Change order
What is a change order?
A change order is a legal record document that modifies the terms and conditions of an existing contract between client and contractor. It typically involves changes like the additions, omissions, or substitutions of tasks, scope of work, budget, or schedule.
Essentially, it’s a written agreement between the contractor and the owner to prevent disputes over what was agreed upon during the course of the project.
Why do you need a change order?
Change orders are necessary in construction projects due to the inherent unpredictability of the process.
Flexibility: Unforeseen circumstances or changes in client preferences help make necessary adjustments while keeping projects on track.
Clarifications and interpretations: Change orders can be used to clarify ambiguities, ensure accountability, or resolve disputes regarding the original contract’s interpretation.
Legal protection: A change order protects both parties that formalize clauses and terms.
What are the elements of a change order?
A well-defined change order should typically include:
Project identification: Clear identification of the project and contract it pertains to.
Description of change: A detailed description of the proposed changes that are different from the original scope of work.
Reason for change: A clear explanation of the reasons for the requested changes.
Cost and schedule adjustments: An assessment of the potential impact of the changes on the project budget and timeline.
Proposed resolution: The proposed solution to accommodate the changes, including revised pricing, schedules, and responsibilities.
Signatures: Signatures from authorized representatives of both the contractor and the owner.
When do you need a change order?
Change orders are typically required in the following situations:
Scope of work modifications: Alterations to the original scope of work outlined in the contract.
Material substitutions: The specified materials that need to change.
Design changes: Modifications to the architectural, design, or engineering plans.
Delays: If unforeseen circumstances cause project delays, a change order may be necessary to adjust the schedule and potentially adjust costs.
Disputes and claims: Change orders can be used to document and resolve disputes regarding the contract’s interpretation or the contractor’s performance.
Unforeseen conditions: When unexpected issues arise, such as discovering hazardous materials or structural problems that require additional work.
What is the role of a change order in construction: standard of care
Change orders play a crucial role in maintaining the standard of care expected from contractors in the construction industry. This refers to the grades of quality and diligence that are required to be upheld by contractors.
They provide clear documentation of all modifications to the original contract, protecting both the owner and the contractor legally.
Change orders ensure transparency and accountability between the owner and the contractor regarding any alterations to the agreed-upon terms.
They help meet industry and compliance standards.
Properly executed change orders help to mitigate risks associated with unforeseen circumstances and design changes.
Remedies in case of breach in a change order
In case of a breach related to a change order, potential remedies may include:
Damages: The non-breaching party may be entitled to damages to compensate for losses incurred due to the breach.
Termination of contract: In some cases, a material breach of a change order may justify termination of the entire contract.
Specific performance: A court order sometimes requires the breaching party to fulfill their obligations under the change order.
Injunctive relief: A court order sometimes prohibits the breaching party from certain actions.
Testing and optimizing your change order process
To ensure efficient and effective change order management, you can standardize contract creation, streamline documentation and approval processes with a CLM, conduct periodic reviews, and establish a feedback system where members share insights.
With a CLM software automating this, you stand to gain significantly. Book a demo with HyperStart to see how you can optimize yours today.
