A Change Order Checklist
William C. Last, Jr.
It is inevitable that change orders will be issued during the course of a construction project. The change in the scope of work can result in the increase of the contract completion time and/or the amount of compensation paid. This article shall provide a checklist that can be followed to help ensure that the contract change order clauses are complied with when a contractor seeks a change order.
From a lawyer’s point of view, a change order is simply an amendment to the construction contract. Since it is an amendment to the contract it is important to comply with the contract change order clauses. Typically, changes in the scope of work can be made expressly through instructions from the other party or constructively. A constructive change order occurs when the other party effectively requires that work outside the contractually agreed upon scope of work be performed. In all but the least sophisticated contracts there are different change order contract provisions for express and constructive change orders.
The express change order provisions set forth how the change is be documented and the means for pricing the change order. The constructive change order provisions will typically include such provisions along with a notification requirement.
Most contracts have specific requirements for how change orders are to be processed. It is not uncommon for the owner to deny a change order based on an assertion that the contract change order clauses were not complied with by the other party. It should be noted that there are defenses to such allegations, which were discussed in a previous article.
Since most change orders are initiated in the field it is advisable to have a checklist for change orders for field personnel to follow. Contractors should create such a checklist and make it company policy for personnel to comply with it. Such a checklist should, at a minimum, include the following:
1. Have the change order contract provisions been reviewed relative to notice, form, timing and pricing of the proposed change order?
2. Has adequate and timely notice of the changed condition, extra work, and additional time requirements been given to the other party?
It is important that the notice provisions be complied with when the change in scope of the work is first observed. A common defense to a change order proposal is the failure to give timely notice which prevents the other party from documenting the changed conditions, document the additional work and/or make an informed decision to proceed with the additional work.
3. Is there a method for logging the submission, response and payment of the change order ? If so, has the proposed change order been logged in?
The time that another party takes to respond to a change order can have a direct impact on the timely completion of the contract work. A change order log allows a contractor to track the time between submission and approval of the change order. It also serves as a method for reminding the field personnel to follow-up on a tardy response.
4. Does the proposed written change order provide sufficient information so that the other party can determine why the additional work and/or additional time requirements are outside the agreed scope of work? Have you provided back-up documentation for the change order?
It is advisable to reference all the relevant general conditions and specifications. If you have photographs, entries from daily job logs, relevant correspondence, including such documentation with your change order may speed the acceptance and payment of the change order.
5. Is the proposed change order priced in a manner that complies with the contractual change order requirements? If the change order can be fully priced until the work is complete, are you providing pricing updates in accordance with the contract requirements (e.g. daily, weekly, monthly) ?
Most contracts provide for three basic means for pricing change orders; the choice of which method is left to the owner. They include an agreed fixed amount, time and materials or a requirement that the contract proceed with the work with cost to be negotiated at a later date based on data that is developed during the additional work. If you cannot agree on the exact amount before the additional work is commenced, many contract clauses require the contractor to notify the owner of the exact cost of the work on a regular basis. The clause may provide that the failure to comply with such a requirement may result in a waiver of the claim.
6. If the change order is on a force account basis (i.e., the other party requires you perform the work on a time and material basis), have you complied with the contractual provisions for evidencing that work is being performed? Does the contract require a representative of the other party to sign such documentation? If so, are you complying with that requirement?
It is important to have force account work documented in accordance with contract. Many require that a specific project representative review and acknowledge that the work was performed on a daily basis.
7. Does the proposed change order include a component for any additional time that may be required for the change order? If so, does the time component explain how the project will be impacted?
8. If you are uncertain as to how the proposed change order will impact the overall time for completion of the project and/or impact other work, have you reserved your right to claim such impacts (e.g., loss of productivity, delays, ripple costs, acceleration) at a later date?
The overall impact on a single change order or a series of change orders may not be realized until well after the additional work is commenced. If you are uncertain as to the impact of the change, it is wise to reserve your rights to make a claim for such impacts. It is also advisable to track the impact of the change on the job. A means for tracking the impact could include a time line. In a columnar format, the key date and then a description of what occurred on that date should be set forth. Key dates should, at a minimum, include: (a) when the claim work was discovered, (b) when the claim work was reported, (c) when the claim work was started, and (d) when the claim work was completed.
On some projects the number and extent of change orders are well in excess of what the parties contemplated when they entered into the construction contract. If the size, nature and number of change orders becomes well in excess of that contemplated by the parties, the contractual method for fairly compensating the contractor may not be applicable. As a result, the doctrine of a cardinal change has been developed by the courts. Generally, a cardinal change occurs when the contractor is required to perform work that is such a nature, quantity and/or impact that is dramatically beyond the types of changes the parties contemplated when they entered into the contract. Maintaining detailed documentation of how the excessive changes impacted the job is necessary for proving a cardinal change.
9. If the change order has been denied, have you complied with the contract clauses for later submission of that change order as a claim resolution process? Have you continued to track the costs and impacts of the additional work?
Such documentation should include daily job logs, schedules, photographs, bid documentation, relevant provisions of the plans and specifications, project correspondence, change order pricing estimates and documentation, job cost reports and employee time records for the subject work. Ideally, a separate file should be established to include the aforementioned documents and to track the status of the claim.
The failure to comply with a contractual change order may result in the denial of a substantial change order. Thus, it is important to establish a policy for the processing of change orders. The checklist set forth in this article is not intended to be all inclusive of the items that should be included, but rather represents a sample of items that may be included.
Irrespective, the starting point for every checklist are the contract change order provisions. Based on the author’s experience in prosecuting change order disputes in the courts, the importance of familiarizing yourself with and subsequently complying with change order contract provisions cannot be stressed enough. It is strongly recommended that a contractor require field personnel to read and understand the importance of those provisions. By requiring field personnel to gain an understanding of those requirements, the contractor has made a large step in successfully processing change orders.
This article, ©2001, was written by William C. Last, Jr. Mr. Last is an attorney who has been specializing in Construction Law for over 20 years.. In addition to belonging to a number of construction trade associations, Mr. Last holds a California “A” and “B” license. He can be contacted at 415-764-1990 or 650-425-7679. A number of his past articles can be found on his website (lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.