing agency should be obtained be-
fore contracting with a third party if the
Grantee wants this assistance added to the
scope of the grant-eligible project.
Quality of materials and workmanship
may be a negotiable item in some mod-
ifications. The corresponding price can
vary over a considerable range. Any pro-
posal for change should include a detailed
description of work, plus a specification
clearly defining quality  of materials and
Most changes clauses specify that an
equitable:adjustment should be agreed up-

  on, The goal of an equitable adjustment is
  tq leave the Construction Contractor in the
  same relative profit or loss position on the
  basic contract after the change order as if
  there had been no need to change the  con-
   The Grantee should establish the cost of
  the change. Insofar as possible, before  the
 start of  work. Pricing of the work after its
 completion is undesirable since it:
 • Compromises the Grantee's ability to
 control  project costs.
 « Gives the Construction Contractor a  dis-
 tinct advantage in negotiations for ex-
 tensions of time.
 • Fosters  a condition where the price
 agreement may be based upon  cost plus a
 percentage of cost basis which is not
 allowed under EPA regulations.
 • Fosters  a pattern of overpriced pro-
 posals which delay agreement until after
 the work is completed.
  I     '•     ti'i,:T *
   At this stage, the Grantee should have
 the CQnstruqJion Contractor's price pro-
 posal, the  Engineer's independent cost es-
 timate and possibly an independent third
 party's assessment if necessary for com-
 parison. The Grantee should be prepared
 to negotiate cost plus a fair profit, in-
 cluding  reductions in overhead and profit
 for deleted work. Under grants awarded
 before May 12, 1982, the Construction
 Contractor is  required by EPA regulations
 to submit sufficient cost and pricing data
 to the Grantee to enable the Grantee to de-
 termine  the necessity and reasonableness
 of costs. Under grants awarded on or after
 May 12,1932, the Grantee is required by
 EPA regulations to conduct a cost or price
 analysis for all negotiated change orders
 estimated to exceed $10,000.
 HO CFR 33.290, 33.1030, Clause 8; 35.938-5)

 There are generally a number of alterna-
 tive methods of meeting the objective of
 the proposed change. The Construction
 Contractor, being the  most knowledgeable
 about its operating costs, can often suggest
 economies in  construction methods or
 materials not apparent to a Grantee. The
 Cost effectiveness of the alternatives pre-
 sented should be compared after a tech-
 nical analysis, taking  into account future
 operation and maintenance costs. Whether
 the change is needed  to complete the proj-
 ect should  also be considered, since the
 "no change" alternative may in fact be  the
 most cost effective choice over the design
 life of the project.  '
 A seemingly minor contract change may
 have secondary impacts which are many
 times more costly than the original change
 order amount. Assessment of secondary
 effects presupposes a thorough un-
 derstanding of the project design, contract
 documents, and the Construction Con-
 tractor's schedule and construction tech-
 niques. Failure to properly assess secon-
 dary effects may undermine the cost
 effectiveness justification supporting the
 proposed change's.
  The following example will illustrate
 secondary effects:
  A change is proposed to increase the
 size and capacity of a pump. The pro-
 posed pump may no longer be compatible
 with intake or discharge piping, power
 source, housing, mounting hangers, or
 electrical controls.
  'Some of the conflicting parts may
 already be ordered or installed. Many of
 the costs may be duplicated, plus, should
 any portion of the duplicated work or de-
 livery time impact the critical path sche-
 dule, the contract completion date may be
  The prime Construction Contractor may
 guarantee and absorb any  unforeseen sub-
 contractor costs; however, any portion of
 the work or related work constructed by
 another prime contractor should be as-
 sessed for costs  and time impacts. On pro-
 jects with multiple prime Construction
 Contractors  and on fast-track projects, the
 Grantee generally has assumed the
 responsibility for coordination and may be
 liable for the secondary impacts on related
 prime Construction Contractors.
  The designer may be entitled to addi-
 tional fees for design (if not to correct an
 error or omission); plus, if the change re-
 sults in an extension of time, there may be
 additional inspection costs.
  If the electrical controls are provided by
 another prime contractor and need mod-
 ification, another contract change  may be
 Time affects price. It is unlikely that a
 realistic price can be negotiated without
 the parties agreeing pr being close to
 agreement on the time adjustment re-
 quired. Deferral  of time negotiations to a
 later date suffers from the same criticisms
 as after-the-fact pricing, since it:
 • Relieves the Construction Contractor of
 pressure to complete the work in a timely
 manner. However, if time negotiations are
 deferred, the Construction Contractor must
 still prove the basis for delays.
• Places the Construction Contractor in
the  advantageous position of negotiating
from actual time, This can be countered
by keeping construction schedules up to
date.  •
 •  Creates a danger of constructive
 acceleration die to failure to issue jus-
 tified time extensions promptly.
   Approval of a change order for time ex-
 tension may extend the amount of        \
 engineering and inspection needed on the
   Approval of a time extension will not
 relieve the Grantee from anv obligations  •»
 that the state or EPA may have imposed
 upon the project.
   In addition to the Construction Con-
 tractor's proposal for time extension, the
 Grantee should make its own independent
 estimate (normally prepared by the En-

