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Silviculture
Manual
C O N T R A C T S
General Post Award

3.1 Notice to Commence Work

3.2 Pre-Work Conference, Work Progress Plan

3.3 Contract Operations

3.4 Contract Amendments and Changes in Work

3.5 Inspection and Acceptance

3.6 Contract Payments

3.7 Post Contract Follow-up

3. General Items - Post Contract Award

3.1 Notice to Commence Work

Operational services contracts require the ministry to issue a Notice to Commence Work. Prepare a Notice to Commence Work letter using the procedures and letter template in Chapter 18 of the Contract Management Manual.

3.2 Pre-Work Conference, Work Progress Plan

Article 6 of the operational services contract (FS 1000) requires representatives of the ministry and the contractor to meet and jointly develop a work progress plan before work commences. Schedule A's for aerial fertilization, tree planting, surveys (optional), aerial herbicide application, ground herbicide application, and vegetation management - livestock grazing each contain additional subjects the work progress plan must address. If applicable, arrange with the contractor to hold the meeting at the work site. Jointly tour the work site to review work conditions, boundaries, and contract specifications. Take care to ensure that any detail discussed and included in the work progress plan does not change the original agreement. If additions or deletions to the original works are necessary, use a Change of Work (FS 601) form.

Consulting services contracts often require an initial meeting to iron out project plans and to confirm the project timetable and working and reporting arrangements. Other types of contracts do not require a pre-work conference, it being more effective to cover off some of the items usually dealt with at a conference over the telephone and by dealing with any other matters during the initial inspection of the project.

3.2.1 General Considerations

See Section 18.4 of the Contract Management Manual for a list of items that may be in the pre-work conference.

If there are more than a few items, prepare an agenda so that no items are overlooked during the meeting.

3.2.2 How to Negotiate

From the ministry's perspective, negotiations over the work progress plan should be firm but flexible. Negotiations must be firm with respect to meeting the fundamental contract requirements. Although the operational services contract states in Article 6 that the ministry and the contractor's representative shall "jointly develop a Work Progress Plan," this does not mean that the ministry gives up its rights elsewhere in the contract to specify what the contractor must do to fulfil the contract.

Flexibility facilitates getting the job done in a manner advantageous to both parties. Flexibility can exist in areas such as start and stop dates, crew size, production rates, etc. - provided these were not specified as "hard" items in the contract. Usually there can be a greater flexibility for contracts not involving a biological window than for contracts with such a window. Take care, however, to not be so flexible as to fundamentally alter the contract requirements. This can lead to the contention by unsuccessful contractors that they could have bid a lower price had they known the ministry would relax certain requirements. In extreme cases, the ministry could expose itself to lawsuit by an unsuccessful contractor for loss of profit opportunity due to unfair process.

If a contractor proposes a previously unidentified efficiency that necessitates a change in the contract specifications, it is acceptable for the ministry to also negotiate a lower contract price that at the same time increases the contractor's profit. The key is that there must be no change to the contract deliverables; the same result is achieved but at lower cost.

3.2.3 Guide to Completing the Work Progress Plan - FS 791B

The purpose of the Work Progress Plan - FS 791B is to document discussions that occurred at the pre-work conference and to provide a schedule for the completion of the individual treatment units. This form may be used for most silviculture operational contracts. Attach additional pages where necessary. The aerial fertilization schedule A itemizes a number of subjects the WPP must address that the FS791B does not specifically provide space for.

The numbered instructions in Table 9 below correspond with the numbers in Figure 7. Work Progress Plan - FS 791B.

Table 9. Instructions for completing the Work Progress Plan - FS 791B

Number

Procedure

1

Ensure the information exactly matches that on the contract document.

2

As above.

3

As above. Do not use different work unit identifiers from those in the contract schedule B. If necessary, work units may be subdivided using a logical identifier that will not conflict with those already in use. For example, if work units are identified as A, B, C, etc, then unit A may be subdivided as sub-units A-1, A-2, etc. Use a separate row for each sub-unit.

4

Use 1, 2, 3 etc. to designate the order units are to be treated.

5

At a minimum, agree on the work commencement date for the starting unit. Beyond this, work commencement dates should be recorded for other work units only if relevant.

6

At a minimum, agree on the work completion date for the last work unit to be completed. Beyond this, work completion dates should be recorded for other work units only if relevant.

7

Use 1, 2, 3, etc. to designate payment areas. If several work units are combined into a single payment area, use the same payment number in each work unit row. If a work unit is to be subdivided into several payment areas, subdivide the work unit into sub-units as per 3 above.
For tree planting contracts, separate units with different bid rates or plot sizes into their own payment areas. This will make calculation of payment certificates easier.

