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Are Owner Direct Purchases that are included in the original GC contract considered to be Deductive Change Orders?

FloridaChange Orders

If a custom homeowner client wishes to pay for items within our GC contract (cost plus) by direct purchase, that does not constitute it to be a deductive change order, correct? Since the items are still in the scope of our cost plus contract but they wish to pay for them on their credit card direct from the supplier (ie. appliances and plumbing fixtures). They have financial incentive to have it be construed as a deductive change order, and I want to be sure that it would not be since it is still in the scope of our contract and purchase order was issued by us. I'm leaning toward not letting them pay the supplier directly. Thoughts?

1 reply

Jan 9, 2020

Ultimately, when working under a cost-plus contract, it makes sense for a contractor to want to keep their customer from purchasing materials directly. After all, that quite directly cuts into the contract price. And, it's not unreasonable for a contractor to ask that the contract be performed, as agreed upon. If the materials were specifically listed in the contract, it also makes sense that the direct purchase of materials may well constitute a deductive change order. Ultimately, it would constitute a lesser amount owed to the direct contractor based on something taken out of the agreement. Now, whether that purchase would be excluded from the contractor's fee calculation might get interesting. And, if the materials were included in the contract and if the owner wasn't entitled to make direct purchases under that contract, it makes sense that the direct purchase might still be factored into the contractor's fee. But also - that seems like a situation that would be primed for a construction payment dispute. And, avoiding it altogether might be wise. Here are some additional resources that might be relevant to you: (1) Pros and Cons of a Cost-Plus Contract; and (2) Deductive Change Order vs. Partial Termination for Convenience | When Scope of Work is Reduced.

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