 of Negotiation

 It  is good construction management prac-
 tice to keep a memorandum of the negotia-
 tions pertaining to a change order. The
 amount of detail and formality involved in
 the memorandum should definitely be not
 more than is justified by the complexity of
 the work and cost involved.
   A record of these negotiations docu-
 ments that the parties have a clear un-
 derstanding of the proposed changes and
 jointly evaluated the reasonableness of the
 proposal. These should include con-
 siderations of quality, cost,  alternative
 methods, secondary effects, and time. The
 memorandum should be prepared at the
 negotiating table and signed by all
 attending. Immediate documentation mini-
 mizes misinterpretation and memory fail-
   The parties may not reach agreement  on
 some or all of the items discussed. The
 disagreements are often more significant ~
 than the items resolved. Those items
 which are not resolved or are not negoti-
 able should also be recorded, stating the
 position of each side and whatever
 reservation of rights is necessary. The
 reasons for disagreement must be clearly
 documented. A multipart bilateral change
 order can then be executed  for the re-
 solved items and one or more unilateral
 change orders issued for those unresolved
 items which must proceed.  The Construc-
 tion Contractor may then seek a remedy
through renewed negotiation, arbitration
 or litigation.
  A number of unrelated items may be
 discussed at the same session and in-     ;
eluded in one memorandum. The Memor-
andum of Negotiation should contain the
following information:
•  Project name and number, location,    '
date.                    '
•  Contract name and number.

 •  Names of persons representing Con-
 struction Contractor, Grantee, Engineer.
 •  Description of proposed change'(Attach
 revised specification, plan, sketches, shop
 drawings, etc.) station location, plan sheet
j number.
 •  Discussion of alternative methods of
 meeting objective and quality con-
* •  Construction Contractor's price pro-
 •  Engineer's independent estimate of cost
 and time changes.
 •  Explanation for recalculation or dis-
 •  Statement of total cost changes in-
 cluding secondary costs.
 •  Statement of total,time changes.
 •  Assurance that complete cost of secon-
 dary effects has been included.
 •  Dated signatures of persons attending.
   The Memorandum is not a notice to pro-
 ceed, nor is it a change order. It should be
 used in the preparation  of the change
 order and retained in the Grantee's files
 for possible later use by the reviewing