8

If relevant, record the agreed minimum number of required workers for some or all units. This usually corresponds with the minimum production rate under items 14 or 15 based on ministry estimates of daily productivity per person. It is usually only enforced when the contractor is not meeting the minimum production rates specified in 14 or 15.

9 to 13

These sections are applicable to planting contracts only.

9

Enter the agreed frequency of stock delivery to the contractor. The frequency will depend upon factors such as the daily production and storage capacity on site.

10 & 11

If the Ministry Representative approves the contractor storing stock on site, record the agreed storage methods 10, locations 11, and seedling box temperature limits.

12

Ordinarily, the location for stock pick up is the same as specified in schedule B. Specifying a different location from that in schedule B may be mutually agreed.

13

Corrugated cardboard containers may be burned or buried. If burning, ensure proper precautions will be made to prevent a fire escape. Reusable containers (normally this is styroblocks) must be either delivered to a recycling or disposal site if unusable or, if usable, returned to the ministry at a specified location. Use judgement in giving the contractor the authority to decide which are unusable.

End of planting only

 

14

For planting, complete either trees/day or ha/day. For all other activities use only the ha/day production rate. See the following item.

15

Determine an initial minimum production/day figure by dividing the total work to be done by the time available in which to do it. Then adjust this figure upwards as necessary to fit the particular situation. The time available may be the contract term or may be a biological time window. Having a minimum rate specified also facilitates the ministry representative's planning for contract monitoring, and for the ordering and shipping of ministry-supplied materials such as herbicide, fertilizer or seedlings.
It is inappropriate to "surprise" the contractor with an onerous minimum production/day at the pre-work conference. If this is important and is not already evident from the contract (e.g., lots of work/short time frame = high minimum daily production), add a minimum rate to Schedule C prior to contract tendering.

16

Usually the contractor's on-site supervisor or foreperson is named as the contractor representative in the absence of the contractor. This must be an English-speaking person.

17

Optional. Any address entered here must match the address on the contract. If the contractor's address has changed, then initiate a contract amendment. All field correspondence must be copied and mailed to the contract address.

18

As above.

19

Only necessary if contractor's WCB number was not included on the contract document.

20

Enter any other relevant conditions. Conditions should expand upon or clarify existing contract requirements, or the contract has specifically provided for them to be included at this stage. They should not result in a material change to the contract. Attach additional pages if necessary.

21

The first level for dispute resolution should normally be between the ministry and contractor representatives. If not resolved at this level, the next informal level is normally between the ministry representative's supervisor and the contractor. Beyond this, disputes should be resolved in accordance with Article 14 of the operational services contract.

Signa-tures & Dates

Both the ministry and contractor representatives must sign and date the work progress plan. The ministry representative should place the originals on the contract file and take a copy along on every field inspection.

Figure 7. Work Progress Plan - FS 791B


3.3 Contract Operations

3.3.1 Ministry Spending and Receiving Authority Responsibilities

The following are the responsibilities of the ministry spending and receiving authorities as they pertain to contract inspections.

Spending Authority

The contract spending authority:

  • acts as the overall contract manager;
  • establishes the monitoring strategy, including the frequency of inspections and items to be covered during inspections;
  • delegates responsibilities to the contract receiving authority; and
  • certifies satisfactory contract performance when work is complete (while this may be delegated to the receiving authority where it is impractical for the spending authority to inspect the work in person, the ultimate responsibility remains with the spending authority).

Receiving Authority (Ministry Representative)

The contract receiving authority (usually the person designated as the ministry representative):

  • maintains regular contact with the contractor;
  • conducts inspections in accordance with the monitoring strategy;
  • enforces the terms and conditions of the contract; and
  • maintains written records and keeps the contract spending authority informed as to the progress of the contract.

3.3.2 Inspections

There are four basic types of inspection:

  1. Initial Inspection;
  2. Progress Inspection;
  3. Re-inspection; and
  4. Final Inspection.

The following sections provide a general overview of inspections. Later sections covering each silviculture contract type contain inspection procedures specific to each treatment activity.

Important: If the contractor's representative is not the contractor him or herself, a copy of all field correspondence must be mailed to the contractor at the address on the contract (in addition to the copy given the contractor's project supervisor in the field).

Initial Inspection

An "initial" inspection is, as the name implies, the first inspection undertaken after work commences. While it is most often conducted by the contract receiving authority, the ministry spending authority may also attend on larger projects.

The initial inspection is important in that as well as getting the work off to the right start it sets the tone of the business relationship between the ministry representative and the contractor. If a pre-work conference has not been held, the ministry representatives should introduce themselves to the contractor's representative on site and review with him/her, as appropriate, the relevant items that are listed for a 3.2 Pre-Work Conference, Work Progress Plan.

