Reservation of Rights to Make a Cumulative Impact Claim

By Richard J. Long, P.E.

Imprecise  wording  on  change  order  forms  often  causes  problems  relating  to  what  costs  are included  in  the  agreed  price  for  the  change.    Contractors  may  argue  that  the  change  order language,  such as compensation  for”indirect  costs, or time-related  costs,”  does not include  loss of productivity  or cumulative  impact costs.  The contractor  argues,in defense of its position,  that there is no way that it could have known the actual impact of later owner-caused  changes at the time that the earlier change  order was priced.   Therefore,  the contractor  waited  until the end of the  job   to  quantify   and  request   its  impact   or  loss  of  productivity   claim,  and  called  it  a “cumulative  impact  claim.”   The owner, however,  often refuses  to pay any more than the price earlier agreed for change orders.

Thus,  an owner’s  primary  defense  to  a disruption  and/or  cumulative  impact  claim  is often  to argue  that,  in  executing  the  various  change  orders,  the  contractor  agreed  to  the  price  of  the change and thereby waived its rights to seek any further compensation.   The argument advanced is that the  contractor,  by signing  the  change  order,  included  any possible  costs that would  be associated  with the cumulative  impact claim and accepted any risk that the costs would be more than anticipated.

This is article/paper explains critical issues concerning reserving the contractor’s rights to make a claim to recover all its costs associated with changes.