 The change order is the  formal doeument
 which  alters some condition of the con-  •
 tract documents. The change order may
 alter the contract  price,  schedule of pay-
 ments, completion date, plans  and  speci-
   It specifies the agreed upon change to
 the contract and should include the
 following information:
 •  Identification of the change order
 •'Description of change '         ;
 •  Reason for change       ;
 •  Change in contract price
 •  Change in unit prices (if applicable)
 •  Change to contract time
 •  Statement that  secondary impacts are
 included                    '         ,
 •  Approvals by Grantee's and  Construc-
 tion Contractor's authorized representa-
 1 The Grantee may require the Engineer's
 signature for internal control, but this is
 not a substitute for the Grantee's signature.
 Notice                .'.••'•-
 to Proceed
 Before proceeding with the work, the,Con-
 struction Contractor may require a
 "Change Order Notice to Proceed" (stan-
 dard forms available from professional and
 trade associations) from the Grantee. If
 needed, the Grantee can provide notice to
 proceed immediately unless prior approv-
 al from the reviewing agency is required.
 The notice to proceed may be made a part
 of the change order, allowing the Con-
 struction Contractor to proceed upon ex-
 ecution of the change order by both par~

 a Change  Order
 to the  Reviewing Agency

 EPA regulations intend that the level of
 detail required in a change order and
 attachments  depends on the dollar amount
 and complexity of the change. For changes
 with a price  of $10,000 or less, abbrevi-
 ated documentation should be used such
 as, for example, a telephone memorandum
 to serve as a Memorandum of Negotiation.
 As another example, sales slips, quota-
 tions, catalogs and price lists can be used
 to support the price paid. By using short-
 ened procedures and by grouping changes
 to be administered in one change order,,
 preparation costs should be kept reason-
 able in relation to the dollar value of the
 .change. However, related work should not
 be separated into several change orders
 just to take advantage of shortened pro-
   Submittal  requirements also depend on
 the date upon which the grant was
 awarded. For grants awarded before May
 '12, 1.982, the change order approval
 request and attachments should be sub-
 mitted  to the reviewing agency as soon as
 a change order has been signed unless the
 Grantee self-certifies its procurement sys-
 tem. Allowable cdsts can,then'be included
 in the next payment request.
   For grants awarded on or after May 12,
 1982, change orders would not need to be
 submitted to the reviewing agency, unless
 the Grantee self-certifies that its own pro-
 curement  system does not meet the intent
 of EPA regulations. However, these change
 orders will be subject to audit by the
 reviewing agency at the completion of the
 project. Documentation should therefore
 be completed, except the approval request,
,. and filed by the Grantee.
   In order to assist the Grantee in prepara-
 tion of the change order approval request,
 the information typically required by the
 reviewer has been listed under Screening
 Process on page 12. This request formally
 notifies the reviewing agency that a
 change has been made to the  contract
documents and asks for change order
approval and determination of allowability
of any additional costs or time for federal
participation. Since .the memorandum of
negotiation, change order and notice to
proceed (if,any) will be included with the
request, it is suggested that information  -
given on .them not  be duplicated on the
request itself.
  The request must be signed by the Gran-
tee prior to submission to the reviewing
agency. As with the change order, the En-
gineer's and Construction. Contractor's
signatures may be required as a  part of the
Grantee's internal control procedures, but
this is not a substitute for the Grantee's
signature. Supporting documentation
should be referenced and then attached to
the change order request.
  The Grantee is expected to keep all
change order documentation on file for 3
years following final grant payment. If a
change order is the subject of a con-
troversy (such as a claim) or audit within
the 3 years, the period shall be extended  -
until resolution of  the controversy or au-
  The Grantee should also check with its
State agency which has reviewed the con-
struction drawings and specifications to
determine if there are any additional
change reporting requirements, such as
modifications to a State-issued building
('(I CFR 33.001: 33.110)'

