change order and contingency management

[Kurt999]

I have a question regarding jobs where a contingency has been included as part of the the contract sum... I think I confused myself.

Say a couple lintels got missed on a project, and it's first noticed during construction. GC submits a cost, and there is ample contingency money to cover the cost.
These become substractions to the contingency line on the G703. So, doing it this way, and as long as the contingency holds out, no Change Orders appear on line 2 of pay app G702.

Is this basically correct? (I know there is more than one way to skin this cat.)

[Coach]

It's a CO regardless of where the money comes from.

[Kurt999]

It's a CO regardless of where the money comes from.

Thanks, Coach -- that goes to the heart of my question... any expansion on what you said would be greatly appreciated.

My current firm is doing as I've described. My past employers have done as you're saying -- all such modifications are treated as change orders. I questioned my current employers a bit -- respectfully, of course. They do seem to be trying to draw a distinction between a change order, and use of the contingency funds.

Coach, one other confusion: how are you tracking change orders on the pay apps if the money to pay for them comes out of the contigency? If I subract, say, the extra lintels cost from the G703 Contingency line, but then also show it on line two of G702, aren't I accounting for the cost twice?

[Coach]

If the cost is already in the contract via contingency line item, then the cost in the CO is zero.
What your current employer doesn't seem to understand is that a CO can have zero cost. In fact, they can also have zero time.

[Kurt999]

If the cost is already in the contract via contingency line item, then the cost in the CO is zero.
What your current employer doesn't seem to understand is that a CO can have zero cost. In fact, they can also have zero time.

Thanks, Coach... I think my employers tend to like the apparent dodging of change orders by adding a healthy contingency to the project. That way, until the contigency is exhausted, they list no change orders, only subtractions from the contingency -- no change to the contract sum occurs. So then it's like "Look what a great job we did -- no change orders!"

Is this breaking any laws? No, but something seems a little less than upfront. I agree with you, that they are all change orders regardless of where the money comes from.

[Coach]

I think most of us have had experience working for idiots.