Are concealed conditions a change order for a CM Guarantee Maximum Price contract?
1 reply
Sep 25, 2019
If there were concealed conditions on a project site, and if those conditions led to an increased price, then executing change orders would be useful (and potentially necessary) to correct the project price. Certainly, the easiest way to proceed when there's a concealed condition at play would be to mutually agree on the changes necessary and to agree to a price for those changes. So, a good first step is often to try and discuss increasing the guaranteed maximum price via change order.
But, even where a customer refuses to accept a change order, a contractor may be entitled to additional compensation if the conditions of the site were intentionally concealed, leading to an artificially low bid.
For one, it may come down to the contract. Many contracts include a concealed or unknown conditions clause allowing for adjustment of the contract price if an unforeseen condition prohibits completing the project, as planned. So, if such a clause is present in a guaranteed maximum price contract, the price can likely be adjusted.
Further, if the contract for work indicates that the guaranteed maximum price is based on the knowledge at the time of the contract, a condition not-known at the time of contracting shouldn't prohibit increasing the contract price. It's common for guaranteed maximum price contracts to specify that the price guarantee is reliant on the project not substantially changing from the time of bidding. And, even in a situation where a contractor was able to inspect the project before bidding, if the concealed condition was one that couldn't have been discovered by a basic inspection, the contractor may be entitled to an increased contract price.
Finally, if the condition was known by the owner and/or customer and intentionally concealed, then a price adjustment should be possible. Otherwise, the entire contract could be put in jeopardy if they've been dealing in bad faith.