Change Order Flow

[Calitex04]

I am a 1st tier sub on a Federal Contract and my 2nd tier sub submitted an RFP to the Prime which was then approved and sent back as a Change Order. I signed my Change order with the prime and sent my Change Order down to my sub to sign. My sub found an error in the amount that they submitted and are not willing to sign this months pay app which includes the executed Change order nor will they sign the Change Order. My sub said it is my fault and I should not have signed the Change Order.

I do not feel that I am in the wrong here because my prime submitted the number that my sub submitted (signed RFP) and my prime has an executed Change Order with the owner. What has to happen regardless of me signing the Change Order is a Request for Equitable Adjustment to submit to the owner.

Am I wrong here?

Any advice would be appreciated

[joel hoffman]

Calitex, what would be the basis for a request for equitable adjustment to the owner? There is no mutual mistake here that I can see. The error in pricing was unilaterally made by the 2nd tier sub. The contractor submitted a proposal to the owner which was probably negotiated and agreed to by the two parties to the prime contract. A mod to the prime contract was executed.

This appears to be a contractual matter between the contractor and its subs or between you and your sub. We here also dont know the terms and conditions of the various subcontracts.

EDITED: You said that you feel that you are not wrong here. In addition to there being no apparent basis to hold the owner responsible via an REA, I suggest in the future that you first bind your sub to its obligation to you before obligating yourself to your prime contractor. Perhaps that is what your sub is blaming you for. I also don't understand the terminology that you used when you said that your subcontractor initially submitted an "RFP" to your prime contractor. Why would your sub request a proposal from the prime?

[Calitex04]

Joel--

Thank you for responding and for your insight.

I believe the REA would be valid because it was an error in wage standards. instead of including Davis Bacon wages the sub just included standard wages. there was nothing to negotiate with the owner as the hours are the hours and rate is the rate. The Owner would have paid the total value regardless.

I was not originally overseeing this sub when they submitted an RFP to the prime.

If I did not sign the Change Order wouldn't we still have to submit a REQ because the prime had already signed their CO with the Owner?

[joel hoffman]

Calitex, thanks for the clarification. I'm not a lawyer. So I don't know all the legal ramifications between a prime and it's subs when the prime relies upon a mistaken proposal from a lower tier sub to make an agreement with the owner (here the U.S.). I think I answered your original question based upon the limited information you provided at the time.

Before responding to your question concerning what you would have to do had you not "signed the change order", please clarify if your subcontractor submitted the change order proposal directly to the prime. Or did it submit it's proposal through your firm to the prime? Who on the contractor's side of the contract reviewed this sub's proposal (i.e., your firm, the prime, both)?

Edit: did the prime sign the "change order" before or after you did?

Also, how much money is involved here in total plus what is the difference due to the mistake? Does this work constitute the entire change order or is it a small share of the work. I have some reservations concerning the government entity's proposal review responsibility here but not having all the information makes it difficult to put this oversight into perspective.

You also said "The Owner would have paid the total value regardless." What did you mean by that? Is this a cost reimbursement prime contract or fixed price and what type of pricing are the subcontracts?