Change orders during construction projects are bound to happen. That is right… bound to happen. Few construction projects go from conception through completed without a change. Change orders are are not necessarily a bad thing. There are a number of reasons why the change is taking place, such as a change in the work, design, schedule, price, market conditions, etc.
Related: What Is IPD
A change order is a technical term of an amendment to a construction contract. A change order is a bilateral agreement between two parties; typically one party is the owner and the other party may be a general contractor, subcontractor or project vendor. The change order represents the mutual agreement between the parties on the change to the scope of work, the price, or another term of the contract. Each party’s signature on a change order is proof of an agreement to the changes set forth. Change orders that take time for approval because of the lack of ability to make a decision or where an independent cost review will occur can delay the project schedule and can have a significant impact on project costs.
What’s important to know about Change Orders?
- Every project has unforeseen conditions that can cause a change order. Work done in 2nd or 3rd generation space may have more change orders because it is harder to tell what is behind the drywall, above the ceiling or under the existing flooring.
- Having a complete set of well-documented drawings that have been carefully reviewed can help eliminate and cut back on change orders.
- Having a single point of contact for information and decision making can reduce change orders. It ensures everyone is on the same page from the owner’s side down through the subcontractors.
- Not all change orders affect the price
- Proper due diligence such as slab assessment, asbestos testing, etc. can help reduce surprises and change orders
- It is important to ensure your contractors are bidding the project not just the drawings on paper.
A signature from both parties is one of the most important steps in eliminating change order headaches. A contractor, subcontractor or vendor who wishes to get paid for doing work from a change order must have the owner’s signature agreeing to the terms. Without their signature they should assume they completed the work for free.