A New Case On Oral Modifications Of Public Works Contracts

Construction projects are littered with daily conflicts and some long term ones; sometimes they merge. Such is the case where there are oral field directives to proceed with changes that may increase the scope of the work. But what happens when the contract says that all change orders must be in writing? Certainly that is just legal mumbo jumbo that does not apply when the owner’ s rep directs that the work be done immediately rather risk delaying the project while waiting for a written change order, right?  Wrong, if you are on a public works project in California.

According to the California Fourth District Court of Appeal, when a written contract specifies that change orders on a public works project must be in writing, a design professional (or contractor) can not make a claim for payment for extra work done pursuant to an oral directive. Click here to read the case.

The court in P&D Consultants v. City of Carlsbad reasoned that such provisions must be enforced to protect the public fisc. Furthermore, design professionals and contractors are presumed to know the limitations and restriction regarding public works projects. “Persons dealing with a public agency are presumed to know the law with respect to any agency’s authority to contract.’ “One who deals with the public officer stands presumptively charged with a full knowledge of that officer’s powers, and is bound at his . . . peril to ascertain the extent of his . . . powers to bind the government for which he . . . is an officer, and any act of an officer to be valid must find express authority in the law or be necessarily incidental to a power expressly granted.” Further, the court explained, “There is no provision in the City charter for execution of oral contracts by employees of the City who do not have requisite authority. The alleged oral statements by the associate city engineer and project manager are insufficient to bind the City. ‘ “No government, whether state or local, is bound to any extent by an officer’s acts in excess of his . . . authority.” 

So there you have it. Construction professionals on public works projects in California must proceed with caution when change order work arises. I am not sure that the public fisc will necessarily be protected by the holding of this opinion. What happens when changes in the scope of work lead to delays while the public owner reviews the change order requests? Is it possible that the cost of promptly performing the extra work could be dwarfed by later claims for delay and disruption by the contractor? This may be the unintended consequence of this case.