CARDINAL CHANGE CLAIMS

ORIGINS OF CARDINAL CHANGE ENTITLEMENT

Holloway Consulting has found that construction contractors working under both public and private sector contracts often file Construction Claims alleging Cardinal Change when such a change has not actually occurred. For example, Construction Schedule Delay due to numerous change orders can be, but is probably not, determinative of a cardinal change. Courts have ruled that change clauses permit the government to delay performance, since the contractor should be granted an extension of contract time. Schedule delay claims have been denied when changes have more than doubled the contract time, but were within the contract scope. Courts have described cardinal change as “profound”, “fundamental”, “drastic”, and “substantial” modifications to the original contract.

In 1922, the Supreme Court defined work within the general scope of the contract as work that should be regarded as fairly and reasonably within the contemplation of the parties when the contract was entered into. The concept of Cardinal Change developed out of subsequent federal procurement law, and also applies to private sector construction contracts.

Prior to the Contract Disputes Act of 1979, a change within the scope of the contract entitled the contractor to an equitable adjustment under the terms of the contract, provided a change clause was included in the contract. A change outside the scope of the contract – Cardinal Change – was considered an administrative breach of contract that entitled the contractor to sue for damages in the Court of Claims. The contractor could not bring a cardinal change claim to the Board of Contract Appeals, since the board did not have jurisdiction over claims that breached the contract or fell outside the scope of the contract. Therefore, the difference between an “in scope” change and an “out of scope” breach was of major importance in establishing the contractor’s entitlement to Cardinal Change.. In theory, when a change breached the contract, the contractor had two choices:

1. Perform the work and sue for damages, or

2. Terminate performance and sue for damages.

Unless the government was guilty of an improper default on the contractor’s progress payments, the second choice was very risky. If the court determined the ordered change to be within the scope of the contract, the contractor would have breached the contract through wrongful termination.

The Contract Disputes Act gave the Board of Contract Appeals jurisdiction for contractor’s appeals on all federal contract claims. Subsequent to the Contract Disputes Act, an ordered change outside the scope of the contract is considered an “offer.” The contractor has the right to accept or refuse this offer, as it is technically a new contract. If the contractor chooses not to perform the work and the government applies pressure in an attempt to force the contractor into performance, the government may become guilty of a breach of contract. Should the contractor accept the offer and perform the work, a written change order to the existing contract is not required, since the contractor is accepting a new contract and the provisions in the original contract would not apply. Presently, contractor’s claims for changes or breach of contract are subject to the same remedy before the Board of Contract Appeals.

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The Holloway Consulting Group, LLC
Construction Schedule Delay Claims Experts
12081 W. Alameda Pkwy., #450
Lakewood, CO 80228-2701
Denver Phone: (303) 984-1941
International Toll Free: (888) 545-0666
Fax: (303) 716-0432

Email: steve.holloway@disputesinconstruction.com
Blog: disputesinconstruction.com
Web: hcgexperts.com

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