Long-standing precedent in Pennsylvania required a contractor’s change order claim against a public entity to be supported by a written change order and strict adherence to the contract requirements and any applicable public law.
For claims against school districts, all of that changed in 2007 with the Commonwealth Court’s decision in James Corp. v. North Allegheny School District, 938 A.2d 474 (Pa.Cmwlth.2007). In James Corp. the Commonwealth Court allowed an extra work claim in the absence of a formal written change order and held that Section 508 of the Public School Code of 1949 (requiring affirmative vote of a majority of all the members of a school board for contracts) did not bar the claim.
And now the decision in James Corp. has been re-affirmed by the Commonwealth Court. On March 6, 2015, the Commonwealth Court issued a formal opinion in East Coast Paving & Sealcoating, Inc., v. North Allegheny School District, a case involving a change order claim based on a directive to perform work without a formal written change order, and cited its decision in James Corp. as binding precedent. In East Coast Paving, the Commonwealth Court stated:
With respect to the School District’s argument that a change order was a necessary condition to payment, our holding in James Corp. v. North Allegheny School District, 938 A.2d 474 (Pa.Cmwlth.2007), is binding precedent. Notably, it involved the School District as the defendant and the very same contract language invoked here by the School District.
The Commonwealth Court also rejected the school district’s argument that Section 508 was an insurmountable obstacle to the contractor’s extra work claim:
In its second issue, the School District argues that the trial court erred in concluding that the School District authorized East Coast to do the soft spot repair work. The School District contends that a change to a contract “must be approved by affirmative vote of the school board members and the approv[al] must be reflected in the minutes or record as provided by Section 508 of the Public School Code, 24 P.S. § 5–508.” School District Brief at 15. According to the School District, the School Board did not approve the soft spot repair work.
The School District made this argument in James, and we rejected it there. We explained:
We reject [the School District’s] argument [that] Section 508 of The Public School Code of 1929, Act of March 10, 1929, P.L. 30, as amended, 24 P.S. §§ 5–508 (requiring school board approval for increases or decreased to indebtedness), bars [the contractor’s] claim for payment of additional work. Testimony established [the School District] considered the work part of the contract; thus, further school board approval was unnecessary.
James, 938 A.2d at 478 n.12. Moreover, we explained:
[The School District], having directed [the contractor] to perform the additional work asserting it was required by contract, cannot now disavow liability for costs incurred by claiming [the contractor] did not have written authorization [from the School Board].
Id. at 487.
The record established that the School District required East Coast to do the soft spot repair work. The School District does not argue that the soft spot repairs were not necessary. As in James, it was not necessary for the School Board to approve, specifically, the soft spot repair work. The School Board approved the paving project and its completion by East Coast, and that is all that was required by Section 508.
Thus, at least for the time being, and at least with respect to contractor claims against school districts in Pennsylvania, a contractor does not need a formal, written change order in order to pursue a claim for extra work performed at the direction of an official or employee of the school district. Moreover, Section 508 of the Public School Code is not a legal impediment to these claims. This is more than welcome news for contractors doing business with school districts across the Commonwealth of Pennsylvania. Of course, contractors are advised to consult with experienced counsel when faced with these types of claims.
The Commonwealth Court decision in East Coast Paving can be found here.