Change order disputes account for an unwarranted amount of the litigation surrounding construction contracts. These disputes typically come to a head toward the end of the project and frequently serve to delay payment. The ultimate costs associated with change order disputes—both in time and money—can damage relationships and significantly reduce the profitability of a project.
In sports it is often asserted that the best defense is a good offense. In the context of a construction project, the best way to defend against a change order dispute is to go on the offense when it comes to negotiating and performing the contract provisions governing the scope of work. Contractors should aggressively define the scope of work, address the performance of extra work, and demand compliance with contract provisions governing any extra work.
Insist on clearly defining the scope of work encompassed by the construction contract. Articulate in detail the work that will be performed. A poorly drafted scope of work is an invitation for a dispute. This is particularly true if you are contracting with someone for the first time.
It is also important to appreciate how tangential contract provisions can affect the scope of work. For example, clauses asserting that the contractor has visited the site and is responsible for site conditions can serve to increase the work necessary to complete the project if unexpected site conditions arise. Clauses addressing conflicts and inconsistencies in the plans and specifications can also expand the work beyond what was originally intended in the event of an inconsistency. These clauses and others must be considered in defining the scope of work.
Include contract provisions addressing the performance of extra work. Well-crafted change order provisions help to prevent misunderstandings and predatory behavior by ensuring the parties are on the same page when it comes to extra work. These provisions typically require that requests to perform extra work be in writing and approved by the owner prior to commencing the extra work. The request to perform extra work should clearly identify the extra work, the additional costs associated with the extra work, and the additional time necessary to complete the extra work.
Demand compliance with the contract provisions governing the performance of extra work. Foremen, project managers, and any other individuals responsible for approving and directing extra work should review and understand the contract provisions governing extra work for each project.
If an oral request to perform extra work is received but the contract requires the creation of a written change order prior to the performance of extra work, refuse to perform the extra work pending the creation of a written change order. If your client insists upon immediate performance of the extra work, and the extra work is of an urgent nature, then prepare an email to your client that: (1) describes the extra work, (2) identifies the additional cost and time for performing the extra work (or that the cost and time will be determined by mutual agreement at a later date), (3) states that your client requested that you perform the extra work without first preparing a written change order, and (4) demands confirmation via reply email that the contents of the email are accurate. If your client is unwilling to follow the formal change order process and reluctant to respond to an email confirming its oral request for extra work, you should refuse to perform the extra work.
As the old saying goes, an ounce of prevention is worth a pound of cure. Along those same lines, expensive change order disputes can be avoided by a relatively small, upfront investment in the process of negotiating, drafting, reviewing, and applying the contract provisions governing the scope of work. For additional information about how we can help you avoid change order disputes, contact Walker Law PLLC.