|February 18, 2014|
Previously published on February 2014
Many contractors do not realize that on public projects in Virginia if a change order increases a fixed-price contract by 25% or $50,000 (whichever is greater), it requires the advanced written approval of the Governor, or his designee, in the case of state agencies, or the governing body in the case of political subdivisions. Part of the Virginia Public Procurement Act, Virginia Code 2.2-4309 has long identified what most thought was an issue of authority - who for the state or local government is required to approve change orders of a certain size. Informal discussions and agreements among those on site may not bind the governmental body if it does not involve the appropriate designee. Even a signed change order executed without the appropriate authority has the potential for being declared void.
The impact of this statute may now be even greater than most contractors and attorneys anticipated. According to one court, Va. Code 2.2-4309 can effectively bar a contractor from even making a claim on a project that exceeds the 25% or $50,000 threshold. In Carnell Construction Corp. v. Danville Redevelopment & Housing Authority, 2011 WL285694 (W.D. Va., Jan. 27, 2011) a federal court in Virginia issued a decision that struck any portion of the contractor’s claim against a public entity that exceeded the 25% of the original contract price because the claim had not been approved by the governing body. Any contractor knows, however, that the nature of a “claim” is disputed work to which the owner and contractor do not agree. The Virginia Public Procurement Act provides a specific process for the resolution of claims that now appears to include a limit on the size of those claims that did not otherwise exist.
This case is under appeal and attempts to modify the legislation will likely wait until this case is final. In the meantime, contractors must be vigilant about not performing extra work unless there is a properly authorized advanced written express agreement. Contractors have the right to ask for the designation authority of the individual. If you find your project in this situation, seek counsel.