By: Jeffrey C. Bright, Esq., Saxton & Stump, LLC
Most project managers know that when the work, cost or schedule is modified, a change order should document the event. But confusion often arises as to what type of notice and documentation should be used in these scenarios.
The answer: it depends.
The circumstances for each situation are different, depending on the specific contract language and the reason for the change. The following points should be kept in mind when deciding the course of action:
Follow your contract. Most contracts provide a specific process for noticing, documenting and agreeing upon changes. Certain timelines and procedures may be required, and they should be followed. If you fail to notice the change order request in a timely manner, you might waive your rights to additional compensation or time. However, even if the deadline has passed, it is often wise to request the change order because you still might be entitled to it.
Change Orders vs. Change Directives. A change order is an agreed upon modification to the contract. But if the change cannot be agreed upon, whether it be disputed compensation, scope or schedule, most contracts provide that a change directive may be issued.
A change directive is a written document that memorializes the existence of a disputed change and mandates that the contractor (or subcontractor) must proceed with the change order work under protest. The protest may be towards the compensation, the project schedule or some other item.
If the issue cannot be resolved, a claim can be made while the work proceeds towards completion. Each of these steps—the proposed change order, the rejected change order, the change directive for work under protest, and the claim for dispute—should be documented in writing and timely noticed.
Different processes may exist for different types of changes. Contracts sometimes require different processes depending on the type of change. If the change is a design conflict, it is often wise to first submit a request for information (RFI).
In the case of a differing site condition or a concealed site condition, some contracts differentiate the standards for recovery of claims. For example, most federal construction contracts classify the issue as either Type I, which is a condition on site that differs from the information provided in the contract documents, or Type II, which is a condition on site that differs from those that are usual and reasonably anticipated.
Some contracts also treat changes to the schedule differently. Certain rights may or may not be afforded, depending on whether it is an adverse weather issue or active interference by the owner or another contractor.
The process and right to recover for changes in time for compensation is dependent on the specifics of the situation and terms in the contract. All parties — contractors, subcontractors, and owners — can protect themselves by making sure there is a change order clause in the contract that details the rights and obligations of the parties. If issues arise, requests for changes (and rejections) should be memorialized in writing to prevent disputes as to facts and notices.
Negotiating change order terms upfront, or noticing and litigating change order disputes, is a complicated area of law and factual documentation. Best practice is to seek counsel advice early and often to ensure that all issues and evidence are documented accordingly.
The author, attorney Jeffrey C. Bright, regularly presents at ABC Keystone’s educational seminars. Jeff focuses his practice on construction matters, civil litigation, employment law and real estate development and disputes. He represents contractors, subcontractors, owners, construction managers and design professionals on the preparation, revision, negotiation and litigation of construction contracts.
Saxton & Stump is a full-service law firm serving businesses by providing legal and consulting services. The firm’s professionals apply strategic solutions and provide problem-solving support to help clients navigate legal issues and thrive in an increasingly complex world.
July 8, 2019