Reviewing Agency
The reviewing agency's responsibility is to
determine if a change order request com-
plies with and satisfies the requirements
of the U.S. Environmental Protection
Agency's (EPA) construction grants pro-
gram" on two points. The first is whether
me work would be considered  a major
change and therefore, in many  cases, a sig-
nificant alteration of the previously
approved plans and specifications. The
second is whether the reviewing agency
should commit additional federal and/or
state funds to the project. To do this, the
reviewer should be thoroughly familiar
with the program, the specific grant con-
ditions, the contract documents and the
following procedure for consideration of a
change order.
  Each reviewing agency has developed
Us own checklists for review of change
Orders, which may be more or less de-
tailed than what is provided here, so that
the Grantee should discuss  those pro-
cedures with the particular reviewer who
is involved^ The procedure  that follows is
organized so that the more detailed an-
alysis required in the succeeding steps
need only be performed if each earlier
step is already satisfied. Thus,  the change
proposal need not be thoroughly analyzed
if the request is deferred or rejected at an
earlier stage. A point which needs to be
re-emphasized here is that the  detail re-
quired by the reviewer should  not be more
man is justified by the complexity of the
change and cost involved.
  Even though each reviewing agency's re-
quirements will differ, the process should
he generally the same and in the following
• Screening of change order materials.
• Verification of prior approval require-
ments.    "        "       _ ^
• Determination of federal  and/or state
funding participation, based upon:
•j— Need for change.
r- Reasonableness of the method of
    accomplishing the objective.
TT- Eligibility of the change.
— Allowability of the costsl
• Documentation of the review pro-
• Notification to the Grantee.


The change order approval request should
first be screened to determine whether the
information and documentation provided
are sufficient  for the subsequent more de-
tailed review. Checklists are a common,
effective technique used  to insure that
each item is verified. Later, they document
the following: who reviewed which items,
when, and what the results were. Also,
where two or more agencies check por-
tions of the same request, the checklist
clearly states  which items Were reviewed
and by whom. A schedule of important
items to be included in a reviewing agen-
cy's checklist for the screening of change
order requests is provided below.

Identification of
change order request.
• Project name.
• Contract name and number.
• EPA Project number.
• State Project  number.
• Grantee nanie.
• Change Order number.
• Date.
• Names, addresses and telephone num-
bers of Grantee, Construction Contractor
and Engineer representatives.
• State approval, name, title, date.

• Required from reviewing agency?
« Obtained from reviewing agency?

for change.                         ,
• Clear understandable statement.
• Cause and  remedial change.
• Reason why  not in original contract.
• References and attached substantiating
• • Applicable contract provisions cited
 and compliance.
 of change.
 • Clear statement, not ambiguous.
 • Revised plan and specification sheets
 referenced and attached.
 • Design data and calculations attached.
 • Scope of change is clear.
 • Change is within project scope.
 • Design is adequate.
 • Revised material or construction
 method is (equal to) (less than) (better
 than) specified construction.
 • Will revision increase/reduce time and/
 or cost of construction?
 • How are operation and maintenance
 costs affected?
 • Is arithmetic correct?
 • Does agency inspection report  verify
 accuracy of statements?
 • Does other substantiation verify accura-
 cy? Grantee inspector reports, laboratory
 tests, pictures, others.
 Change to
 contract price
 • Dollar amount of change shown (zero
 for no change).
 • Construction Contractor's cost break-
 • Profit entered separately.
 • Engineer's independent estimate in-
 cluding verification of costs for new item;
 • Documentation  referenced, attached.
 • Are unit prices  in accordance  with con
 tract documents and regulatory require- ' .

 Change to
 contract tune.                        '
 • Statement of number of days or zero
 • Documentation referenced and attachec

  Non-federal funding is properly
  certified and authorized.

  • Signature(s) entered and dated.
J • Execution of signature(s) agrees with
  prior approval requirement.
  • Change'order signature(s) entered and
j dated.
  • Execution of change order signature(s)
.  agrees with prior approval requirement.

  Attachments are listed
  and attached.
  • Memorandum of Negotiations.
  • Cost and pricing data attached and cer-
  tified by Construction Contractor (if in ex-
  cess of regulatory limit).
  • Change Order and Notice to Proceed (if

    If it has been determined that the
  change order approval request has ade- ,
  quately met the screening criteria, then the
  reviewer can proceed to a determination
  of whether, the prior approval require-
  ments have been met. If the request has
  failed to meet the screening criteria, then
  further information should be requested.

