A shipbuilder sued an offshore supply company over payment for extra work performed on a large vessel. On October 28, 2013 Semco LLC filed suit in a Louisiana district court, claiming that the Grand Ltd issued a change order that increased the cost of the project by more than $12 million over the original contracted price.
The plaintiff alleged that the Grand Ltd withheld payment for significant additional construction necessitated by added demands that the defendant made, including the ability to hold a larger crane, the addition of an aluminum wheelhouse and a special generator. Due to the change orders, Semco claimed that its man hours increased from the original 150,000 it anticipated to 320,000, bringing the total price of the project to more than $28 million.
Semco sought unspecified damages for contract reformation, cause of action for change items and recognition of liens, and demands the seizure and sale of the vessel to the highest bidder to satisfy the debt.
The Most Common Obstacle to Your Projects
Changes to a construction project are the most common causes for disputes between builders and their clients. No matter how well you plan the work, few construction projects go from start to finish without a change somewhere along the way. The change order can be requested by the client or the contractor, or may be the result of unforeseen circumstances. Change orders commonly occur when:
- The project’s work was incorrectly estimated;
- The customer or contractor discovers obstacles or possible efficiencies that require them to deviate from the original plan;
- The customer or contractor are inefficient or incapable of completing their required deliverables within budget, and additional money, time, or resources must be added to the project;
- Additional features or options are perceived and requested by the client during the course of the project;
- Extreme weather conditions cause delays or require additional work to complete construction.
Whatever the cause, the exact terms of a change order need to be discussed, documented and approved in writing by all parties. Change orders often take one of the following forms:
- A fixed sum change order;
- Time and Materials (T&M) change order;
- A T&M, after which a unit price is later negotiated based on data developed during the T&M stage.
Keep Change Orders From Tying Up Your Business
A change order can delay project completion, increase costs and keep you from signing new projects. If a change order arises in your project, stay on track by consulting with the construction law attorneys at Smiley Law.