Home>Levelset Community>Legal Help>What happens if I have a $100,000.00 contract

What happens if I have a $100,000.00 contract

What happens if I have a $100,000.00 contract and we almost always have change orders, should I account for the estimated changes or just submit the prelim at $100,000.00?

3 replies

Aug 16, 2019

§ 8200(a)(2) of the California Civil Code calls for "An estimate of the total price of the work provided and to be provided." But, it's just that - an estimate. In the construction industry, it's understood that no sub or supplier could exactly estimate project costs at the start of the job. As mentioned above - change orders are common. Plus, other issues - like delays - can also affect the price of the work. As Levelset discusses in this article, there's some wiggle room when it comes to this estimate. That is, as long as the original estimate is made in good faith and has been calculated based on some reasonable basis. Ultimately, if there are some foreseeable change orders or costs, it might be wise to include that in the initial estimate on a preliminary notice. But, adding cushion as a practice is generally not a great idea since that'd be intentionally manipulating the project estimate. The estimate on a California preliminary notice should be as accurate as possible based on the knowledge at the time the notice is sent. For more information on California preliminary notices: (1) About California Preliminary 20-Day Notices (2) The Ultimate Guide to California’s 20-Day Preliminary Notice (3) California Preliminary Notice: Should I Add 20% To The Estimated Contract Value?

0 people found this helpful

Helpful

Aug 19, 2019

There is a famous case in California (Rental Equipment v. McDaniel) which, in essence, says that you must have a "rational basis" for your estimate and that it cannot be "made up from whole cloth." Yes, we love the legal parlance! Anyway, I typically guide my clients to play it conservatively and go with the amount estimated by my customer (in writing), but if there is a established track record of an average of 20% overage due to change orders, then my client might consider using a 20% higher figure since there is a rational reason for the estimated value. There is not typically an advantage for you, however, to include the anticipated change order amount so that is why I typically go the conservative route. (NOTE: The information presented here is general in nature and is not intended nor should be construed as legal advice for any particular case or client. The content contained herein is published online for informational purposes only, may not reflect the most current legal developments, verdicts or settlements, and does not constitute legal advice. Do not act on the information contained herein without seeking the advice of licensed counsel. This posting does not create any attorney-client relationship and is neither intended to constitute an advertisement nor a solicitation).

1 person found this helpful

Helpful

Mar 5, 2020

I wanted to follow-up and confirm you’ve been paid on this project matter.

If I can further assist your company with any unpaid invoices, please feel free to call or email. Remember, while perfected lien rights do afford a more direct path to payment, my firm can collect for you even when lien rights have expired or were never pursued.

Mike Ross Miller, Ross & Goldman mross@mrgpartners.com (512)275-6412 Direct https://www.mrgpartners.com/levelset

0 people found this helpful

Helpful