Cohen Seglias Co-Chair of the Federal Contracting Group, Edward DeLisle, testified at a Small Business Committee hearing titled, “All Work and No Pay: Change Orders Delayed for Small Construction Contractors.” The hearing examined the effects of change orders on small business contractors and potential solutions to alleviate the financial burden on small businesses caused by agency delay in approval and payment of change orders.
With firsthand experience navigating small business federal contracting laws, Ed spoke on the current change order process and its negative impact on small construction contractors. One very big problem is the delay in recognizing a change in scope by a government agency. By delaying the recognition of a scope change, the contractor is placed at risk because, in many situations, it will perform the work and then have to wait an inordinate amount of time to get a contract modification, which it needs for billing purposes. This effectively means that the contractor is financing the performance of additional work.
In the most extreme cases, small business construction contractors have been forced to close their doors and/or file bankruptcy as they wait for government issuance of necessary contract modifications.The legislative branch understands this and there is legislation out there designed to help. Bills have been introduced, which, if passed into law, would require federal agencies to (i) pay 50% of the proposed cost by the contractor for any unilateral change order issued, where the parties cannot agree on price and (ii) include as part of a solicitation any agency-specific change order protocol that differs from the typical FAR-mandated modification processes.