Construction Change Order: Friend or Foe
The dreaded Change Order or CO is almost unavoidable on most projects. COs commonly result because of things such as inaccurate specifications, ambiguous or inaccurate drawings, unforeseen conditions at a job site, issues with construction materials, faulty budgets or schedules, or additional requests or changes by an owner. CO logistics vary by contract, and it is important for all contract parties to understand, and follow, the change order requirements.
Either party may initiate a CO. Unfortunately, when the contractor has initiated the CO, skepticism may commonly arise from the owner’s team. One way to avoid this is to maintain a positive project relationship among the parties, including not letting issues linger. After-the-fact COs are particularly frustrating, and typically such delays waive entitlement to otherwise valid change claims.
Regardless, although initiating a CO may induce animosity between the parties, COs serve important purposes and are better viewed as a positive first step to avoid later disputes and disputes resolution processes.
Whether the CO is friend or foe depends on one’s perspective. From the perspective of a friend, properly administered CO processes provide a means for documenting scope changes, addressing pricing changes, and memorializing other changes or modifications to the base contract. They can prevent “scope creep” and, when properly memorialized, may confirm the agreement of the parties about the subject of the CO.
When properly prepared and administered, the CO clearly and effectively memorializes the “why, how, who, and what” of the change by providing a clear roadmap for why certain changes were made, who directed the changes, etc. This helps prevent many problems that typically arise later after memories may have faded or intentions been forgotten. Accordingly, CO’s should include more, rather than less, detailed information, including approved sketches of the changed work as appropriate.
The parties do not want to be “penny foolish” about CO preparation. Even a small undocumented change in construction can result in significant negative impacts on the overall project, promote animosity and distrust among the parties, preclude otherwise allowable adjustments to the contract’s time, performance period, or both, and even result in unexpected liabilities. Contractors and owners alike should seek the assistance of legal counsel to assist with the memorialization of key construction records for that day when your project encounters problems or changes and memories suddenly go hazy amid the finger-pointing.
