CONTRACT CHANGE ORDER (CCO)

WHAT IS A CONTRACT CHANGE ORDER (CCO)? 

1. Definition of CCO according to experts:
    " Suharto (1995) said that CCO is a change after the contract is signed"
 
    "Ibbs and Allen (1995) say that a Changer Order is defined as any event that results in a
modification of the original scope, execution time, cost and quality".
 
    "Fisk (2006) says that a change in contract (CCO) is an agreement between the owner
and the contractor to confirm that there are changes to plans and the amount of
compensation costs to the contractor that occur during construction, after the signing of
the work between the owner and the contractor".
 
2. Definition of CCO in the scope of Institutions and Government. Legal Basis and
Definition of Contract
According to the American Institute of Architects (AIA), a Contract Change Order is a
written request signed by the architect, contractor and owner made after the contract
is issued, which has the power to change the scope of work or make adjustments to
the contract value and time. completion of work".
Contract Change Order (CCO)  in the implementation of Government Projects is
defined as a change in writing between the Commitment Making Officer (PPK) and
the Provider/Partner/Contractor to change the condition of the initial contract
document, by adding or reducing work.
3. Differences in Contract Change Order, Addendum and Amendment.
Knowing about the definition and differences of CCO, Amendment, and addendum is
indeed very important before knowing more about the impact of CCO on the quality
of construction projects. Here's the difference between the three:

 Contract Change Order (CCO) is a request for a change in contract

which will later be used as the power of attorney to change the scope of
work.

 Amendments are changes to the contract without adding or removing

clauses/articles of the contract. Its nature is only to make changes by
adding or subtracting to existing paragraphs or
paragraphs. Amendments are made due to administrative errors but
need to be stated in written form and agreed upon by the parties.

 An addendum is a change in contract by adding or subtracting

clauses/articles of the contract which are physically separate from the
main agreement but are legally attached to the main agreement.

Some experts argue that Amendment and Addendum are the same terms or have
equivalent meanings. Both of these terms have the meaning of changes or additions
and subtractions.

So that it can be said that addendums and amendments are not substantially
different, only the use of the two terms is more commonly used in one topic, namely
addendums are used in an agreement/agreement or contract, while amendments are
used for changes to laws or written legal basis.

LEGAL BASIS CCO

Even though the latest regulations regarding the Procurement of Goods/Services,

Presidential Decree 16/2018, have been issued, those relating to contract changes
still refer to Presidential Decree 54/2010. Perpres 54/2010 Article 87 becomes the
legal basis for the implementation of CCO, with the following characteristics of CCO:
1.) If there is a significant difference between the field conditions at the time of
execution of the work, with the drawings and/or technical specifications specified in
the Contract Documents, the PPK together with the Goods/Services Provider may
make changes to the Contract which include among others:

 Increase or decrease the volume of work stated in the contract;

 Adding and/or reducing the types of work items;
 Changing technical specifications and work drawings according to the needs
of the field/work location;
 change the implementation schedule;
 If necessary to complete the entire work, the CCO is permitted for
additional work so that the contractor can carry out additional work that
has not been stated in the contract.

2.) Additional work is carried out under the following conditions: not exceeding 10%
(ten percent) of the price stated in the initial agreement/contract; and there must be
a budget available to carry out additional work.
3.) The Contractor is prohibited from diverting the implementation of the main work
under the Contract, by subcontracting to other parties, except for some of the main
work to specialist Goods/Services providers. If it violates, it will be subject to
sanctions in the form of fines in the form and amount in accordance with the
provisions as stipulated in the Contract Documents.
4.) Changes to the contract caused by administrative problems, can be made as long
as it is agreed by both parties
IMPACT OF CONTRACT CHANGE ORDER (CCO)
 
The impact of CCO on construction projects is very large if not properly
anticipated. Examples of direct impacts are disrupted workflow, increased
construction costs due to volume and material additions and time adjustments,
rescheduling of implementation after changes in work, conflicts between contractors
and owners, and so on.
In general, the impact of CCO can be divided into five categories, namely:
1. CCO impacts time
Contract change orders in construction projects are one of the causes of time delays
due to time overruns. Impacts related to time include delays in completing work,
delays in logistics, delays in material and procurement requirements, rework,
demolition and re-planning.
2. CCO has an impact on costs
The impacts of CCO related to costs include additional costs, additional overhead
costs, compensation funds, changes in cash flow, loss of profits and additional
payments for contractors.
3. CCO has an impact on productivity
The CCO of construction work will affect productivity, including a decrease in work
productivity both in equipment and in human labor, there is compaction in the project
implementation schedule.
4. CCO has an impact on increasing the level of risk. Legal Basis and Definition of
Contract
CCO will also result in an increase in the impact of the level of risk on the project,
including delays in project progress, reduced opportunities for project acceleration,
loss of float, increased sensitivity to delays, obstacles in the field/work location and
disruptions to each work.
5. The relationship between the impact of CCO and others.
The other impacts of having a CCO on a project include a low professionalism
relationship between the PPK and the Provider, the occurrence of claims and
disputes, the low quality and quality of work, damaging the good name of the
contractor, and the occurrence of poor security conditions.
In the implementation of construction work, it is certain that CCO will occur. CCO is
carried out so that a project can be completed with the aim of fulfilling the wishes
and expectations of service users. However, on the other hand, if there are lots of
CCO, it will be detrimental to construction projects. Therefore, efforts are needed to
minimize changes along with the impact of CCO, namely there must be the most
effective and targeted CCO management/control in order to achieve the objectives
of the construction project.
Source:  https://www.pengadaanbarang.co.id/2019/08/contract-change-order-cco.html