Legally Speaking: Avoiding Disputes--The Many Shapes and Sizes of Change Orders
Design ChangesRelatively simple changes in the architectural design of a project are not difficult to accommodate with approved change orders. Design changes may increase or decrease the cost and difficulty of completing a project. Before a contractor agrees to an appropriate increase or decrease in the contract price given the architectural change, a careful contractor should also consider more than just the basic change to contractor's work. For example, design changes may affect more than is initially obvious. In reviewing a proposed design change, be sure to confirm whether the change may also affect the timing and scope of work of other subcontractors, the types of materials originally specified for use and related issues such as site preparation, coordination with other subcontractors, and code requirements. Often contractors are quick to agree to change orders, especially if they will increase the overall project price. However, before quoting a change order cost, be sure to anticipate the coordination of that change order with the other aspects of the project as originally designed.
Designation of Specific Supply SourcesIt is not uncommon for owners and general contractors working on public projects to specify brand products. However, public project bidding cannot require that the approve products are such a specific type that it would unfairly limit competition. Commonly, a bid package will identify a minimum of three acceptable manufacturers for a given product. In addition, the words "or equal" are often included to contractors to propose other manufacturers of competing products so long as the product is of the same or superior level of quality.
If a contractor bids a project with a particular approved product in mind, and the general contractor/owner later insists that a different product be used, you are justified in requiring that a change order be made to compensate you for the increase of material costs as directed by your general contractor or property owner. If you intend to submit a proposal using a product different but "equal" to the specified product, be sure to indicate in your proposal an explanation of how the similar product meets or exceeds all of the function, performance and quality criteria of the specified product.
Relying on General Contractor/Owner-supplied InformationWhether you are bidding on new construction or improvements to an existing facility, you usually have to rely on specifications that have been provided to you by third parties. Site conditions are often different than specifications prepared by the architect or project designer and may unexpectedly increase your costs. After you have received plans and specifications, compare those conditions to the actual site. Significant discrepancies between the drawings and the actual site conditions should be brought to the general contractor or owner's attention immediately. To avoid any disagreements, it is a good idea to photograph the site conditions you observe and submit a change order proposal appropriate for the circumstances.
Owner-furnished Materials or EquipmentAs a cost savings measure, owners sometimes designate that certain equipment or materials will be supplied directly by them. Alternatively, you may be required to work around equipment or materials that will be incorporated into the structure during or after your work is completed. If your contract calls for the use of materials or equipment to be supplied by the owner, be sure that the contract specifies what is going to be supplied, at whose expense, and who is responsible for any delays in delivery of the equipment. Further, any changes to the owner-supplied materials should be documented in a change order and there should be a clear understanding as to who is responsible for determining whether the equipment or materials being supplied are appropriate for the project.
Additionally, in circumstances in which you have to work around owner-supplied equipment or install it as part of the scope of your work, you should first confirm with the owner the accuracy of the dimensions of the equipment to be installed, the installation requirements for the equipment and how it may affect your work. If you are requested by a general contractor or owner to install materials or equipment you are unfamiliar with, you should either clearly address that with the owner or general contractor or, perhaps, better yet, decline to work with the requested equipment or material.
SummaryMore often than not, after commencement of a construction project, changes occur on site that are caused by customer preference changes, differing site conditions or budget constraints. Requests for changes frequently come up in an informal basis, with the owner or general contractor verbally giving you the approval for the requested change. While it is tempting to accommodate the people for whom you are working based on their word and good faith assurance that you will be compensated for the change, it is advisable that before committing to your general contractor or owner, give careful thought to the requested change and the impact it is going to have on your performance. Once you have analyzed how the requested change is going to affect both the cost and labor factors for your portion of the work, confirm the detail of the change order in writing with your owner or general contractor and reach an agreed price for the desired change.
Disagreements as to the scope and cost of onsite change orders are often the subject matter of claims in arbitration and civil courts. With the fading of memories and sometimes the impossibility to recreate the required costs or to inspect the changes made, proving claims for change order costs that are not documented are extremely difficult to prove. On the other hand, change orders that are written and approved by someone with decision making authority often times spare the parties of later disagreement and delays in payment. The additional time spent in documenting your project in this fashion, in the long run, will increase your profitability and improve your working relationships with your customers.