Cardinal Changes

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Third Party Procurement

Frequently Asked Questions

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Q. We recently issued an RFP for towing services with an estimated annual expense of about $150,000. However, the engines in our fixed route buses have a defect, and now we project that towing expenses will be at least $300,000. Does this constitute a cardinal change for which we should cancel the RFP and re-bid? We believe we could get a better price based upon our higher usage. How should we proceed?

A. We would advise you to amend the RFP to give prospective vendors your more accurate estimate of the volume of services required. This could well result in lower prices. However, if you awarded a contract based on a requirement for $150,000 in towing services, you could not issue a change order against that contract to require twice the volume of services. That would be a cardinal change since it goes far beyond the level of services the parties originally had in mind when the contract was awarded. The subject of cardinal changes is discussed in the Best Practices Procurement Manual (BPPM), section 9.2.1 - "Contract Scope and Cardinal Changes." (Revised: September 1, 2009)

Q. We are in the process of planning for a Modern Streetcar. We have a consultant on board for work through Preliminary Engineering. We have recently discovered that we will need someone to perform Project Management Oversight for the Design, Construction, Maintenance and Operation of the Streetcar. We also discussed starting that process now (to speed up design and construction as we have an tight deadline) and having the new contract include Preliminary Engineering, which has yet to be done under Phase 3 of the existing contract. Obviously the firm already on board for several years has quite a leg up on another firm coming in and replacing them. It seems almost pointless and a waste of other firms resources to formally solicit for this requirement when the existing firm has to be considered almost a shoo-in. The scope of the original contract did not contemplate Project Management, so change ordering it in could be considered a cardinal change, and issuing a new contract to them would be a sole source situation. Is there is a way to consider this as a cardinal change to the existing contract or as a sole source and issue a new contract?

A. The circumstances you described do not warrant a change order for several reasons. First, the project management oversight phase was not within the contemplation of the original competition, and the new work is simply beyond the scope of the original contract, adding years to performance and substantially more funds and effort. If your agency's decision is to award the oversight work to the incumbent, your choices are a sole source add-on to the existing contract or the award of a new sole source contract. The sole source justification, although discouraged, would need to be processed through appropriate agency management levels for approval. From an FTA perspective, however, a competitive RFP would be much preferred, even if the incumbent has a competitive advantage by virtue of its present contract work. Conducting a new competition would preclude any questions later from FTA or the professional engineering community. (Reviewed: September 4, 2009)

Q. Can a fuel contract be amended to increase quantities and include additional locations for delivery without being considered a cardinal change to the contract? We are a city department, and our current contract is attractive to the other departments. Some of the departments have asked if the contract can be expanded to include them. This would mean additional locations and volume (50,000 gallons on a 1,200,000 gallon contract) to add to the contract that was not originally considered at the time of the bid. Can the other departments use this contract?

A. The Best Practices Procurement Manual (BPPM) discusses the topics of joint procurements, "piggybacking" and "tag-ons" in Section 6.3.3.

The scenario you describe would be considered a "tag-on" and thus a cardinal change. Your agency may want to consider a future joint procurement with other local agencies for fuel if you believe this would produce better pricing. The solicitation would inform the bidders of the total estimated quantities to be purchased by the participating agencies and the contract could then be structured as an indefinite quantity contract with minimum and maximum quantities. FTA requires indefinite quantity contracts to have minimum and maximum quantities, which when reached would require a new procurement action. This is to protect the suppliers as well as to avoid open-ended contracts where unlimited purchases can be made at the originally quoted prices (a situation never intended by the parties). (Reviewed: September 4, 2009)

Q. The construction contractor for our ARRA funded March Point Park 'n Ride Rehabilitation Project discovered some saturated subgrade within the first couple of days on site. Work has halted and their preliminary estimate of $44,000 is 29% above the Contract Amount, which exceeds the 25% Cardinal Change threshold established in our Procurement Policy. My question seeks clarification between the Cardinal Change rule and the Differing Site Conditions clause. We have determined the change work to be within the scope of the original competition as these latent physical conditions were unknown at the time of bidding, or the site inspection, but are necessary to be completed in order to facilitate the rest of the work as bid. The park 'n ride improvements cannot be completed without the change work to drain off the water from the site. Considering the short timeline before the asphalt company closes for the winter, we do not want to halt progress on the Project by having to rebid it. In speaking with you, it is my understanding that the Differing Site Conditions clause overrides the Cardinal Change rule IF it is determined that the change work is within the scope of the original competition and that the contractor can be instructed to proceed with the change work while we negotiate the claim request. Please clarify the difference in writing and if my understanding is correct.

A. The Differing Site Conditions clause gives you the contractual authority to proceed with this unforeseen condition at the work site. The cost of the additional work, though substantial in relation to the initial contract value, does not override the authority of the Differing Site Conditions clause. As you note, another consideration (beyond the cost of the work) is what was included in the scope of the original competition when competitive bids were solicited and received. The IFB and resulting contract envisioned the possibility of site conditions being materially different than those described in the IFB, which conditions could affect the prosecution of the work, and thus this site condition change was within the scope of the original competition; i.e., all bidders knew at the time bids were submitted they might be required to respond to differing site conditions in order to complete the contract. Based on the foregoing, we would not treat this as an impermissible cardinal change. (Posted: January, 2010)

Q. Do FTA guidelines allow the project scope for an A/E contract to double? Would this be considered a sole source procurement? What concerns in this regard should I know about?

