approved change order confirming the subcontractor’s price within five days. If the subcontractor does not receive such confirmation, then the change order work required of the subcontractor by the general contractor is not state-directed and approved. This flow down provision is not enforced by the state agencies, but it is the current law. Consequently, if the state agency and general contractor cannot agree on price, the state shall issue a Construction Change Directive and agree to partially fund the change order and then negotiate on price 30 days after commencement of the work. The law also requires that state agencies publish guidelines for the new law. However, very few have complied with this provision of the law. Currently there are no sanctions imposed on state agencies for non-compliance with the law, despite its addition to the statutes. Despite recent passage, it has not made it into the Code of Maryland (COMAR). COMAR 21.07.02.02 still references unilateral change orders and is in direct conflict with the statutory provisions. As a result, many contractors are unaware of the new law. Although the Coalition for Contracting Fairness initiated the bill, Champe McCulloch, president and CEO of Maryland AGC, ignited and fueled success of the bill. Several others worked tirelessly behind the scenes to maneuver the bill, including: Ike Casey, executive director of American Subcontractors Association of Metro Washington; Wayne Frazier, president of Metropolitan Washington Minority Contractors Association; Steve Weissenberger, vice president of the Mechanical Contractors Association of Maryland; and representatives from the Alliance
for Construction Excellence. They relentlessly tried to inform Maryland state leaders that this new law signed by the governor with an effective date of July 1, 2016, has yet to be embraced in COMAR. Maryland Department of General Services has issued its guidelines and to date appears to be the only agency that is fully embracing the new law. There is optimism that this issue will be resolved soon, but in the meantime, getting the message out about the new law is paramount. If a state – or for that matter – the federal government, mandates minority and small business participation on contracts, timely approval and payment for change orders is essential. It is rare that such contractors, especially economically disadvantaged contractors, can finance large change orders; unfortunately causing many companies to implode due to lack of cash flow. For more information about the issues that can arise with state-directed change orders, see the Maryland State Board of Contract Appeals case involving appeal from M. Luis Construction Co. Inc. under SHA Contract No: BA6885184, wherein the state for the first time decided (October 29, 2015) on the impact of cumulative delays caused by state-directed change orders, which greatly assisted in passage of the new law.
Karen Barbour is the founder and president of The Barbour Group, LLC – and a veteran of the surety bonding industry. Karen was instrumental in the creation of the State of Maryland’s Change Order Fairness Act and is working to fully implement the legislation across the state. Karen started her career in surety as a home office bond underwriter in 1985. Karen is well known as an innovator and expert within the surety industry. Karen Barbour, karen@thebarbourgroup.com
40
// Winter 2019
