Be the change that you wish to see in the world, but make sure the change is in writing, signed by both parties, and does not run afoul of any contract documents. Change orders in construction projects are a necessity and, more likely than not, an inevitability. Who makes a Change order request? What goes into them? What are the procedures? We will discuss these questions and others below.

1.    What is a Change Order?

Typically, a Change Order is a written instrument prepared by a contractor or a design professional and signed by the project owner, contractor and design professional, stating their agreement about:

a. A change in the scope of work;
b. An adjustment to the contract amount; and/or
c. An adjustment to the time to perform the work.

Getting a change order in writing and signed is of paramount importance.  Most construction contracts state that the contractor waives any claims for additional payment and more time if the change order is not in writing and signed by both parties, typically before the extra work is performed.  Also, the contract might prohibit certain change orders, such as change orders that increase the cost of the work provided under the contract in excess of a certain percentage, say 25%, of the original contract price.

2.    Major v. Minor

Not all changes to the work will require a formal, written, and signed change order. In some circumstances, an owner will require the contractor to complete minor changes to the work, often called a change directive. What the difference between a major and minor change?  In theory, a minor change will not have a large impact on the contract sum or contract time. If a contractor wants to dispute a change directive, the contract will likely have a deadline to provide notice to the owner. If the contractor does not dispute the change directive within a given deadline, the contractor may, depending on who wrote the contract and how one-sided it is, waive the claim for additional contract sum or time.

3.    Rock and a Hard Place

What happens when a change order is not timely approved, thereby delaying the critical path of completion and exposing the contractor to delay damages?  Should the contractor perform the work without a signed change order?  Should it wait it out and potentially incur an offset for the owner’s delay damages?  This is a common catch-22 for contractors and one that is best addressed and cured in the contract negotiation phase.

For instance, the contract may give the owner or design professional unlimited time to decide to accept a change order proposal. If the change order work is crucial and on the project’s critical path, the owner’s or design professional’s delay in considering or approving the change order proposal may expose the contractor to delay or liquidated damages. On the other hand, if the contractor begins the work without having an approved change order proposal, the contractor may waive its right to be paid for the extra work or having liability for non-conforming work, or both.

In determining how to address change orders or negotiating change order provisions in contracts, it is always advisable to consult with legal counsel.  The attorneys in our Austin and Dallas offices are available to answer any questions you may have.

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