Change order white paper

During a construction project, whether residential or commercial, nothing creates more problems than a change in the scope of work. Typically, construction contracts require changes in work that affect time of completion or dollars, costing more or less, must be in writing. So why is this such a problem for both project owners and contractors? The reason is changes normally occur on the run during construction. They occur with little thought, planning or concern for their ramifications on other parts of the project. If the change is clearly spelled out in writing then a lot of confusion can be avoided. It protects the owner from hidden costs and the contractor from not getting paid for additional work. It also spells out exactly what will be done so all parties know where the additional work begins and ends.

What typically happens is the contractor notifies the owner of an issue and they "verbally agree" to make some changes to the work because no one has time to put it in writing. Nobody wants to stop or slow down the work waiting for a written change order. These types of verbal agreements can have huge ramifications. The original contract documents can be modified and the requirement that all changes be put in writing, can be modified. This can happen by orally agreeing to ignore the writing requirement. When that happens the project owner is open to the project going over budget because of changes. The contractor is subject to performing additional work and not getting paid for it. It's a minefield for all involved and very difficult to sort out. When a full blown dispute erupts, long after the verbal agreements were made, the parties are headed to court or arbitration.

Most change order issues germinate right at the start before the construction documents are even signed. Meaning that most project owners "save" money by not demanding an accurate, detailed and complete set of drawings and scope of work. Allowing the builder to prepare the drawings and scope of work may reduce costs at the start however, it is likely to cost the owner tenfold or more when questions arise during construction and changes must be made and work clarified.

It is a better practice to have an independent individual such as an architect or engineer prepare the drawings and scope of work. This individual stands between the owner and the contractor is watching out for the owner's interest. It's also a good idea to have them approve the construction work prior to making any payments to the contractors. Does this add to the cost of the project? You bet. However, if the project is completed smoothly, with a minimum of changes and no disputes at the end what is that worth; priceless! Without detailed drawings and scope of work many of the details and even major construction methods are left up to the general contractor and subcontractors. Without a detailed plan, changes likely will begin early in the project and continue throughout until completion. This kind of haphazard building is normally very frustrating for the owners and contractors. It leads to extended time lines as delays in decisions regarding changes trickle down to all contractors on the job.

No construction project or renovation will likely proceed from start to finish without some changes being made. What is important is how will the impact of those changes be handled. If it's not clearly spelled out in the contract documents and followed, then everyone involved with the project will be in a sea of unknowns and left to sort it out at the end of the project. This often leads to hard feelings, frustration, and litigation where someone is going to lose big and it's all up to someone else to decide. Wouldn't you rather be in control of how changes will be addressed? Make sure you have addressed in the contract documents how changes will be handled and even more important be sure to follow it.