  Prior Approval

  Written approval from the reviewing agen-
  cy prior to the start of ,work associated
  with the change is often required. The
  conditions which require prior approval
  were previously discussed in Prior
  Approval Requirements on page 3. After
  the change  order approval request has
  been screened, the reviewer must de-
  termine whether the scope and conditions
  of the change would have required prior
  approval. If so, a check must be made
  whether the approval had been given prior
  to the start  of the change-related work.
  The actual work done must be reviewed to
  see whether it conforms fairly closely with
  the terms of the prior approval. If there is
  a substantial difference, the work would
  have to be considered done without prior
    When the work would have required
  prior approval and it was not given, the
  reviewer must then decide whether to
  seek a deviation from the pertinent regula-
4 tion, (see Prior Approval Requirements on
  page 3) or to disapprove the cost of the
  change. On the other hand, when the
  change had received  prior approval or did
» not require, it, the reviewer can then pro-
  ceed to the determination whether federal
  and/or state participation in the funding of
  the change  should be approved.
    This is an appropriate point to remind ,
  the reviewer of the need to act as ex-
  peditiously as possible on prior approval
 requests. Delays could increase the Con-
 struction Contractor's costs and possibly
 lead to secondary effects on both project
 cost and completion time. ,

 Determination of Federal
 and/or State Funding
 The reviewer's determination on whether
 to approve additional federal and/or state
 funding for a change would be based on
 the Grantee's analysis of the need and
 demonstration of the reasonableness of the
 means for accomplishing the changed
 work. Following that, the reviewer must
 determine that the change consists of elig-
 ible work and that its costs  are allowable.
 Review of
 the Need for Change
 Expeditious processing of the change
 order is necessary in order to deal with
 the inevitable changes in circumstances or '
 conditions which arise duririg the .course
 of construction and require increases or
 decreases to the work, cost and time for
 completion. These changes  can generally
 be classified into the following six categor-
 ies:  differing site conditions, errors or om-
 issions in plans and specifications,
 changes instituted by the regulatory agen-
 cies, design changes, overruns/underruns
 in quantities, and factors affecting time of
   It is possible that some change order
 request submissions may fall outside of
 these categories. However, those requests
 would have sufficiently similar character-
 istics that the reasoning process developed
 in one or more of these six, categories
 could be used.
   The reviewer must determine that suf-
 ficient evidence has been provided to
 demonstrate the need for a change. While
 this is largely a subjective judgment, it
 should avoid being a second-guess of
 whether there is a need. It .should instead
 be a determination whether the Grantee'
 made a reasonable analysis, using a ration-
 al basis such as in the chapter entitled
 Conditions that May Warrant a Change
. Order on page 4. If the,evidence of need
 has not been affirmed,  the request should
 be returned to the Grantee for further jus-
   The reviewer should give particular
 attention to the regulatory prohibition
 against funding change orders resulting
 from Grantee mismanagement or the Gran-
 tee's vicarious liability for the improper
 actions of others.
 (40 CFR 30.600)

