Change orders are one of the most controversial topics in the construction industry.
Owners and contractors understand that change orders are a fundamental legal concept that is to protect both parties. Change orders exist because construction projects often present unforeseen challenges, errors in plans, scope changes by ownership or budget reduction. Owners and contractors may not agree on whether something is a change (which costs more money) or part of the original contract scope (and included in the original price). This is where contractors must be prudent and if in doubt always refer to the contract or attorney for guidance.
Below are some helpful tips to reduce the risk of having attorneys litigate a change order dispute:
Is the change order justified? Review bid documents, RFIs, work orders, and change order wording in contracts. Consider clauses which determine whether written specifications or drawings control.
Never start work on a change order, until receiving a written, dated and signed change order from the owner.
If the owner and the contractor execute a change order, but the contractor fails to obtain a change order from its subcontractor, there may be a gap in the scope of work.
Every change order should identify the additional work being requested, including drawings, revised costs, scheduling updates, and revised costs.
This should all be reviewed, understood, and signed by each party. Make certain that you cover yourself as often contractors will perform the extra work of a change order with intentions of getting written approval from the owner. Normally, the excuse is a resorting to a verbal agreement, lack of time or placing too much faith in the other party. You want to eliminate any chance of confusion or dispute, get it all in writing upfront and document and photograph your work at different stages.
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