Conduct the initial inspection with the contractor's representative in attendance, pointing out any observed deficiencies. It is important to establish early in the contract the standards of work expected by the ministry. (Refer to program manuals for assistance in this regard.) Also, it is less costly to the contractor to remedy a deficiency at once, as opposed to later when it may have been partly covered up by other work or the crew has shifted to another work unit.

Use the Camp Standards Checklist - FS 776A.xls when inspecting silviculture camps. Inexperienced inspectors who are unsure of how to make use of the form or how to conduct camp inspections should be accompanied and trained by experienced senior staff on their first several inspections. Deal with serious infractions that have health or safety implications by issuing a notice to comply. Then contact the Ministry of Health and/or WCB, advising them of the problems and if appropriate requesting they conduct an inspection. The regional planting specialist can also advise on how to best deal with specific infractions.

Progress Inspection

A "progress" inspection is one of (usually) a series of on-site inspections while the work is fully operational. It is normally conducted by the ministry representative (contract receiving authority). Some aspects of progress inspections, such as the taking of survey measurements may be undertaken by an implementation contractor.

During the early stages of the contract, progress inspections may be required daily, or even several times daily, until the competence and reliability of the contractor is established. Avoid lengthy intervals between progress inspections as this can result in what started as a relatively simple problem becoming much more complex, possibly requiring additional work and expense by the contractor for which the contractor may seek additional payment.

Conduct progress inspections on a random basis without prior notification to the contractor. Do, however, encourage the contractor to attend the inspection, but do not allow him/her to lead the site tour as the contractor may avoid going past substandard work. Inspections must be thorough; if an inspector has viewed a project and has not taken corrective action on an observable problem, the contractor has the right under contract law to conclude that the work is acceptable and to continue doing it in the same manner. Where necessary, specifically schedule subsequent inspections as a follow-up to ensure that instructions to the contractor were followed.

Re-inspection

A "re-inspection" is where the contract provides the contractor with the right to request a re-inspection of the work, or remeasurement of the area, where he/she disagrees with the original inspection results or measurements. The contractor must provide notice within the time limits specified in the contract. Provisions regarding who bears the cost of re-inspection and which set of inspection results will be used are included in the contract.

Final (Payment) Inspection

The "final" inspection is a scheduled inspection conducted jointly with the contractor to determine whether or not the work is complete (or substantially complete) and is in accordance with the contract specifications. For many types of silviculture contracts quality inspection plots are established. Final payment to the contractor and release of the contractor from further contractual obligations in relation to the work normally results from a satisfactory final inspection. Any remaining deficiencies in the work are identified, and final instructions are issued to the contractor where necessary.

It is important that the final inspection be thorough, leaving no `loose ends.' Where instructions have been issued, or if the work is determined to not be complete, schedule additional inspections.

The final inspection is conducted by the contract receiving authority. On larger projects the ministry spending authority may also attend.

3.3.3 Failure to Commence Work

A contractor failing to start within the time specified in the Notice to Commence Work is in breach of contract. At this point, it is within the ministry's right to terminate the contract. However, normally the ministry representative should first attempt to contact the contractor to discuss the matter. How to deal with the situation depends on the nature of the work to be done and the reason for the contractor's failure to commence. If able to contact the contractor and the contractor's reasons for failure to commence are acceptable, it may be appropriate to agree on a new start date. This is an amendment to the contract that must be in writing. In this case, issue a new notice to commence work cancelling and replacing the earlier notice. Include in the covering letter the ultimatum that if the contractor does not start by the revised date the ministry will proceed to contract termination.

If not able to contact the contractor, or if the contractor's reasons for not starting are unacceptable, and/or there is some urgency to commence, then it is appropriate to terminate the contract. See 3.3.8 Contract Termination.

3.3.4 Overview of Progressive Contract Compliance Process

Obtaining contract compliance is normally handled in a progressively more severe manner as follows:

  1. issuance of a verbal/written warning;
  2. issuance of a Notice to Comply;
  3. issuance of a Suspend Work Order; and
  4. termination of the contract.

Lower level steps may by omitted where there is a significant and immediate threat to workers, property, the environment, or to the successful completion of the contract.

Figure 8 shows an overview of the contract compliance process. Each of the steps is further described in the sections following this figure.

Figure 8. Overview of the contract compliance process

3.3.5 Verbal/Written Warnings

The verbal or written warning is the first step in the progressive contract compliance process.

When to Use

Issue a verbal/written warning when:

  1. a contract infraction has been detected early enough that it is not yet posing a significant and immediate threat to the successful completion of the work, to workers, to property, or to the environment; or
  2. the contract infraction is of a minor nature.