 Reasonableness of the  Method
 of Accomplishing The  Objective        ,
 This evaluation is based on consideration
 of the quality, cost, alternate methods^
 secondary effects of the change and the
 impact on completion time. The following
 items should assist in the evaluation of
 the change order for reasonableness:    >
 Quality considerations.
 — Js quality of change equal to, less
    ,than, or greater than original work?
 —,  If greater, is it justified?
 —  If less, is a credit offered?
 —  Does it equal or exceed minimum .
    • technical standards?
 —  Does it require additional review un-
     der the National  Environmental Policy
 Cost review.
 —  Have cost and/of price analyses been
     performed?               ,    .
 —  Do cost and quality match up?
 —  Is the cost fair and reasonable?
 —  Is a cost-effectiveness analysis
     needed? What is its conclusion?
   The reviewer may  evaluate the cost of
 proposals by either or a combination  of
 two methods: cost  and price analysis.
   Using the cost analysis method to evalr
 uate proposals involves a detailed review
 of the cost components plus profit. Cost
 components include  direct and indirect
' items of cost. Direct costs include labor,
 fringe benefits, equipment and material
 costs directly attributable to  the perform-
 ance of the changed work. Indirect costs
 include insurance, bonding,  overhead, and
 other similar costs which may be allocated
 and represented as a percentage of direct
   Using price analysis, the Grantee com-
 pares the price of an item with other  es-
 timates, bids, or 'quotations for similar
 items. Individual components of the price
 are not evaluated separately. Care must be
 exercised  when.comparing prices to de-
 termine the similarities and differences be-
 tween the items.              .      ,
 Alternate methods.
 —  What other alternatives were consid-
     ered to accomplish the objective?
 —  Is the evaluation of alternatives (in-
     cluding no change) adequate con-
     sidering the scope of complexity of
     the change?                 .
 —  Is this alternative cost-effective?
 —  How does it affect future maintenance
 —  Is the change necessary, to complete
     the project?
 Secondary effects of the change.
 — ' Are there secondary  effects?
 —  Are the secondary effects evaluated?
 —  Is this change order the unforeseen or
     miscalculated result  of a previous
     contract change?             .    •
 —  Are the cost analyses for secondary
     effects complete and reasonable?

  Impact on time of completion.
  —  How does the change impact on the
      time of completion?
  —  Is the Grantee legally obligated to
      grant extension of time?
  —  Is the Grantee obligated to pay for the
      additional costs incurred by the time
            	!' L	         ' '    "! 1
    If the  method for accomplishing the
  change has been determined to be reason-
  able, then  the reviewer must proceed to
  determine the eligibility of the change
  order request. If the reasonableness has
  hot been affirmed, the request may either
  be referred to the Grantee for further
  clarification or may be denied partial or
  complete Federal funding participation.
  (40 CFR 30.700)

  Eligibility of
  the Change
  Eligible costs are those costs in which
  federal participation is authorized by the
  particular statutes which govern that
  grant. A  finding of eligibility for a particu-
  lar item of work means that the descrip-
  tion pf this work fits, within the limita-
  tions set forth by applicable statutes.
  Sources of authority for funding eligibility
  Include those shown below and the re-
  viewer must determine which  statute is
  applicable to the specific project.
 * Public Law 84-660 (enacted  July 9, 1956
 and amended through November 3, 1966):
 authorized publicly owned wastewater
 treatment plants, intercepting and outfall
 sewers, and waste water pumping facili-
 • Public  Law 92-500 (enacted  October 18,
 1972): added collector sewers and land
 integral to the treatment process.
 • Public  Law 95-217 (enacted December
 27,1977): added privately owned treat-
 ment works if overseen by a public agen-
 • Public Law 97-117 (enacted December
 29,1981): restricted new grants for sewer
 replacement/rehabilitation, new collector
 sewers and combined sewer overflow
 correction after September 30, 1984.
  Eligibility determinations are made
 When the  construction grant is  approved.
 Additional screening for eligibility of each
 change order must be made on  the basis of
 the following limitations which are com-
 mon to all the foregoing statutes:
 • Is the change related to the construction
 of publicly owned treatment works?
 • Is the request related to approved plans,
 specifications and cost estimates?
 * Js it not included in any work previ-
ously determined to be ineligible (unless
eligibility  criteria changes)?
  • Is the change related to that which is
  necessary to maintain effluent limitations
  and schedules of compliance?
  • Are EPA funds available from the cur-
  rent State allotment?
  • Is there assurance of the availability of
  additional non-federal share funds, if
  necessary?                         -
  • Are the size and capacity, including re-
  serve capacity, related to needs?
  • Are there any proprietary, exclusionary
  or discriminatory requirements other than
  those based on performance?
  • Is the change cost effective?
   If the reviewer determines that the
  change order request is eligible, and that
  cost can be allocated to the extent of bene-
  fit properly attributable to the project, the
  request must then be reviewed for
  allowability. Should the request be de-
  termined to be ineligible, the request must
  be denied grant funding.
  HO CFR 30.705)

