Change Order Do’s and Dont’s

From the Mo-Kan Construction Law Blog by Lee Brumitt

Three things are certain in life: death, taxes, and change orders. There are very few projects that don’t have some measure of change or different site conditions which should result in adjusted compensation to a contractor and a change in scheduled date of completion. The change order process doesn’t begin when a potential change is encountered. In fact, the process starts before a bid is submitted and long before a contract is delivered for signature. When a contract if finally signed, it should precisely define the scope of work being undertaken in such a way that parties can determine whether work encountered after commencement is within or outside of that scope. The following Do’s and Don’ts take this reality into account and provides tips to follow to both avoid change orders and assert the right to a change order:

Bidding, Contracting, and Planning for Change Orders

• Do review and have a complete understanding of the work description, drawings, specifications, time limitations, and anticipated contract terms and look and account for errors in design when preparing a bid.
• Do bring design errors to the architect or engineer’s attention and prior to submitting a bid.
• Do provide a detailed description of the scope of work included in your bid and provide a complete list of work, materials, equipment, and services that are excluded in your bid and, ultimately, your contract.
• Do make bid prices contingent upon written assumptions about the time and conditions allowed for performance of your work and build in protections for seeking adjustments in contract price, time of completion, or right of termination in the event of delays or other conditions out of your control.
• Do identify the labor billing rates and mark-up on materials which you will use to price extra work encountered on a project.
• Do make certain that the scope of work defined in your contract is accurate and does not exceed the scope of work defined in your bid.
• Don’t sign a subcontract which does not accurately describe your scope of work and any exclusions to that scope of work and which does not match the scope of work defined in your bid.

How to Handle the Change Order Process When A Change is Encountered and Identified

• Do request a change order immediately and in writing when:
  • you come upon a site condition which is inconsistent with the plans and specifications and/or you are directed to do work which is outside of the scope of your work;
  • you need more time to complete your work…for any reason;
  • you have incurred costs due to the delays or performance of other subs, the GC, the design professional, or the owner.
• Do present a timely written claim for adjustment to the subcontract amount or time of completion before commencing any extra work, if the contract requires a claim to be made within a certain time frame.
• Do require a written change order to be signed by the other party before commencing extra work.
• Do proceed with extra work if no signed change order is in place if you are provided you with a Construction Change Directive or similar order to perform extra work, which:
  • is in writing
  • acknowledges that the work is extra work requiring additional compensation and/or additional time, and
  • is provided by an individual authorized by the party to authorize extra work.
• Don’t worry about “rocking the boat” by refusing to perform any extra work before receiving a change order signed by the GC or receiving a Construction Change Directive or an Order to proceed.
• Do proceed with extra work if the party with whom you have contracted refuses to sign a change order or a Construction Change Directive or similar order to perform extra work under extreme caution and only if:
  • you prepare and send a written Change Order Memorandum describing the extra work you have been asked to perform
  • confirming the party’s refusal to sign a change order or Change Order Directive;
  • stating that the extra work is being performed under protest and with full reservation of right to seek an increase in the contract price and additional time to complete that contract, upon completion of the extra work when all information regarding the consequences of the extra work in known.
• Do take photographs, prepare a report of the extra work in daily logs and other reports, and maintain detailed daily records of all labor, burden, material, equipment, and other costs incurred in performing extra work and, if possible, obtain the signature of the party with whom you have contracted and/or the owner’s representative on a daily basis.
• Don’t perform extra work based on verbal assurance that you’ll get paid.
• Don’t just wait for the GC to announce updates and changes to the project schedule without your input and active participation.

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