Construction

Construction Program Guide

Contract Claims

The FHWA's policy for Federal-aid participation in construction contract claims requires a examination of the specific facts of the claim and the contract basis for payment. Federal-aid participation is not automatic in any claim.

Authority/Legal Basis

Laws

• 23 USC 315 Rules, regulations, and recommendations(2012) provides very broad authority for the Secretary of Transportation to prescribe regulations to carry out the Federal-aid highway program. However, there are no specific statutes dealing with construction contract modifications other than the required use of standardized changed conditions clauses as required by 23 USC 112(e).

Regulations

• 23 CFR 635.102 Definitions (04/01/2013)
• 23 CFR 635.109 Standardized changed condition clauses (04/01/2013) prescribes the standardized contract clauses mandated by the 1987 Surface Transportation and Uniform Relocation Assistance Act. These contract clauses include the following:
  • Differing Site Conditions,
  • Suspensions of work ordered by the engineer, and
  • Significant changes in the character of work
  Subsection (c) address the unique use of changed condition clauses for design-build contracts. The FHWA encourages but does not require the use of such clauses in design-build contracts.
• 23 CFR 635.120 Changes and extra work (04/01/2013) describes the FHWA approval procedures for the review and approval of change orders and extra work. Paragraph (c) discusses the need to address contract time impacts when developing a contract change document.
• 23 CFR 635.121 Contract time and contract time extensions (04/01/2013) describes the FHWA approval procedures for the review and approval of time extensions.
• 23 CFR 635.124 Participation in contract claim awards and settlements (04/01/2013) describes the basis for determining Federal-aid participation on any claim.

The above regulations provide the FHWA's regulatory policy regarding construction contract modifications. However, please note that these regulations were last updated on August 2, 1991 and do not include revised stewardship, oversight, and applicability requirements resulting from the 1991 ISTEA and the 1998 TEA-21. See the discussion in the FHWA Contract Administration Core Curriculum Manual for a summary of current FHWA policy).

Policy

• The FHWA Contract Administration Core Curriculum Manual summarizes policy and provides general guidance concerning contract modifications. Please refer to the following sections of the manual for more specific guidance:
  • Standardized Changed Condition Contract Clauses
  • Change Orders (Extra Work and Time Extensions)
  • Claims
• Home Office Overhead Cost Formulas (12/15/1988) discusses FHWA policy on participation in home office overhead as part of a construction contract claim.

Guidance

General Information

• FHWA Contract Administration Core Curriculum Manual
• FHWA Form 1365 - Record of Authorization to Proceed with Major Contract Provision is a form that can be used to document the FHWA's advance approval of change orders
• Geotechnical Guideline No. 15 - Geotechnical Differing Site Conditions (05/02/1998)
• Additional Guidance on 23 CFR 635 A former Federal-aid Policy Guide, Nonregulatory Supplement, 23 CFR 635A (10/09/1996) 5) Changes and Extra Work; 7) Contract Time and Contract Time Extensions and 9) Participation in Contract Claim Awards and Settlements

Training

• NHI 134037A - Managing Highway Contract Claims: Analysis and Avoidance
• NHI 134049 - Successfully Managing Construction Scheduling and Risk
• FHWA Contract Administration Core Curriculum (Course Description (.pdf))

Archive

• Alternative Disputes Resolution (12/16/1992) states that while FHWA encourages the use of ADR to resolve claims, doing so will not automatically result in Federal-aid participation in any claim payments.
• Participation in Contract Claim Awards and Settlements (10/23/1985) provides a synopsis of the final rule establishing 23 CFR 635.124.