Deal with each occurrence on an individual basis considering its nature and the assessed degree of severity.

Examples of situations where a verbal/written warning is appropriate are the early detection of:

  • unsafe work practices not posing imminent danger;
  • production rates below those specified in the contract, and this can be offset by increasing production during the remainder of the contract; or
  • improper work practices which, if left uncorrected, may result in work having to be redone.

Examples of contract infractions of a minor nature include:

  • improper site clean-up not posing imminent environmental danger; or
  • camp standards for a silviculture contract have not been posted on site as required by the contract.

Procedures

Issue a warning immediately after observing a contract violation or a potential violation, preferably after first discussing the matter with the contractor. Be certain that the warning is not perceived by the contractor as "advice", which may be accepted or rejected by the contractor without consequence.

Where a ministry inspection report form is available for a specific activity, use the space provided on the form for giving written instructions to the contractor. If there is no space provided on the form, write the instructions separately on an FS 242 Form, attach it to the inspection form, and give a copy of both to the contractor.

Guide to Preparing a Written Warning

The numbered instructions in Table 10 below correspond with the numbers in Figure 9. Example of a Written Warning.

Table 10. Instructions for writing a warning using form FS 242

Number

Procedure

1

Enter the contract number, or project number or some other identifier that clearly references the contract document.

2

Print the name of the ministry representative. It is acceptable for another person to prepare the written warning (for example, an implementation contractor) provided it is signed by the ministry representative. No one other than the ministry representative has the authority under the contract to represent the ministry to the contractor.

3

Print the contractor's name the same as on the contract. If the contractor has a project supervisor on site as its representative, print the name of both the representative and the contractor as shown in the example.

4

When preparing the warning be specific as to:
the nature of the non-compliance;
the part of the contract the contractor is in violation of;
what must be done to be in compliance; and
the date by which compliance must be achieved.

5

The contractor or contractor's representative signs as receiving the 242. Signature only indicates receipt, not agreement. In signing, the contractor does not waive any right of dispute resolution under the contract.
If the contractor refuses to sign, note this fact in or near the contractor's signature area.

6

Only the ministry representative may sign. See 2.

 

Figure 9. Example of a Written Warning


3.3.6 Notice to Comply

Issue a Notice to Comply when:

  1. a prior verbal or written warning has not been satisfactorily acted upon by the contractor within the specified time; or
  2. non-compliance with the contract is posing a significant threat to the successful completion of the work and the necessity for immediate action requires stronger enforcement action than issuing a verbal/written warning.

Procedures

Unless a specific form is available for use, issue the Notice to Comply in writing using an FS 242 form. Cover the same items noted above under "3.3.5 Verbal/Written Warnings - Procedures."

Other items that should be addressed include:

  • reference to earlier verbal and written warnings regarding the matter, if any;
  • whether or not work completed to date may, or must, be redone to raise it to the required standard; and
  • the amount of any damages being assessed.

Assessments for Contract Non-Compliance

Some silviculture contracts provide for assessments in the event of contract non-compliance. Such assessments are not normally applied when a first warning is issued (i.e., a verbal or written warning) but are nearly always applied after a Notice to Comply is issued.

Figure 10. Example of a Notice to Comply


3.3.7 Suspend Work Order

Issue a Suspend Work Order when:

  1. a contractor has failed to fully comply with a Notice to Comply on a matter which relates to an essential aspect of the contract, all other avenues to obtain contract compliance have been exhausted, and there is an intent to terminate the project;
  2. a contractor has failed to fully comply with a Notice to Comply on a matter which is not an essential aspect of the contract, all other avenues to obtain contract compliance have been exhausted, and there is an intent to re-commence work once the non-compliance has been resolved; or
  3. contract infractions are posing a significant and immediate threat to workers, to property, or to the environment, and there is a necessity to suspend work until corrective action can be taken.

An order may be made with respect to all or parts of the project.

Procedures

Use an FS 242 form to issue the Suspend Work Order, clearly noting the reason for the order together with reference to earlier warnings having been issued (if relevant).

Other items that may be included are:

  • a request for the contractor to meet with ministry representatives to resolve the matter;
  • what the contractor must do to have the Suspend Work Order rescinded; or
  • the fact that the ministry will be proceeding to terminate the contract.

Figure 11. Example of a Suspend Work Order


3.3.8 Contract Termination

Terminate the contract when the contractor has failed in an essential aspect of the contract and all avenues to correct the problem have been exhausted.

Reasons for contract failure considered to be the fault of the contractor include:

  • failure to comply with an essential contract requirement or specification (e.g., methods, materials, production rates, quality, timing, etc.);
  • abandonment of the contract;
  • contractor's incapacity; and
  • contractor bankruptcy.