A. The FTA Best Practices Procurement Manual (BPPM) discusses "Contract Scope and Cardinal Changes" in section 9.2.1. Excerpts from that section are reproduced below.

"With respect to the FTA requirements governing changes, the change must be within the scope of the original contract. If it is not within the scope, it is considered a cardinal change. Such changes are not properly processed as changes under the Changes clause, but are properly processed as new procurements. See FTA Circular 4220.1F, Chapter V 7.b. "Impermissible Actions" for FTA guidance on this issue.

Within the general scope - The meaning of this phrase is somewhat vague and has been the subject of much interpretation by various judicial bodies processing contractor protests and claims. The Federal Court of Claims coined the term "cardinal change" to describe those changes that are beyond the scope of the contract. There are various tests used to determine if a change is within scope. One test examines changes in the nature of work to be performed. Another looks at the amount of effort the Contractor is required to perform. Still another test concerns whether the proposed change is within the scope of the original competition.

Nature of work - In one case the court held that the changed work is considered to be within the general scope if it "should be regarded as having been fairly and reasonably within the contemplation of the parties when the contract was entered into." The Federal Court of Claims stated the test to be whether the work performed was "essentially
the same work as the parties bargained for when the contract was awarded." In another case the court stated that a cardinal change occurs if the ordered deviations alter the nature of the thing to be constructed. The general principle appears to be that if the function or nature of the work as changed is generally the same as the work originally called for, the changes are considered to be within the general scope. For example, in a contract to build a hospital where there were many changes in the materials used, but where the size and layout of the building remained the same, the changes were held to be within the scope.

Amount of effort - The second test for determining if a change is within scope concerns the amount of effort in terms of work disruption and cost increases experienced by the Contractor. In one case requiring a subcontractor to place backfill simultaneously with the work of other subcontractors, the change was considered so disruptive as to be a cardinal change because it added over 200% to the cost of the backfill work. In another case the court decided to hold a trial on the cardinal change issue where there had been 130 changes, the time of performance had doubled, and costs of $4.6 million were incurred above the contract price of $5.8 million. But it should be noted that contractors have rarely been successful in arguing for cardinal changes on the basis of amount of effort.

Scope of the original competition - Competitors sometimes protest the issuance of changes when they believe that a new competitive procurement process should have been used for the changed work. In deciding these cases, the courts have used the criterion of whether the change was within the scope of the original competition, i.e., what the competitors should have anticipated to be within the scope of the competition. An important factor to be considered is "whether the original solicitation adequately advised offerors of the potential for the type of changes during the course of the contract that in fact occurred . . . or whether the modification is of a nature which potential offerors would reasonably have anticipated under the changes clause." This issue is an important one because the Changes clause lends itself to potential abuse in the matter of ordering quantities not originally competed. This practice tends to become an expedient to avoid the time and expense of a new procurement action, but it is improper when the additional quantities exceed the scope of the original competition. Such additional quantities should either be bought through a new competitive procurement, or processed as a sole source action with the requisite organizational approvals.

Number of changes - The number of changes issued has not been a determining factor as to whether the changes cumulatively are within scope. The Board of Contract Appeals held that approximately 100 change orders was not beyond the general scope. Another case held that 200 change orders was not beyond the general scope.

Time of issuance - The time of issuance of the changes has not been considered a factor. In one case the Contracting Officer issued six changes after completion of the work, which extended the contract period by 120 days, and the court held that these changes were within the general scope.

Changes in quantity - Major changes in the quantity of the work have been held to be cardinal changes. This principle applies to both additive and deductive changes. Major additions in the quantity should be processed as new competitive procurements. Large reductions in quantity should be processed as contract termination actions. The Comptroller General has held that a change adding quantities above the contractual maximums was outside the scope and therefore a cardinal change."

We would question whether the additional work being done that causes a 100% increase in the value of the contract was (1) reasonably within the contemplation of the parties when the contract was awarded, and (2) essentially the same work that the parties bargained for at the time of initial award. For example, if the A&E firm was selected to design a building, and during the course of the design, perhaps late in the design work, a series of unforeseen design changes had to be made on account of funding constraints, construction code changes, etc., but the building retained its essential character (as in the hospital case above), then the 100% cost growth is probably within the scope of the contract. You will have to apply the criteria above to your specific situation to determine if the added work is a permissible change within scope or whether the added work must be treated as a sole source procurement outside the authority of the changes clause. (Posted: May, 2010)

Q. If piggybacking on a contract for over-the-road coaches, in which the original contract did not have a low-ceiling option (2.5 inches shorter than a standard over-the-road coach ceiling), would a purchase of low-ceiling buses from the original contract constitute a cardinal change?

