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w GIMf~I/ ' PENCE/KELLY o~`~ `Os CONSTRUCTION, INC. = ec ~ ~ ,,a° P.O. Box 4109 (503) 399-7223 °~ ~r~~~~` 2747 Pence Loop SE (503) 585-7477 Fax Salem, OR 97302-8109 (503) 224-8681 Po~tiand ccs ~ass June 4, 1999 Mr. Billy Wasson Project Manager - Courthouse Square Marion County 3150 Lancaster Drive NE Salem, OR 97305-1398 RE: Proposed percentage fee mark-up for change orders Dear Billy, Pursuant to ARTICLE 73.3.3 of our contract, I propose the following cost adjustrnent procedures for change orders. Pence/Kelly has had the following pricing guidelines in contracts on the last three public projects we have constructed and found them to be fair to all parties. The definition of terms will allow everyone to easily review cost changes, remove some of the gray area and generate confidence in pricing that is presented. Please consider the following: • Definition of Terms CONTRACTOR means the individual, firm, or corporation awarded the Contract for the Work contemplated. DIRECT COSTS - Unless otherwise provided in the Contract Documents, Direct Cost shall be limited to the following: cost of materials, including sales tax and cost of delivery; cost of labor, including social security, old age and unemployment insurance, and fringe benefits required by agreement or custom; worker's compensation insurance; bond premiums; rental value of equipment, and machinery; and the additional costs of field personnel directly attributable to the change. OVERHEAD - The following items shall be included in Contractor's markup (general and administrative expense, overhead and profit) and shall not be charged as direct cost of the Work: Personnel above the level of foreman (i.e., superintendents and project managers); equipment owned or leased by the Contractor (i.e., job trailers, small tools); expenses of Contractor's offices including personnel; and overhead and general and administrative expenses. SUBCONRACTOR means the individual, firm, or corporation having a direct contract with the Confractor, or another subcontractor, to perform a portion of one or more items of the Work. Chaagg, Order Cost In the event there are any changes or extra work of a class not covered by the prices included in the Contract Documents, the basis of payments shall be agreed upon in writing between the Parties to the Contract before the Work is done. If basis of payment cannot be agreed upon prior to the beginning of the Work, and if so directed by the Owner's Authorized Representative, then work shall be performed on the • basis of furnishing direct labor, equipment, and material costs on all work performed. In either case, in "Creating Landmarks of Exce!lence" ~ , /7„ ~ ,~'~~ ~~~~~ ~, .