A201/7.3.8 question

[hnQ_9999]

7.3.8: "The amount of credit to be allowed by the
Contractor to the Owner for a deletion or change that
results in a net decrease in the Contract Sum shall be actual net
as confirmed by the Architect (A). When both additions and credits
covering related Work or substitutions are involved in a change,
the allowance for overhead and profit shall be figured on the basic
of net increase, if any, with respect to that change (B).

Commentary: "When the change results in a credit, the amount of the
credit is determined by the cost that would have been incurred in executing
the change by the contractor without decreasing the contractor's
overhead and profit (C)."

My understanding:
(A) and (C) : Changes results in net decrease, no GC's profit & overhead being calculated.
(B) Changes results in both additions AND credits, GC's profit & overhead will be calculated accordingly.

Please let me know if I understood it correctly?
(A) and (C), for example, if CD called out 50 large canopies @ $20K ea, GC's profit and overhead, say 15%,
is $150K. If Change Order scales back to 20 smaller canopies @ $10K ea. GC still pockets $150K
and the Contract Sum will be (50x10K) = $500K less?
I think (B) is common sense, although I can't think of an example.

Thank you

[rktecto2014]

hnQ_9999,

you are correct. the contractor's O&P will not change, if it shown as 15%, and the balance will be credited back to the Owner.

[vjam]

I think the math is incorrect... would it not be [50 * $20K] = $ 1M; [20 * $10K]= $200K >>> 1,000,000 - 200,000 = $ 800,000 credit to Owner?

When there is a decrease, only the decrease is credited back (Consider O&P is already "spent" for contractor's home office operations, so not decreased).

If there are increases and decreases, they are tallied first, and then if the final tally is a decrease, that becomes the credit back to the owner, w/out O&P decreased. If there is an increase, O&P is calculated on that increase.

vjam