 of the Costs
 Project costs are allowable if the project is
 authorized by applicable statutory pro-
 visions, as previously discussed under
 Eligibility of the Change, and payment is
 allowed under applicable regulatory pro-
 visions. These provisions also apply to an
 allowability determination for a change
 order and  are as follows:
 • The costs must be reasonable and with-
 in the scope of the project (reasonableness
 has been analyzed under Reasonableness
 of the Method of Accomplishing the
 Objective on page 13).
 • The cost is allocable to the extent of
 benefit properly attributable to the project
 (appropriate allocation of costs  has been
 analyzed previously under Eligibility of
 the Change).
 • Such costs must be accorded consistent
 treatment through application of generally
 accepted accounting principles.
 • The cost must not be allocable to or in-
 cluded as a cost of any other federally
 assisted program in any accounting period
 (either current or prior).
 • The cost must be in conformity with
 any limitations, conditions, or exclusions
 set forth in:
—  the grant agreement.
—  40 CFR, Parts 30 and 35. Particular
    attention should be paid to:
    •  40 CFR 30.710(a), referencing OMB
    Circular A-87 Rev., which provides
    principles for determining allowable
    costs for all grants awarded to state
    and local governments.
    • 40 CFR 35.940  "Determination  of
    Allowable Costs" for grants  awarded
    before May 12,1982, or Appendix A
      of. Part 35, Subpart I for those
      awarded on or after that date.
  —,  41 CFR 1-15.2 and, if appropriate, 1-
      15.4 which provide comparable prin-
      ciples for determining allowable cos1;
      for contracts between the Grantee an
      the Construction Contractor.
  —  Chapter VII, Section B, Allowable as
      Unallowable Costs in the Handbook
      of Procedures for the Construction
      Grants Program for Municipal
      Wastewater Treatment Works for
      grants awarded before May 12, 1982.
  —  Program Requirements Memoranda
      and policy memoranda published am
      adopted by the Office of Water Pro-
      gram Operations, U.S. EPA, as applic
      able based on the date of grant award


 The reviewer may notice that one or a
 group of change orders indicate that sig-
 nificant Grantee project management im-
 provements are needed to insure that proj
 ect objectives will be met. In this situa-
 tion, the reviewer should recommend to
 his or her supervisor that particular atten-
 tion be given to the project. One option
 available to reviewing agency is a
 recommendation to the Grantee that an ex
 perienced construction manager be re-
 tained. Another option is for the reviewinj
 agency to request that an evaluation of the
 Grantee's construction management organ-
 ization be performed. This type of review
 would be requested from and coordinated
 by EPA headquarters.


 The Grantee must be formally notified of
 the action taken on the completed change
 order request. This notification informs
 the Grantee of one of the following actions
 as applicable:
 • If prior approval  is required:
 —  costs of change order are allowable (01
    partially allowable as stipulated).
 —  costs of change order are riot allow-
 • If prior approval not required:
—  change order is approved and costs   *
    are allowable (or partially allowable
    as stipulated).
—  change order is approved, but costs   *
    are not allowable.
—  change order is not approved and the
• In all cases, that approval of a project
change does not obligate EPA to any in-

