Colleagues,
As part of their fiduciary responsibilities, the Board of Trustees recently revised its policy on the reporting and approval of contract change orders and amendments. System Capital Programs will continue to prepare and submit all required Board reports. Capital construction units will play an important role in monitoring cumulative contract changes and notifying us when key thresholds are approaching.
A detailed description of all changes is provided below, or download a one-page summary.
Construction Contracts
For Board-approved construction contracts of $5 million or greater:
- Construction contracts with cumulative change orders that result in a total contract value of $5 million require Board approval.
- Cumulative change orders exceeding $1 million, but less than $5 million must be reported to the Board.
- Cumulative change orders exceeding $5 million require prior Board approval; subsequent Board approval also required for each additional $2.5 million in cumulative change orders ($7.5 million, $10 million, etc.)
To allow adequate time for review and possible Board action, System Capital Programs will be monitoring board-level construction contracts with cumulative change orders exceeding $4 million. We encourage CCUs to incorporate similar monitoring processes with board-level contracts.
Professional Services Consultant (PSC) Contracts
For Board-approved PSC contracts of $1 million or greater:
- PSC contracts with cumulative amendments that result in a total contract value of $1 million continue to require Board approval.
- Cumulative amendments exceeding 5% but less than 15% of the original Board-approved contract amount must be reported to the Board.
- Cumulative amendments exceeding 15% of the original Board-approved contract amount require prior Board approval; subsequent Board approval also required for each additional 10% in cumulative change orders (25%, 35%, etc.)
To support proactive review, System Capital Programs will monitor Board-level construction contracts when cumulative change orders exceed $4 million and Board-level PSC contracts with cumulative amendments exceeding 10%. While we do not anticipate many contracts will reach approval thresholds, CCUs are encouraged to establish internal review checkpoints when monitoring Board-level contracts. Once identified, we will work together to monitor project progress and ensure appropriate review and Board coordination.
Recommended Actions
System Capital Programs will continue to prepare and submit all required Board reports and will work to incorporate these policy changes into Kahua workflows. Our goal is to identify contracts approaching approval thresholds early enough to ensure appropriate review, planning, and Board coordination.
Thank you for your continued collaboration. Please contact Mike Wilson or Angela Jacobs if you have any questions.
Michael A. Wilson, II
Senior Assistant Vice President
System Office of Capital, Utilities, and Real Estate