A. If the change to a low ceiling configuration only involves placing a false drop ceiling under the original ceiling, we would say it's a cosmetic change and not a cardinal one; if it involves physically removing the original roof/ceiling and replacing it with another one, we would consider it a cardinal change since it involves a change to the basic structure of the bus. (Posted: January, 2013)

Q. Our agency is looking at purchasing 5 buses as a piggyback procurement from the options available on another transit systems contract. We will need to make some changes to the contract such as changing the driver’s seat, changing the seating fabric, changing the tires and the fare-box as well as installing AVL equipment on the bus. Can these changes be processed under the "changes clause" or are they considered a cardinal change. If we are able to make these changes under the "changes clause" are we required to do and ICE and/or a cost/price analysis for each change?

A. We believe the changes you describe can be made under the changes clause. Yes you will need to do an ICE and a cost or price analysis for each of the changes. (Posted: January, 2013)

Q. Recently my agency executed a Contract for Forty-Foot Low Floor CNG Transit Buses. There has been some discussion within the agency about reducing the number of seats from 40 to 32 to allow for additional ADA compliant wheelchair securement locations. One of the minimum requirements stated in the RFP and subsequent Contract requirements is \"at a minimum there will be 40 passenger seats.\"

A. The reduction in the number of bus seats, or the change in seating configuration to allow for more ADA compliant seating, would not be considered a cardinal change. The seating changes will not change the nature of the vehicle (e.g., low floor to high floor; diesel to hybrid) nor will they affect the integrity of the original competition (i.e., had these changes been known originally it may have affected the number of bidders for the contract). (Posted: August, 2013)

Q. My questions are: (1) What is the definition of “outside the scope”? (2) What is the definition of “Cardinal Change”? (3) Does any change to our contract constitute “outside the scope” simply because the contract does not address changes at all? (4) We’ve had two previous changes to the contract on Maintenance & Fuel issued by MOA’s in 2010 & 2011. Since our contract does not address changes, would these changes have been considered “outside the scope”?

The only change request at this time is the extension of time. The scope of work and the hourly rate will remain the same. Nothing else will change other than the contract date.

It is the Agency’s analysis that our Procurement Manual requires a “sole source” if it’s “outside the scope,” and we believe this one-year extension is clearly outside the scope as defined in the guidance from FTA. I would appreciate your input to help us understand whether or not an extension would be possible based on the interpretation of “outside the scope” and “Cardinal Change.”

A. FTA Best Practices Procurement Manual (BPPM), section 9.2.1 discusses “Contract Scope and Cardinal Changes.”

There are several criteria for determining when a change is within scope or out of scope (and thus a cardinal change). One of the criteria is what was within the scope of the original competition; i.e. what the parties contemplated when the contract was being competed. For “term-type” contracts awarded for services for a specific period of time (e.g., five years), the parties contemplated that the services would be provided for the term that was established in the solicitation and in the contract. The various offerors did not contemplate that the contract would be significantly extended (e.g., by an additional year) on a non-competitive basis. Had the offerors anticipated future non-competitive extensions they might conceivably have changed their proposals to offer more attractive terms, such as a lower rate of profit? In any event the additional years would have been priced as options under competitive conditions with the initial proposals and the option years pricing would have been considered as part of the original contract award decision. That was not done in this case. In the absence of contract options, which were priced and evaluated at the time of basic contract award, any significant extensions of time to a term type contract such as yours would be considered outside the scope and thus a cardinal change requiring a sole source justification.

The conclusion would be different if the contract were a completion - type contract requiring completion of specified work and deliverable items that, for various reasons, could not be completed by the required delivery date. In these cases the delivery date could be extended to allow the contractor to complete the required work and deliver the items specified in the contract. These extensions of time to allow completion of the contract would not fall under the changes clause of the contract and thus the issue of cardinal change is not relevant. They would fall under the Delays clause and thus the reasons for the delay would be considered as to whether caused by the contractor, the owner, or acts of God.

The fact that the contract does not contain a changes clause might mean that the owner does not have the contractual authority to change the contract unless the contractor agrees to the change. In other words, the owner could not impose a change unilaterally as he could under the changes clause. The same principles regarding cardinal changes would, however, apply to the changes being contemplated - the fact that the owner and the contractor agree to the changes does not make them permissible if they fall outside the scope of the contract (as the courts have interpreted that term over time). For example, if the change is beyond the scope of the original competition (as is the case in your situation), the parties cannot implement the change without the Agency’s internal approval of a sole source justification. (Posted: September, 2013)

Q. If our Agency chose to change our Procurement Manual to allow, at our discretion, a one-year extension of a five-year service contract and treat the extension as a “change order” type of action, would this be acceptable to FTA, or would the extension still be considered a sole source action?

A. The Agency's Procurement Manual is not the controlling factor here. FTA policy precludes the Agency from extending the contract unless the Agency processes a sole source justification through appropriate management officials (regardless of what the Manual says). The Agency Manual does not affect whether the contract extension is a cardinal change or not, and the Manual cannot change the nature of the action from a cardinal change to a permissible contract change. The facts of the case (the original contract term, original competition parameters, the criteria established by the GAO and various court decisions, etc.) determine what is permissible. These facts require a sole source justification in order to extend the contract. (Posted: September, 2013)

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