Are Change Orders Good or Bad for Contractors

Change Orders for Contractors: Good or Bad?

A guide to help you document and perform your work, so that you're protected on every jobsite.
(First Published in The Walls & Ceilings Magazine, September issue, 2019)

Construction projects have been described as organized chaos. Architects and engineers, who admittedly do not know everything about the complex systems they are designing, work with both traditional and new materials to develop a design that mostly meets the requirements of the owner. Invariably, during the course of a construction project, discrepancies are discovered, preferences change, or conditions are found that are not accounted for in the initial design. Any of these may lead to change. If this change leads to a change in the scope of work for the general contractor or subcontractor, or it has a significant impact on the timeframe of construction, change orders will be required.

In all the standard contract forms from American Institute of Architects and in many of the contract forms from ConsensusDocs as endorsed by the Associated General Contractors of America, there are specific references to scope changes and change orders. And because most conditions have been experienced before, and there has been litigation on many of these, contractors and designers can anticipate the form of most of these changes.

Change Order Causes

First, let’s break this down into the most common causes of change orders:

• Drawing errors and omissions, including conflicting details and missing information
• Design changes. This can be even more of an issue in design-build projects, where the design phase continues during construction
• Unforeseen or hidden conditions, such as differing subsurface soil conditions, or hazardous or historic materials found when renovating an existing structure
• Substitutions
• Changes in cost or availability of materials from when the contract is signed to when the construction is scheduled to begin
• Request by owner for upgrades or moving/rearranging portions of the project

Based on these causes, a change in construction may or may not affect the cost and time it takes for a wall and ceiling contractor to perform his or her work. But it usually does. All parties that have been involved in construction for any length of time have experienced “scope creep,” where you are continuously asked to do a little bit more than what was in your original scope of work in the contract. It can start out relatively benign: the concrete is not square, so you have to add some additional shims or braces or fasteners to make sure the wall can be properly connected and plumb even though the adjacent concrete is not. At some point, if the concrete is off by enough, this involves extra costs and time, and as a contractor, you may want reimbursement for this.

Because this has happened before, general contractors usually include a couple of catch-all phrases in the contract. The first catch-all phrase is the pre-construction meeting, where the framing contractor meets with other parties before they start the work, observes the area where their work will be, and “accepts” the existing conditions as ready for the subcontractor’s portion of the work. The second catch-all phrase is a statement that when the subcontractor starts the job, they are automatically accepting what is in place. There are several problems with this.

Quite often, all of the substrates (concrete, structural steel, etc.) are not complete when the contractor starts, and sometimes these materials are in locations that cannot be verified without special equipment. It is only after the subcontractor’s work has commenced that he or she will discover how far out-of-plumb the masonry is, that was 50 feet in the air and not accessible/verifiable until more of the structure was built.

Protecting Yourself

So, as a subcontractor, how do you protect yourself? Here are some key points:

• Review your contract and specifications carefully before starting.
• If a specialty engineer or additional subcontractors are required as a part of your scope, get them on board early and engage them in the document review process.
• Keep open, constant communication with other members of the design and construction team.
• Document, document, document! I have heard Pat Boyd often repeat a quote from his father, who built and ran a successful drywall business for many years: “if you treat every project like it’s going to the courthouse, it probably won’t.” The key is to make sure and capture in written and electronic form any and all agreements, requests, completed work, uncompleted work, in short, everything that could affect the scope, quality and timeframe of completion of the work. You do this so that if there are questions later, you can quickly and easily pull up records of what was done when and by whom, and what was requested—when and what actions were done as a result of that request. The key is not only to document but to have a filing system so that everyone on your team can appropriately document and file information for easy indexing and retrieval. It doesn’t help to have 2000 pictures of the jobsite if you don’t know when or where they were taken.
• Know and follow your contract. Quite often, there are requirements in other sections of the specification that affect what you can and cannot do. Construction Specifications Institute MasterFormat section 00 63 00 is entitled, “Clarification and Modification forms.” This section is typically included by reference as part of your contract and includes RFI forms, substitution request forms, Construction Change Directive forms, and Change Order forms. Section 01 26 00, “Contract Modification Procedures,” gives basic requirements for changes in the work, and section 00 90 00 includes instructions on recording revisions, clarifications, and modifications. Make sure a person that understands the legal nuances of construction contracts reads and understands these sections of the specification before signing any contract.
• Keep records of the work you do, even if you are not charging for that work, and make sure the general contractor and others are aware of the work you are doing. For example, if on every floor of a 20-story building, at the bathrooms you have to make repairs because the plumber is notching your studs or because the owner has moved a wall, you may be willing to absorb the cost on one or two floors, but it starts to add up pretty fast. So, let the GC know that this is an issue, that you have already incurred say six man-hours of work and $150 worth of materials to make these fixes, and if it continues on subsequent floors, there will be change orders and back charges.
• Approval is an essential part of getting paid for changes in the work. Sometimes, a general contractor will include language, prohibiting their own foremen from signing off on change orders. Even if this is the case, it’s better to get some sort of signed documentation of the requested work than having no documentation at all.

