A change order is an agreement made during the course of a job that alters one of three things — the cost, the scope, or the schedule. But before a change order request can be issued, the terms must be sorted out.
This is done by having the parties who will carry out the changes agree to revisions. These agreements begin as proposals that will be reviewed, negotiated, and converted into a change order for inclusion in the contract.
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What does a change order actually change?
The big misconception about change orders is that they change the work. They do — but that’s not really what they’re for. What a change order actually changes is the construction contract.
For example, let’s say an architect is walking on a job site and asks the carpenter “As long as we’re in here, can you guys replace this shoe moulding?”
If the carpenter says, “yes,” the work has changed. The carpenter has now promised to carefully remove 80 feet of shoe molding, haul it to the landfill, buy new shoe molding, prime it, paint it, cut it to fit, nail it down, patch and prime the heads, touch up the paint, clean up the mess and throw out the waste.
But the carpenter won’t get paid for any of this extra work unless the contract is changed to reflect it. Until the contract is changed, the shoe molding won’t show up on the schedule of values, so it can’t be included on the pay application.
Not only will this create payment issues, but there are plenty of other questions raised if the work changes without a change to the contract:
- Is your team insured while doing that work?
- If it takes longer to finish the job because of this work, are you vulnerable to liquidated damages?
- Can you include the payment for that work if you have to file a mechanics lien?
The only way to make sure you’re protected and that you’ll be paid is to make the work part of the contract. The issuance of a change order is how you amend it.
The importance of the change order
Do we really need change orders? You do if you want to get paid for your work.
Any revision to the contract that changes the scope of work, the contract sum, or the date of substantial completion must be made by a change order. It’s the main legal way a construction contract can be amended.
So, when the architect or project manager asks for that extra shoe molding — or for any change in the scope of work — the best response is, “Sure. I’ll get you a price for that.”
Because if the scope of work is going to change, you want the contract to change accordingly — or you might not be paid for it. Also, by saying you’ll price the change, you’re telling the architect a few things.
First, you’re establishing that you understand the process. You know that you should submit a price for the additional work so it can be added to the contract.
Second, it signals that you’re a pro. You value your time and your skills and expect to be paid for what you do.
Third, it puts the architect (or GC) on notice that you expect to be paid for everything you do. Plus, it can put them at ease, knowing they don’t have to wonder how you might try and make that money back.
So now you’ve established the rules and everyone can move forward, knowing that things are going to be done by the book.
Next, someone has to initiate the change order process.
How a request for change order works
A request for a change order can be “top-down” or “bottom-up.”
A top-down change order request means it originates from the “top” — the architect or owner (or the GC if you’re a subcontractor). This could be a change adding or subtracting parts of the work for any reason at all. Asking you to replace that shoe molding, for instance, is a top-down request.
A change order request that goes “bottom-up” originates with a worker in the field, and heads “up” the chain to the owner. For instance, if you discover that the existing conditions on site are not as they were called out in the drawings and additional work on your part is required, you can issue a request for a change order and send it “up” the chain.
Responding to a request for change order
If the architect or GC wants to instigate the change order (top-down), they’ll likely use a standard form, like the AIA G709 and send it to all parties.
This is not the change order itself, but a request for proposal (RFP) asking you to propose your terms for carrying out the work. It should be treated like a separate little contract, with all the standard information required — cost, scope, and time.
The price of the new work, obviously, will be the first consideration. You’ll propose a cost add/deduct for your portion of the work. Note that this should include taxes, labor burden overhead, and profit, just like a free-standing quote.
Spelling out in detail what you intend to do is critical. Again, an approved change order becomes part of the contract, and you will be held to fulfill whatever you’re proposing here. The more clearly you define the exact limits of this work, the less trouble you’ll have making sure it’s signed off on — and you’re getting paid for it.
The job schedule is often impacted by change orders, so you’ll need to propose any change to the date of substantial completion for your portion of the work.
Simply adding days of work won’t mean you’ll get approval for them to be added to the general contract. That will require demonstrating how the additional work impacts the critical path of the schedule that the GC submitted at the beginning of the job. However, you may receive additional days on your subcontract even if the general contract schedule remains unchanged.
One other thing to keep in mind about getting an RFP is speed. If you can be shown to have delayed the change order process by not responding to the RFP in a timely manner, you might be held liable for a project delay.
Just as importantly, you can’t get paid for the work until the paperwork process is completed — so the sooner you respond, the sooner you can get your money.
Submitting a request for change order
Often, job site conditions reveal surprises or omissions in the drawing set, and a contractor or subcontractor needs to submit a request for a change order.
Typically, you’ll want to send a request for information (RFI) to the GC or architect. This is a form you submit alerting them to the fact that you think a change is needed.
Much like the RFP, you’ll need to propose work that you will do to remedy the situation. It will also come down to cost, scope, and time, just as above.
Then, you attach any supporting documents, send it up the chain, and wait. This can be frustrating because you’re getting some pressure to put that shoe molding in and this is the best time to do it — but it isn’t officially a part of your work (yet).
Issuing a change order
Any party to a construction contract may instigate a change order.
If you find there’s a change that needs to be made to keep the work moving and time is getting short, you can move past the request for information and simply submit a change order.
If you’re a subcontractor, your change order goes to the CG, since that’s who your contract is with. Otherwise, it goes straight to the owner (via the architect, if there is one) for approval.
First, you need to check the contract. The requirements can differ slightly depending on the details of Division 1 of your contract documents, but a method will be spelled out for issuing change orders.
Regardless of the specific requirements, the information needed is essentially the same as always — scope, cost, and time. These are the only things that can be changed in a construction contract.
If you want to cut to the chase and issue a change order, Levelset has a series of free change order templates available to download. Easily document and submit the changes required to make additional work (like that shoe molding) part of the contract.
Download a free change order template
Find free templates for both subcontractors and GCs in Google Sheets, Excel, and PDF formats.
Getting a change order approved
Like any business agreement, some negotiation is usually required to get a change order approved.
Everyone wants everything a little cheaper and a little faster, and sometimes you can accommodate them and still make the profit you need.
Each situation will be different and affected by your efficiency, your relationships, and your willingness to make a little more or a little less for your efforts. But one thing will remain true no matter what — documentation wins.
It’s much harder for someone to argue with you when you have thorough documentation.
Material quantities, materials costs, labor rates, trash-hauling — these are all inarguable costs that, if spelled out clearly, are likely to be accepted as part of the new work.
The more detailed you can be, the easier you make it for the other person to approve changes.
Don’t forget to document dates: Many, many disputes about change orders are about the time, not the cost. Make sure all the dates are documented, including when:
- You were asked to do the work
- Any RFI was submitted
- The change order was first distributed
- The change order was approved
- Based on the change order approval, that the work can begin
Change order approved!
Once the change order is approved, it is as much a part of the contract as any other page, drawing, or spec.
Attach the change order, physically if possible, to the rest of the contract documents. This is why you often see change orders literally cut out and taped into the recordset of drawings on the job.
Just as the owner is responsible for paying for that work, you are legally responsible for doing it — so incorporate it into the contract documents. In addition to making it part of your set, the approved change order (and any others), plus all attachments, should be included with the application for payment and with any lien waiver that covers that portion of the work.
Again, the change order is now part of the contract, and will even be part of any claim you make if you should ever have to file a mechanic’s lien. So, now you should be ready whenever anyone asks you to add anything to the work, no matter how casually they might make their request.