Written by: Nicole M. Garcia
A construction contract has two key components: the scope of work, and the price. A detailed scope of work is crucial for project costing. It is rare to come across a construction project that is completed exactly as planned and promised in the original contract. Thus, even the simplest construction project can require scope of work changes to account for unanticipated occurrences.
A change order is a document used to record an amendment to your original construction contract. Change orders in construction create a record of additional services being provided to the customer, along with costing for those services. A subcontractor that neglects to use change orders may forget to bill additional costs related to the changes requested, or forget to complete the changes altogether. When change orders are done properly, they can serve as a record of the change. Unfortunately, many times subcontractors do not properly execute change orders and thus result in contract disputes between the parties to the contract (i.e. general contractor v. owner or subcontractors v. general contractors, etc.)
Although this is not an all-inclusive list, here are some steps than should be taken when executing a change order:
- Give “Notice” to the proper party in order to advise of what is considered a change or is now required to be a change. If you don’t give this notice, you may never be able to collect on it.
- Demand a written order to do the change.
- Negotiate contract terms for prompt payment for changes. It is now common for clauses to provide that only the disputed portion of a change can be withheld. These types of provisions reduce the risk that the contractor will have to finance the extra work.
- Negotiate contract terms that allow you to verify that the customer has the money to pay for the change.
- Include Time Extensions as a part of the Change Order. This saves the Contractor form possibly being held liable for liquidated damages.
- Consult with all subcontractors (i.e., trades) about the impact of the change required or requested. It is important to always keep in mind the impact the change will cause all the trades on the job because the change may affect them or unintentionally cause delay for them as well.
- Reserve lien rights for unresolved changes. Many lien waivers are drafted to give up lien rights for all work as of a certain date. If work has been done on changes, but not yet paid for, signing such a lien waiver could be giving up rights. Make sure that you tailor the lien waiver form to accurately reflect what should or shouldn’t be covered.
- Fully document specific costs of the change. The moment work is to start on a change, the contractor should assign a separate number to that work and record all expenses to that number. A lot of money is lost by contractors when they can’t prove the cost of these changes. A job can take months or years depending on its size.
- Watch out for unauthorized change orders. Make sure the person ordering the change order is authorized to do so under the contract.
If you are currently facing legal troubles in regards to a change order(s) dispute please contact the Florida Construction Law Group at 305-227-4030 or firstname.lastname@example.org and we will assist you and ensure everything is set up and handled properly throughout the project.