  crease in the amount of the grant or grant
  payments unless an amendment to in-
  crease the grant is also approved. This
  limitation should-be stated in the approval
  and appropriate action taken toward
  amending the grant if necessary. The
 j Grantee should also be informed of any
 ; restrictions on grant amendments, such as
  the State  agency denying certification of a
  grant increase or any regulation which
 ^limits grant increases.
  Appeal of
  Allowability Determination
  The Grantee may appeal a determination
  of allowability to the Regional Administra-,
  tor within 30 days of its receipt. This ap-
  plies to determinations by the state agency
  or EPA project officer. Details and appeals
  procedure are explained in 40CFR 30.1100
 and 35.960, plus 35:1030-9 for de-
 terminations by delegated state agencies.
 the Project File
 for Change Orders
 The reviewer must maintain in the project
 file a list of the allowable and unallowable
 dollar amounts of each change request,
. plus the cumulative dollar amounts to
date. Allowable time extensions and cur-
rent time of completion should also be
  Interim reimbursement payments to the
Grantee may include the value of
approved change orders if requested.  The
reviewer w_ill determine that a reimburse-
ment request is based upon the sum of ori-
ginal contract amount, plus only allowable
costs for contract changes, not to exceed
the grant amount as amended.
  Each change order should be shown
separately, in numerical order, with its in-
dividual tabulation of quantity and pay-
ment. If the change, affects an original con-
tract quantity, the change will still appear
separately, since there may be a time lapse
between Grantee processing and EPA
approval. A change which alters ,an origin-
al contract quantity or price will reference
that original item.
  The reviewer will file the following
documents, as applicable, with the con-
tract changes:
• Request for change order approval -
signed and dated copy - with attachments
as follows:
—  Memorandum of negotiation including
    the Engineer's independent estimate
    (if requested by the reviewing agency).

—  Change order.
—  Notice to proceed (if prior approval is
    required, notice will be furnished sep-
• Reviewer's checklist - signed and dated
copy.   ,
• Notification of approval or disapproval.
• Request for additional information or
• Memoranda of meetings.
• Telephone conversations - notes of the
• Inspection Reports - review agency in-
• Project cost summary - updated.
  The contribution of the following partici-
  pants in the development of this guidance
  is gratefully acknowledged:

  Contractor  ,
  Burns and Roe Industrial Services

  EPA Project Officer
  Eliot, Tucker - Municipal Construction Di-
  vision  ,

  Peer Reviewers
  Robert Gervais - EPA Region 9
  George Gunn - CH2M-HU1, Reston, Vir-
 i                                  -
  Technical Reviewers
  Michael Sloss - California State Water Re-
  sources Control Board
 'Ta-Shon Yu - Maryland Environmental
  Health Administration
  George Goldy - New Jersey Department of
  Environmental Protection
Conrad Simon - EPA Region 2
Charges Strubbe - EPA Region 5
Evan Revelle - U.S. Navy, Naval Facilities
Engineering Command
R.P. Young - U.S. Army Corps of En-
gineers, Los Angeles District
Jack Farless - U.S. Army Corps of En-
gineers, San Francisco District
Thomas Gower, Jr. - EPA Office of In-
spector General
Allan Abramson - EPA Region 7  ,
Todd  Gayer - EPA Region 5
David Fulton - U.S. Army Corps of En-
gineers, South  Pacific Division
Seymour Lubetkin - Roy F. Weston, Inc.,
West Chester, Pennsylvania
Thomas Wolf - Milwaukee Metropolitan
Sewerage District, Wisconsin   '
James Borberg - Hampton  Roads Sanitation
District, Virginia
Ron Bond - City of Knoxville, Tennessee
Wayne Bruce - East Bay Dischargers Au-
thority, San Lorenzo, California
Hugh  McMillan - Metropolitan Sanitary
District of Greater Chicago, Illinois
Orlando Dalke  - Idaho Department of •
Health and Welfare
Paul Kuhn - Greeley and Hansen En-
gineers, Chicago, Illinois
David Achorn - Maine Department of En-
vironmental Protection
Gordon Wegwart - Minnesota Pollution
Control Agency
Al Stewart Rosin - Lockwood, Andrews &
Newnam, Inc., Houston, Texas
O.S. Hiestand - Section of Public Contract
Law, American Bar Association
Tom Stire - EMA, Inc., St. Paul, Minnesota
Harold Gray - H.R. Gray & Associates, Co-
lumbus, Ohio                         '
John Foster - Malcolm Pirnie, Inc., White
Plains, New York
Allan Smirni - Envirotech, Menlo Park,
Charles Parthum - Camp, Dresser &
McKee, Inc., Boston, Massachusetts
Ernest Trad - New York State Department
of Environmental Conservation