By: David L. Simmons, Drewry Simmons Vornehm, LLP
Yogi Berra famously said, “If you don’t know where you are going, you might wind up someplace else.” He was probably not talking about the construction industry, but his advice applies nonetheless.
Most construction projects of any size will involve some measure of change or differing site condition that should result in an adjustment to compensation and schedule. Unfortunately, many contractors do not address the change order process until an event arises that impacts cost or schedule. The change order process actually starts before a bid is submitted and long before the parties sign a contract.
The contract documents govern the change order process in numerous ways. The contract defines the scope of work and clarifies whether the encountered event is included within the contract price and schedule. The general conditions define the change order process that must be followed by the claimant in order to present his claims. Contract provisions may also be included that limit the amount of damages or time that can be recovered in a change order claim.
A contractor would be well advised to anticipate the occurrence of change orders and implement the following checklist:
- Review carefully the work description, drawings, specifications, time limitations, and anticipated contract terms when preparing a bid.
- Bring to the architect’s attention design errors that relate to the work prior to submitting your bid.
- Clarify the work and materials included in the bid, and those that are excluded, where the language is not clear.
- Include the labor rates and mark-up on materials applied to items of extra work encountered on a project.
- Confirm that the scope of work defined in your contract does not exceed the scope of work defined in your bid.
- Review and comply with the contractual procedure for presenting change order claims.
- Request a change order promptly and in writing when (1) you encounter a site condition that is inconsistent with the plans and specifications; (2) you are directed to do work that falls outside the scope of your work; (3) you need more time to complete your work for any reason; and (4) you have incurred costs due to the delays or performance of other parties.
- Present a written claim for adjustment to the contract price and time prior to commencing the extra work.
- Proceed with the extra work if you receive a Construction Change Directive that complies with the requirements of the contract.
- Compile detailed records relating to the changed work, including photographs, letters, emails, daily logs and other records.
- Avoid performing extra work based upon a verbal assurance that you will be paid. At the very least, send a confirming letter that you have been directed to proceed with the changed work, and that you expect to be compensated for the change.