If the cause of the contractor's failure was not within the contractor's control, terminate the contract without penalty to the contractor (normally the matter is discussed with the contractor and the contract termination is by mutual agreement).

Reasons that may not be the fault of the contractor include:

  • weather-related problems beyond those that could normally be expected;
  • access problems which are not the responsibility of the contractor under the contract; and
  • ministry-caused problems, such as failure to supply materials to be used in the contract. (This may result in compensation for a reduction in work where provided for in the contract.)

Once the decision has been made to terminate, prepare a contract termination letter using Figure 12. Notice of Contract Termination, below, as a template. Edit the template so that italicized wording, boxes denoting optional text, and undesired optional text is deleted or replaced so that none appears in the issued letter.

Once the letter is signed, the Ministry Representative should inform the contractor verbally of the termination. Send the termination letter by courier or double-registered mail. If by courier, require the courier package be signed for at the contractor's address.

Table 11 lists follow-up items after a contract is terminated.

Figure 12. Notice of Contract Termination


Table 11. Follow-up items after a contract termination

Item

Action When Contract Terminated:

 

Due to Non-Compliance

By Mutual Agreement

Payment for work performed prior to Suspend Work Order.

Make payment for the portion of work completed only when it has value to the ministry and performed in accordance with the contract. Prorate payment if the work has part value.

Make payment in full for work satisfactorily completed prior to work stoppage.

Payment for reduction in work.

No payment.

Payment as provided for in the contract.

Disposition of performance security when a performance bond

Immediately advise the bonding agency of the contractor's default and of the ministry's intent to make a demand on the bond.

Release the performance bond following normal procedures.

Disposition of performance security when other than a performance bond

Confiscate the performance security following procedures in the Ministry Revenue Management Procedures Manual.

Return performance security to the contractor following normal procedures.

Disposition of holdbacks

Confiscate holdback if contractor has been overpaid for work which subsequently proves to have no or only partial value due to the termination.

Release holdback as per normal procedure.

3.4 Contract Amendments and Changes in Work

Chapter 21 of the Contract Management Manual covers contract amendments and changes in work but has not yet been issued. The following presents a brief coverage of the subject on an interim basis until the Contract Management Manual chapter is issued. It only addresses changes to operational services contracts.

3.4.1 Choosing a Form

All contract amendments must be documented in writing. There are two approved forms for amending a ministry contract. Ministry policy stipulates that only these forms shall be used. The forms are:

Use Table 12 below to assist in determining which form to choose. If unsure of which form to use, use the contract amendment form, which is more versatile.

Inadvertent use of either form for the wrong type of change or amendment is not a problem. Both forms are supplemental contracts and equally serve to amend a previously signed contract. The desired result is still achieved provided the change or amendment is properly written and executed.

If a change involves both an increase in work and a change in the work specifications, do not issue both a contract amendment and a change of work order. Use one or the other form based on whichever is the more significant change. For example, if there is a significant increase in the work along with a relatively minor change in a work specification, use the change of work order form to cover off both amendments.

Table 12. Guide to choosing a contract amendment form

Form

Use For:

Examples

Contract Amend-ment
(FS 600)

Any contract change, except if the change solely consists of an increase or decrease in the originally specified work for which a Change of Work Order is preferred.
Changes to a section, clause, or schedule requirement of the original contract.

  • Revise the time schedule or extend the contract completion date.
  • Raise or lower the maximum fees and/or expenses limit of a consulting services contract.
  • Change a performance standard or deliverable requirement in one of the service contract schedules.

Change of Work Order (FS 601)

Authorizing additions or deletions to the originally specified work or service.

  • Increase or decrease the amount of work, expressed in units of work (e.g., number of trees planted, number of maps to produce, number of pheromone baits to set-up, volume of cones to be collected).
  • Add or delete area to be worked (e.g., hectares to be traversed, hectares to be mapped or juvenile spaced).
  • Agreed substitution of specified materials or products.

3.4.2 Important Considerations!

Before considering a change to a contract, check the following items.

Contracts Guaranteed by a Performance Bond

Amend contracts guaranteed by a performance bond with caution. It is a condition of the bond that if the contract is materially increased or decreased, the surety must be informed and consent to the changes. Inform the surety company if a contract amendment or change of work order will encompass one or more of the following:

  1. completion date is revised;
  2. location of work/project is moved or changed;
  3. method of payment will deviate dramatically from original contract or large amount of monies will be withheld at length;
  4. a single material increase or decrease to the work affecting the contract price by more than 20%;
  5. a major material change which deviates from the original scope of the contract (and may be outside the contractor's general area of expertise - e.g., adding spacing to a tree planting contract).

