Construction projects are complicated, often involve multiple players, and rarely go exactly as planned. As you get into a project, the owner changes their mind about something, unexpected problems are discovered, or one subcontractor makes a change which causes a problem for everyone else. While there is always flexibility in the quoted price and in the schedule, it’s also important to retain as much control over the details as possible so that projects can be delivered on time and within budget. To this end it’s important to understand the role of construction change directives in your project and in your contract.
A good construction contract allows for both small and large changes in the scope of work and outlines a process by which these changes and any associated changes in timeline and price are documented.
Claims & Change Orders
If you’re told about a change and make the change before filing a change order, then later, you file a claim for the work completed. While construction businesses have less leverage in enforcing claims, they occasionally occur due to the complex and timely nature of projects.
Change orders are more common. They’re a simple written agreement that incorporates itself into the main contract that states the adjustments in scope, price, and time. These are signed by all parties and become part of the main construction agreement.
A change directive or force account work is not the same thing as a change order. A change order requires agreement from the owner and other parties involved. A change directive is used to direct the contractor to perform additional work when there is not an agreement between the owner and contractor. Change directives are not a request, but are instead directions that the construction contractor will have to figure out how to handle within the budget or justify additional costs.
The construction contract should state how change directives will occur. Often, when the owner and contractor cannot agree on the work, the decision is made by the architect, who makes a final determination on changes to scope, schedule, and costs. Contractors are then free to include price adjustments on pay requests, but this can lead to lawsuits of the owner believes the contractor is inflating the price.
While change directives are less frequent than change orders, they often are the first sign of problems between the contractor and owner and are frequently litigated. Construction change directives have many of the same enforcement requirements that come with contracts with the additional complication that the contractor does not have to agree to the specific change directive.
Is your company operating many projects in multiple states? Do you want to ensure you fully understand not just change directives, but other key legal challenges, and be prepared for payout problems before they occur? Request a free lien seminar from one of our legal experts. We are offering an in-depth seminar for your management team. Click below for more information and fill out the form to see if your company qualifies for an NLB lien seminar.
This blog is for educational purposes only and not intended for legal advice.