Statutory Limit On Change Orders Bars Contractor Claim In Virginia

Thomas Brownell is a Partner in the Northern Virginia office

A recent Virginia case strictly construing a statutory limit on the amount of contract change orders has raised concerns among contractors doing business with Virginia state and local agencies. In Carnell Construction Corp. v. Danville Redevelopment & Housing Authority, 745 F.3d 703 (4th Cir. 2014), the Fourth Circuit Court of Appeals held that a construction contractor's claim for extra work performed at the request of a local housing authority must be cut by the amount it exceeded 125 percent of the base contract price because the governing body of the housing authority had not approved the changed work in advance, as required by statute.

The statue in question, § 2.2-4309 of the Virginia Public Procurement Act (VPPA), limits the scope of changed work under fixed price contracts as follows:

§ 2.2-4309. Modification of the contract. A. A public contract may include provisions for modification of the contract during performance, but no fixed-price contract may be increased by more than twenty-five percent of the amount of the contract or $50,000, whichever is greater, without the advance written approval of the Governor or his designee, in the case of state agencies, or the governing body, in the case of political subdivisions. The Virginia statute is not unique. Section 13-218(e) of the Maryland State Finance and Procurement Code, for example, prohibits a state agency from proceeding with changed work on a construction project unless it gets prior written approval from the state unit and certification from the fiscal authority as to the availability of money and the effect of the contract modification on the project budget. Similarly, in the federal system, while the standard "Changes" clause (Federal Acquisition Regulation 52.243-1) does not contain a dollar limit, a contracting officer may not exceed the dollar limits of his or her warrant and likewise may not issue change orders in excess of available contract funding. Contractors usually consider these restrictions as applicable only to the internal operation of the government agency, however, and only rarely are they applied to limit contractor claims in a court or board of contract appeals.

In the Carnell case, the contractor and the housing authority got into a dispute over performance of a $793,541 fixed price construction contract. The contractor brought suit and a jury returned a verdict for the contractor for extra...