Pricing a credit for deleted work fairly
The owner's email arrives on Tuesday: the entrance canopy is deleted to save money, so please credit the $78,320 shown for it in your schedule of values. The canopy steel was fabricated last week and sits in the fabricator's yard. The connection design was stamped a month ago.
Price the credit from the costs you will no longer spend from the day of the deletion, apply markup only as your contract says, and show the owner what comes off and what was already spent. A schedule-of-values line is a billing breakdown that includes design done, material made and orders that cannot be cancelled. US Department of Veterans Affairs construction contracts, for example, measure a credit-only change by the reasonable cost to the contractor if it had performed the deleted work, and treat a reasonable allowance for overhead and profit as part of that credit.
- Get the deletion in writing, with the date costs stop.
- Stop spending that day: tell trades and suppliers in writing, and ask each for its credit and its cost to date.
- Price what you will no longer spend — labour, equipment, supervision, material not bought and trade credits — at the prices you actually awarded.
- List what is already spent or committed, with proof: design, fabrication, delivered material, restocking fees.
- Offer the owner what has been made. One Iowa specification for municipal work lets the owner either pay for delivered material and take it, or pay the restocking fee to return it.
- Add the work the deletion creates, such as patching and flashing, to the same change order request.
- Apply markup as the contract says, and show the credit as a table: original line, avoided, spent, net.
Common mistakes
- Crediting the schedule-of-values line, with its front-loading and work already done.
- Forgetting savings elsewhere, such as the crane day.
- Passing on a trade's credit without checking it against the trade's own price.
- Leaving credits to the final account, when nobody remembers the basis.
Checklist
Before you send a credit
- Deletion and its date in writing
- Trades and suppliers told to stop
- Avoided costs at awarded prices
- Spent and committed costs, with proof
- Made material offered to the owner
- Work the deletion creates added
- Markup as the contract says
Check your understanding
The owner deletes 200 m² of carpet. Your flooring trade offers a $4,800 credit, but priced that carpet at $9,600. What do you do?
