Question #1: Describe the difference between a cardinal change and a constructive change. Provide examples of each.

Cardinal Change

Cardinal Change refers to an out-of-scope changedirected and instructed by the government that isoutside the intent of or scope of the original agreement, and as such itrepresentsa breach of government contract (Cook, 2014). In such as scenario, a contractor has two options, one is tocease working on the project and apply for damages on account of the breach of contract, or he can opt to complete the project and get compensation commensurateto theadditional work undertaken.

A cardinal change may occur in the situation where a contractor is facedwith a task that is significantly unrelated to the original project as a result of substantive alterations directed by the government or necessitatedon account of actions by thegovernment.It can also be an outcome of the physical conditions faced by a contractor that were initially not anticipated and which profoundly alter the description of the project (Phillips, 2000). An example of a cardinal change would occurif a governmentcommissions the building of a single office block; it cannot direct the contractor, by change order, to construct another office block. Such an out-of-scope work is over and above the scope of the initial contract and this reflects an example of a cardinal change. However, a change order involving the construction of an additionaloffice room would be valid as stated under Federal Acquisition RegulationChanges Clause(Part 43—Contract Modifications, Subpart 43.2—Change Orders).

Whether a certain change represents a cardinal change is a question of degree, and it isvery subjective. According to Kelleher, Abernathy, Bell, & Reed(2010), the two basic test questions to establish whether a change is cardinal change are:was the instructed change contemplatedby the parties when the contract was signed?andwas the project, as modified, relatively the same basic project? If the answer is to the positive, then the change is a cardinal.

Constructive Change

Constructive Change refers to any behavior by a government representative or contracting officer to instruct for changes in a project that are not a formal change order and has the effect of making a contractor to undertake work that is beyond the contract requirements or significantly differs from the scope that was ordered by the initial terms of the contract without a formal order under the Changes clause (Cook, 2014).They arise from informal acts or omissions of the government or its agent that change the requirements of the contract. These actions or omissions cause the contractor to perform work not required by the contract, thus increasing the contractor’s cost of performance. They warrantthe project contractor additional relief and compensation subject to the Changes Clause (Springer, 2013). However, the contractor must evidence that it is the government that directed and compelled it to perform the additional work. Any act or omission, written or oral,by the government or contracting officer requiring a contractor to undertake a scope of work that goes outside the contractual scope of the original contract, constitutes constructive change. They may not be identifiable until their cost and schedule impacts are noticed and attributed to an act or omission of the government (Springer, 2013). There are five types of constructive changes: Misinterpretations by the government, defective specifications, government interference and failure to cooperate, superior knowledge or failure to disclose, and constructive acceleration.

According to Cushman, Cushman, Carter, Gorman, & Coppi (2001), causes of constructive changes include delays, incorrect technical direction, disruptions, and interference with the contractor’s work without a formal suspension to stop work order; inadequate or defective requirements documents; and misinterpretation of specifications.they also include defective specification, overly-strict-inspection; hastening of contract implementation to complete it sooner than scheduled; and other problems for which the government is responsible. That is, Constructive changes occur when a contractor is instructed to take on additional scope of work that is dissimilar from the one agreed upon in the contract, work which accelerates the completion of the project, and work that attracts additional costs as a result of incorrect specifications.An example of a constructive change would occur when defective, or impossible specifications cause frustration and increase the time and costs of performance until the specifications are corrected or relaxed.

Question #2: Based on the reading materials and your business sense, what are 2 ways to prevent the aforementioned changes?

Constructive changes can be prevented or avoided byCareful preparation of the original contract files by eliminating any hint of ambiguities, vagueness and inconsistencies; and by cogently understanding what a contract entails and compels byunderstanding what the contractstates and not what it ought to say. Constructive changes can also be avoided bymaintaining good records as documentation can eliminate any avenue for misunderstanding; by always acting in good faith and adhering to the correct procedures; and lastly by keeping channels of communication open with the contracting officer andasking a question when in doubt. The Government can avoid constructive change if itsContracting Officer or authorized representative individuals are alert to the implications of their actions

Cardinal changes can be prevented by the contractor invoking the cardinal change rule which allows a contractor to take no notice of the conditions and obligations of a contract where profound changes have been madethat results in achange in the very nature of the contract.

References

Cook, C. W. (2014). Successful Contract Administration: For Constructors and Design Professionals. New York, NY: Routledge.

Cushman, F. R., Cushman, E., Carter, J. D., Gorman, P. J., & Coppi, D. F. (2001). Proving and Pricing Construction Claims. New York, NY: Aspen Publishers.

Federal Acquisition Regulation . (n.d.). Part 43—Contract Modifications, Subpart 43.2—Change Orders. Federal Acquisition Regulation.

Kelleher, T. J., Abernathy, T. E., Bell, H. J., & Reed, S. L. (2010). Federal Government Construction Contracts: A Practical Guide for the Industry Professional. Hoboken, New Jersey: John Wiley & Sons.

Phillips, C. S. (2000). Construction Contract Administration. Littleton, CO: SME.

Springer, M. L. (2013). Project and Program Management: A Competency-based Approach. West Lafayette, Indiana: Purdue University Press.

 
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