The courts have ruled that decisions on materiality rest almost exclusively with the surety. Failure of either party to notify the surety of any of the above proposed changes could render the bond invalid. Therefore, provide a copy of any change of work order or contract amendment to the surety under the above circumstances. However, do not report minor changes or amendments, since nominal price or material adjustments are quite common in contracting.

Amendments That Increase the Contract Price Above Policy Limits

Ministry policy requires the approval of the ministry responsibility centre manager where a contract amendment increases the total contract value by more than 25% if the original contract value was less than $100,000 or 10% if the original value was $100,000 or more.

Contract amendments that would increase the total contract value to $100,000 or over may also be subject to Treasury Board approval requirements and may be subject to the Agreement on Internal Trade.1 Check with the local finance section or appropriate program managers before entering into negotiations on such contracts.

3.4.3 Negotiating and Preparing a Contract Amendment - FS 600

The most common contract amendments are extensions in time, changes to a contract specification, or adding a term. Each of these are addressed in the following sections.

Extensions In Time

Contractor Responsible for the Delay

If the contractor is considered responsible for not having met the contract completion date, assess whether a contract extension is in the best interests of the ministry. Reasons for not extending the contract include:

  • the contractor is not likely to complete the work within a reasonable period of time; or
  • the contractor has not performed well on the contract to date.

In addition to not extending the contract, hold the contractor accountable for having missed the contract completion date. Mechanisms for this include:

  • levying assessments where provided for under the contract;
  • non-payment - if the work completed before the end of the contract term does not provide value to the ministry or is of only partial value, make contract payments accordingly; or
  • confiscation of the performance security and any outstanding holdback payments, to the extent necessary to ensure the work is completed to the original contract specifications. If the security is in the form of a performance bond, notify the bonding company and request action.

If the contract is to be extended, consider not only holding the contractor accountable for having missed the contract completion date as above, but also ways to ensure that the work is completed by the extended deadline. Mechanisms to accomplish this include:

  1. If contract holdbacks have not been held, but the contract provides for them, a performance holdback may now be initiated. If the contract does not provide for holdbacks, a provision may be added through the contract amendment.
  2. If a performance security is not being held, the contractor may be required to submit one through the contract amendment.

While a contract amendment must be agreed to and signed by both parties, if the contractor will not agree to any of the above changes when they are deemed necessary by the ministry to ensure performance, do not extend the contract.

Where the contractor is responsible for the delay, the contractor cannot claim for losses associated with the delay.

Contractor Not Responsible for the Delay

If the contract completion was delayed for reasons beyond the control of the contractor, such as adverse weather or fire closures, consider extending the completion date using a contract amendment form (FS600). Make the extension for the number of days affected by adverse conditions. If work cannot re-commence until the following season, consider extending the term to allow work to continue in the next season. If the next season is in a new fiscal year, follow procedures in "Fiscal Year End Considerations," below.

If the delay is not the fault of the contractor, the contractor might submit a request for an increase to the contract price. Judge each case on its own merits. Normally it is up to the contractor to carry insurance to cover such risks. However, if the delay has been directly the fault of the ministry, it may be appropriate to negotiate an increase in the project price. Before agreeing to an increase, ensure that additional funds are available, and obtain all required approvals.

Fiscal Year End Considerations

A contract may be extended past the fiscal year-end of March 31st, provided:

  • the contract spending authority has budgeted for and is confident that funding will be available in the new fiscal year to cover the extension;
  • the responsibility centre manager approves the extension into the next fiscal year, thereby potentially committing funds as a high responsibility centre priority should direct funding not come available; and
  • the contract contains the standard appropriation clause (all standard ministry contracts contain this clause).

The appropriation clause is derived from the Financial Administration Act and effectively causes termination of the contract if funding is not made available by the Legislature or Treasury Board in the next fiscal year. If this occurs, immediately notify the contractor to suspend work. Make payment only for work satisfactorily completed up to the date the suspend work order was issued. Do not pay for a reduction in total work.

Example of Amendment Wording

Following is an extract of the FS 600 contract amendment form showing the suggested wording of an amendment to the contract term. In this example, the contract is being extended to March 31, 2002. Note that the amendment wording is shown in a script font; in an actual amendment, use an Arial or similar font.

Graphic

Changing a Performance Standard

Negotiating With the Contractor

A performance standard is ordinarily changed when it is discovered during performance of the work that the specified standard is inappropriate. A change may also be required when new program standards are introduced after a contract has been issued.

Depending upon the nature of the change, negotiations may be required with the contractor. The best approach is to verbally discuss the matter with the contractor. Ordinarily, the contractor will be receptive to any change, as he/she wants to do the best possible job. If the change does not cause any increase in the contractor's cost, and the contractor agrees, proceed with the a contract amendment. If the contractor disagrees with the change, either from a technical or monetary standpoint, negotiations may be required.

