LOS ANGELES:Change Orders as a Business Practice in DBB

Change Orders as a Business Practice in DBB

The Case of Tutor Perini

City agencies can experience unexpected cost increases following a DBB procurement. In 1995, Tutor Perini, a contractor hired by the Los Angeles County Metropolitan Transportation Authority to construct the Red Line, sued for $16 million in additional expenses they claimed were due to design flaws or other issues that were the responsibility of the public sector. In 2001, after years of legal battles, Metro won the dispute and was awarded $29 million. The dispute excluded the company from contracting for Metro for years, but the company was the lowest bidder and was selected to construct the Purple Line in January 2017. Like many other firms in the construction industry, the firm continues to use claims and change orders to resolve disputes with both public and private clients. Tutor Perini’s March, 2017 SEC 10-Q financial report reported $464 million in claims and $250 million in unapproved change orders. The company claims that they are simply meticulous about documenting flaws and aggressive about ensuring that they are paid all of the funds they are entitled to. Regardless of the merit of the claims, the change order process is one of the challenges to the DBB system.