Laurie Hager | Snell & Wilmer
Many construction contracts require the contractor to obtain a signed change order before performing work that deviates from the original contract scope. But in practice, contractors are often faced with the dilemma of waiting to obtain a signed change order from the owner or upstream contractor for requested additional or changed work, which may delay the project or its work, or pressing on with such work without a formal change order in order to avoid causing project delay, or delay to its work. Many contractors opt for the latter option, and then run the risk of not getting paid for the extra or changed work, because of a contract provision requiring signed change orders before proceeding with such work.
Washington’s public contracting code, at Revised Code of Washington (RCW) 39.04.360, already provided some protections to contractors in that situation on public projects. In March 2024, Washington Governor Jay Inslee signed SSB 6192, which amends RCW 39.04.360. As of June 6, 2024, the protections under RCW 39.04.360 were expanded to subcontractors and suppliers for public projects, as well as to contractors, subcontractors, and suppliers for certain private projects. The new law does not apply to single-family homes or other private residential projects of 12 units or less.
This law mitigates the dilemma created when an owner authorizes additional work, but delays signing the formal change order for such work. Under this new law, upon request by a contractor, an owner must issue a change order for undisputed, authorized additional work within 30 days after satisfactory completion of such work. If the change order is not timely issued, interest accrues on the undisputed, satisfactory work at the rate of one percent per month beginning 30 days after the satisfactory completion of the work.
Contractors also have change order obligations to their lower-tier subcontractors or suppliers. Within 10 days of receipt of an approved change order (from owner or upper-tier contractor), the contractor (or subcontractor) must then issue a change order(s) to its lower-tier subcontractors that performed the changed work. If the upper-tier contractor fails to issue a change order within the timelines required, the upper-tier contractor becomes responsible for a proportionate share of the interest accrual at one percent per month beginning 10 days after receipt of an upstream-approved change order.
An aggrieved party may bring a lawsuit for violations to this law, including for the “dollar amount” (i.e., cost) of the satisfactory work, the one percent per month interest, plus for an award of reasonable attorneys’ fees and costs under the statute. The law, however, does not grant contractors, subcontractors, or suppliers any rights against a party with whom they don’t have a written contract.
While beneficial to contractors and suppliers, the new law has several notable ambiguities that could lead to disputes. The new law does not cover change orders that are disputed. Moreover, the law does not explain what constitutes work “in dispute” which does not require a timely change order under the statute. Also, the law does not explain how to determine the “dollar amount” (i.e., cost) of the change order work. Thus, for contracts going forward, parties may want to consider whether to include provisions that define what constitutes work “in dispute” and that address how to determine the “dollar amount” of a change order, to cover these issues not addressed by this statute. Additionally, the law does not state whether it applies to existing contracts that were entered into prior to June 6, 2024. Given this uncertainty, and to minimize possible downside risk, owners and contractors may consider implementing the procedures under this new law on any pending projects going forward, regardless of whether the contract was in place prior to June 6, 2024.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.