Example of Amendment Wording

In this example, the colour of flagging tape for a survey strip line is being changed from blue to multi-colour because it was discovered after the contract was issued that a mining exploration crew has run strips through the area using blue flagging.

Graphic

Changing the Contract Price

Negotiating With the Contractor

A contract price must not be changed without just cause, especially contracts awarded through competition. Usually the reason for a price change will be directly associated with a change in the contract requirements. Such price changes are dealt with in other subsections.

Example of Amendment Wording

In the following example, the ceiling price of a consulting services contract is being raised by 15% from $62,700 to $72,105.

Graphic

Adding a Term to an Option to Renew Contract

Negotiating Price and Term

Option to renew contracts are described in "Creating Multi-year and Multi-activity Contracts." The additional work periods which may be included in the contract should have been specified in the information to bidders and in the contract at the time the competition was held.

Extend the term of the contract by changing the contract ending date. If the contract consists of active and inactive work periods, as is the case of most silvicultural activities, include the dates of the active work periods in Schedule A of the contract. While the ending date of the contract extension and the dates of the additional active work period are determined by the ministry, the price of the additional work will be subject to negotiation. (It is not subject to negotiation in a multi-year contract where the original contract bid price was fixed for all years.)

The price of the additional term should not change substantially in favour of the contractor as other contractors may complain of unfair or preferential treatment. As a guideline, if the initial contract term prices were unit based, the same unit prices should be used in the additional term. It is acceptable to negotiate an adjustment for inflation where it has exceeded three percent over the preceding term.

If the initial contract term price was lump sum or fixed price, and the work to be done in the next term is substantially the same, the same price should prevail. If there is more or less work than in the previous term, negotiate the price based on a percentage increase or decrease to the work, keeping in mind that a contractor's overhead usually increases as a percentage of the cost when the work goes down and decreases as the work goes up.

If there is no agreement with the contractor on the price of the additional term, the work may be competitively awarded upon expiry of the original term of the contract. The contractor is under no obligation to agree to an additional term and may decline without penalty.

Example of Amendment Wording

Following is an extract of the contract amendment form (FS 600) showing the suggested wording for adding a second contract work period. In this example, a 2nd season is being added to an implementation contract. To accomplish this, the term of the contract is extended continuously to the end of the second work period, Schedule A is amended to add a second period during which the services must be provided, and Schedule B is amended to increase the contract ceiling price to pay for the increase in services.

Graphic

3.4.4 Negotiating and Preparing a Change of Work Order - FS 601

Increase in the Work

Negotiating With the Contractor

When the change encompasses extra quantities of work units already specified in the contract, attempt to negotiate the extras at the same or a lower price than that specified in the original contract. Usually the contractor's overhead as a proportion of unit cost is reduced with an increase in the number of units, and the ministry should benefit from this (through lower prices) as well as the contractor (through greater profit). However, other factors may enter into the negotiations that must be taken into consideration. For example, the contractor may claim that the extra work will actually reduce profit as he/she has other work already lined up elsewhere at better prices. The bottom line, from the ministry's perspective, is that the price agreed to should not be more than a fair market price that could be obtained through competition, with some additional allowance for the cost and time delays associated with conducting a competition.

When requesting prices or quotations for proposed extra work, confirm that the contractor's written or verbal offer includes all overhead, profit and other things necessary to completely incorporate the changes into the contract work, exclusive of the federal Goods and Services Tax (GST).

Example of Change of Work Wording

When dealing with lump sum-based extras, use the term "price" (rather than "cost") on the change of work order because it is more conclusive in its legal interpretation. "Cost" generally implies the actual amount the contractor paid to acquire the labour and materials, while "price" is the amount the contractor will charge the ministry for the fully completed extra work.

In the following example, an additional block is being added to a planting contract for a total price of $19,548. The last treatment unit on the existing schedule B was unit F, so the new unit is added as unit G. Schedule B is amended accordingly (showing a new contract total price) and is attached to the change of work order, along with a project map showing the unit boundaries and any other necessary planting details.

Figure 13. Example of a change of work order for an increase in work


Decrease in the Work

Causes of a Decrease

The five common causes of a decrease in the work are:

  1. the work location has been rendered inaccessible (e.g., flooding, road washout, early snowfall);
  2. the natural "window" in which the work may be performed has closed (e.g., tree cones are now infested with bugs and are no longer suitable for collection);
  3. the work is not available due to incompletion of an earlier phase (e.g., small business sale not logged; danger trees not felled);
  4. supplier problems (e.g., insufficient fertilizer, shortage of seedlings); and
  5. government did not approve the funding or institutes a reduction in funding.
Negotiations Not Appropriate

There is no negotiation over compensation or a price change when the reduction in work is related to either the 1st or 5th cause listed above. These are both provided for in the operational services contract form - the first under clause 10.01 (d) (assuming the spending authority elected clause 10.01 (X) when the contract document was prepared) and the 5th under clause 12.10 (no funding is also provided for under the Financial Administration Act).

