Liquidated Damages Under the 2015 South Carolina OSE Manual
How many of you have had projects where there are quite a few smaller change order requests but the architect wants to wait until the end of the project to write one big change order to cover everything at once? (Yeah, we all know it is not supposed to be done that way, but it happens more often than most of us will admit, and regardless of how many times we tell our clients to never do work without having a signed change directive or change order).
It is annoying, but often ends up being okay in the end. That is, it’s okay until the architect also tosses in liquidated damages into the same final change order. Then what do you do? Under section 7.2.5 of the OSE supplementary conditions, “Agreement on any Change Order shall constitute a final settlement of all matters relating to the change in the Work that is the subject of the Change Order, including, but not limited to, any adjustments to the Contract Sum or the Contract Time.” So, on one hand, if you sign the change order, you waive your rights to dispute the liquidated damages. On the other hand, you really want to be able to bill for all those other changes listed in the change order.
One of the new OSE procedures helps settle your dilemma. Under new section 7.16.2 B., the OSE specifically prohibits the agency from incorporating liquidated damages in a change order. Specifically, the new provision provides: “Actual or Liquidated Damages to be assessed a contractor are NOT to be incorporated into a change order, as they are not changing the value of the contract. They are only to be listed as a line item deduction from the amount paid on the pay application.” (emphasis original). Form SE-395 can now be used by the agency to document and assess liquidated damages on a project. Form SE-395 is listed as an optional form, but we’re more likely to see it being used now that liquidated damages can’t be included in the final change order.
This post is part of a series by Elmore Goldsmith attorney Leslie Sullivan examining recent changes to the 2015 edition of the South Carolina Manual for Planning and Execution of State Permanent Improvements. The manual can be found in its entirety here. To view other posts in this series, click here.