U.S. Department of Transportation
Federal Highway Administration
|To:||Mr. Kevin P. Monaco
Director of Legislative Affairs
Utility and Transportation Contractors Association of New Jersey
Lakewood, NJ 08701
|Date:||November 15, 1996|
Dear Mr. Monaco:
Senator Frank R. Lautenberg recently asked us to review your letter endorsing a change order to include the Parsippany Road Interchange Reconstruction project as part of a contract awarded to D'Annunzio and Sons Construction for an ongoing 1-287 project. As Senator Lautenberg requested, I am replying directly to you.
Contracting under the Federal-aid highway program is based on the premise that competitive bidding is the best way to keep costs low while achieving a quality product. Indeed, Federal law requires competitive bidding unless some other method is more cost effective or an emergency exists (Title 23, United States Code, Section 112).
We recognize that after a contract gets underway, conditions may change or circumstances may exist that were not anticipated during preparation of the plans, specifications, and estimates. Our governing legislation and our implementing regulations allow for change orders within the scope of the work covered by the contract. In awarding contracts for Federal-aid highway projects, the State transportation department must include a standardized clause on changed conditions to provide for an adjustment of contract terms if the altered character of the work differs materially from that of the original contract or if a major item of work is increased or decreased by more than 25 percent of the original contract value. The key to the change order process, however, is that the change must involve the work covered by the contract.
On March 18, the New Jersey Department of Transportation (NJDOT) proposed a change order in the $40 million contract awarded to D'Annunzio for sections 9S and 1OV of the 1-287 project. The change order did not involve the scope of work covered by the contract, or reflect changes in conditions on the site of the contract. Rather, the change order added a project to reconstruct the Parsippany Road bridge, at a cost of approximately $10 million. A revision of this type is clearly not a "change order" as provided for in Federal law or our regulations. Instead, approving the change would award a Federal-aid contract, under the guise of a "change order," to D'Annunzio without competitive bidding. As such, it would not only violate Federal law, but would be unfair to other contractors, presumably including other members of your association, who may wish to bid on the bridge project.
In submitting the request for approval of the proposed change order, the NJDOT suggested that the change would result in savings as called for in Title 23, Code of Federal Regulations, Section 635.104, which reads:
- "Actual construction work shall be performed by contract awarded by competitive bidding; unless, as provided in §635.104(b), the SHA [State highway agency] demonstrates to the satisfaction of the Division Administrator that some other method is more cost effective or that an emergency exists...
- Approval by the Division Administrator for construction by a method other than competitive bidding shall be requested by the State in accordance with subpart B of part 635 of this chapter."
Subpart B covers "Force Account Construction," with work performed by State forces, not change orders to add work to an existing contract.
In summary, we have reviewed our Division Office's decision to deny the NJDOT's request for a change order and we find that the decision was correct. It is in accordance with Federal law and our implementing regulations. It also is fair to other contractors, who will have an opportunity to bid on the contract when it is advertised. Moreover, I believe it is fair to D'Annunzio. The contractor will not be given the work without going through the bidding process, but because its forces are mobilized in the area, the firm will be in a good position to submit a competitive bid.
If you have any further questions, you may wish to contact Mr. Dennis L. Merida, our Division Administrator. His address is 840 Bear Tavern Road, Suite 310, West Trenton, New Jersey 08628-1019. His telephone number is 609-637-4200.
/s/ original signed by
Rodney E. Slater
November 15, 1996