With respect to cause #2 above, the possibility of this event should have been anticipated at the time of contract award and the contract styled accordingly so that no compensation is payable. In the case of cone collection, for example, the contract for helicopter hire would be based on an hourly rental, while cone pickers would be hired on an hourly or daily pay basis.

Negotiating With the Contractor

Negotiations with the contractor may involve the following:

  1. The price of the residual portion of the contract. - The contractor bid on the work as a whole. Depending on the amount of the reduction it may be unfair to expect the contractor to hold the same price for the residual portion. This is usually only negotiable with respect to causes 3 & 4 when clause 10.01 (Y) has been elected. (This is not addressed further here.)
  2. Price adjustments for substitute work. - If substitute work is proposed by the ministry, there may be a need to negotiate price adjustments if the substitute work is not considered by the contractor as equivalent in value.
  3. Compensation for a reduction in the work. - This is generally only payable if the contract provides for compensation, only for causes 3 and 4 above, only if the contractor has mobilized following a notice to commence work, and only if there is not a negotiated price adjustment for the residual portion of the contract. (Clause 10.01X of the operational services contract is applicable when a changed condition occurs "during the course of the work." The ministry considers work to have begun once it has issued the notice to commence work.)

Clause 10.01 X of the operational services contract contains compensation provisions for a reduction in the work. The formula is that the ministry pays 15% of any short-fall below 90% of the original contract price, provided the reduction in work was not due to any cause over which the province has no direct control (e.g., Act of God, unsuitable weather, natural disaster, labour dispute).

If there are no provisions for compensation in the contract, approach a contractor's request for compensation carefully. Contact a ministry contract administration specialist for advice, as the ministry must guard against setting precedents, and if compensation is payable, must ensure it is fair and equitable. Normally, the risk of a reduction in work is assumed to be the contractor's. Where this risk has been assumed by the ministry through a contract provision for compensation, in addition to being fair, one of the major reasons for doing so is self-serving. In activities where reductions in work are a fairly common occurrence, contractors will bid higher prices to compensate for the risk. By including a compensation clause, the ministry is in effect insuring the contractor against this risk and should receive lower bid prices in return.

Example of Change of Work Wording

In the following example, two treatment units (TU's) are being removed from a spacing contract. In this hypothetical case, a recent file check by the ministry representative found a previously-approved stand management prescription for these areas is no longer valid. As a result, TU C is being removed in its entirety. This unit was bid as a lump sum price. Only 5 ha of a 20 ha TU D (25% of the area) is being removed. It was bid at a price of $1,400/ha. Because the contractor had started work (on TU A) and no substitute for the deleted areas could be found, compensation is payable under the contract for the reduction in work. Total contract value was $46,547.

Figure 14. Example of a change of work order for a decrease in work


3.5 Inspection and Acceptance

See 3.3.2 Inspections.

3.6 Contract Payments

Other than for tree planting, use the Contract Payment Certificate - FS 606 for all silviculture operational services contracts. Instructions for completion of this form are included with the downloadable document (the document must be `protected' for the instructions to display at the bottom of the screen when each form field is entered).

3.7 Post Contract Follow-up

3.7.1 Entering Information in RESULTS

Upon contract completion, spending authorities shall ensure contract details are recorded in RESULTS. Doing so meets all ministry silviculture record-keeping requirements. Refer to RESULTS manuals and on-line instructions/help for data requirements and procedures for data entry.

The RESULTS system also contains a contractor performance record subsystem. To have this information available to all districts on the RESULTS system, it is critical that the "Maintain Projects" screens are fully filled in for all silviculture projects. Contractor performance records should be updated particularly when there has been a failure to meet all the conditions of the contract. Entering performance into RESULTS will allow other Ministry staff access to performance records for contractors bidding on other Ministry work.

1 All of the provinces, Canada and two of the territories are parties to the Agreement on Internal Trade. The new territory of Nunavut is not. The objective of this agreement is to reduce and eliminate, to the extent possible, barriers to the free movement of persons, goods, services and investments within Canada and to establish an open, efficient and stable domestic market.


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Copyright 1999 Province of British Columbia
Forest Practices Branch
BC Ministry of Forests
This page was last updated March 2002

Comments to: Tim Ebata <Tim.Ebata@gems8.gov.bc.ca>