In addition to these critical points, it’s important to remember that there are three types of costs associated with changes. It’s easiest to get paid for the first of these—direct costs—but the last two are a bit more difficult.

• Direct costs (labor, materials, supervision … hard costs)
• Indirect costs (office overhead, delays, opportunity costs, lost profit … soft costs)
• Consequential costs (damages, interference, disruption, re-sequencing)

In summary, the important bottom line is to be able to complete your work in a timely manner and to get paid a reasonable amount for the work you do and the expenses you incur. Below is a list of helpful resources for identifying the types of changes. Use this as a guide to help you document and perform your work so you can get paid, avoid litigation or arbitration, and move on to the next job.

References

• AIA Contract Documents Contract Relationship Diagrams. American Institute of Architects (AIA). April 2017
• AISI S202-15: Code of Standard Practice for Cold-Formed Steel Structural Framing. American Iron and Steel Institute., Washington, DC. 2015
• Brennan, Daniel et. al. The Construction Contracts Book: How to Find Common Ground in Negotiating Design and Construction Contract Clauses, 2nd Edition. American Bar Association, Chicago, Illinois. 2008
• Bruhn, John R., The Impact of Building Information Modeling (BIM) on Change Orders for University Construction Projects. Master’s Thesis, University of Alabama. Tuscaloosa, Alabama. 2014
• Civitello, Andrew M., and William D. Locher. Contractor’s Guide to Change Orders, 2nd Edition. BNI Building News, Los Angeles, California. 2002
• O’Brien, James Jerome. Construction Change Orders: Impact, Avoidance, Documentation. McGraw Hill, New York. 1998

About Don Allen, PE, LEED AP

Don Allen, P.E. currently serves as Director of Engineering for Super Stud Building Products, Inc., where he oversees product development, testing, engineering, and technical services. Having worked in the cold-formed steel industry since 1990, Don served as a CFS specialty engineer, Engineer-of-Record, and industry representative before his current position with a stud manufacturer. He concurrently served for more than nine years as Technical Director for three associations in the cold-formed steel industry ─ the Steel Stud Manufacturers Association (SSMA), the Steel Framing Alliance (SFA), and the Cold-Formed Steel Engineers Institute (CFSEI). He chairs the Education Subcommittee of the American Iron and Steel Institute’s Committee on Framing Standards and Committee on Specifications and was the recipient of the 2013 CFSEI Distinguished Service Award. He has given presentations on CFS in China, Colombia, Egypt, Hawaii, and South Africa, and has been involved in design projects in North America, Africa, and Europe.

About Super Stud Building Products

Since 1973, Super Stud Building Products, Inc., with its roots in the New York Tri-State area, has been a proud manufacturer of the building industry’s most diverse offerings of steel framing components and accessories for use in the construction of commercial, institutional and residential structures. With manufacturing plants in Edison, New Jersey and Hattiesburg, Mississippi, Super Stud is a multi-regional steel framing and accessories manufacturer committed to quality products, unmatched service, competitive pricing and timely deliveries across the entire East Coast and beyond. Super Stud plays an active role in the steel framing industry, participating in the American Iron and Steel Institute (AISI), the Association of Walls and Ceilings International (AWCI), ASTM International and the Steel Framing Alliance (SFA).