Code and Legal Topics
October 2007
What I hate about change
orders
Few construction projects can be completed without
change orders. A change order is the means to bridge the intent
of the design and the reality of the field. The most palatable of
change orders are classified as 'Express Change orders'. These change
orders usually consist of deletions or additions to the contract
and are priced by the contractor in advance of the owner's acceptance.
They are clear-cut, value adding, contract governed and uncontestable.
Unlike 'Express Change Orders' directed
by the owner on a voluntary basis, the second class of change order: 'Constructive Change Orders' arise during the course of
work from circumstances that were unforeseen by participants in
the project at the time of bid and force performance of the contractor
above and beyond the stipulations of the contract.
What I actually dislike most are change orders falling
into the class: "Constructive Change Orders of
the third kind. "
Kinds of Constructive Change Orders
I. Concealed Conditions is a contractual
term describing unavoidable conditions discovered or emerging after
the contract is executed.
- Existing sewer line undersized or deteriorated
- Existing electrical wiring not to code
- HVAC equipment thought be working but discovered
to be unusable
- Deficient seismic restraints/connections not
apparent during design or bidding.
- Columns or Conduits concealed in walls
- Human remains or artifacts found during excavations
- Emergencies - threats to life or property.
Concealed conditions are, fortunately, self evident,
easy to document and most owners and contractors will be able deal
with them evenhandedly within the terms of the contract.
II. Defective plans
In every construction contract, where he has hired a third party
design professional, the owner implies and warrants that the plans
and specifications are accurate and sufficient enough to build the
project. Although cities check the plans prior to issuing the permit
they are not concerned with the intent of the design so much as
with compliance with the building codes.
Being off-site, plan checkers are unable to compare
the drawings with the actual conditions at the site. Frequently
errors or omissions in the plans are not discovered until the inspector
arrives – by which time the cost of correcting errors may
have increased.
Even in the TI business, working in existing buildings,
we see defective plans –and the architect is often not at
fault. Frequently the designer is given outdated or inaccurate information
by the owner or a tenant upon which the design is based. Other examples
of defects are:
- Missing or inaccurately specified handicapped
access features
- Fire rating, exiting , seismic restraint, storage
issues
- Code interpretation differences between architect
and jurisdiction
- Insufficient allowances provided by the contract
due to vague criteria on the plans
- Construction details unworkable in the field
- 'Red Lined' plans will almost certainly create
change orders if the contract has been signed prior to submittal
to the city and receipt of comments.
Most professionals in the design industry own up to their errors
and will advise the owner to issue a change order to the contractor
to correct such defects. Sophisticated owners generally rely on
experienced design firms to mitigate these problems.
III. Owner caused delays and sequencing
changes The 3rd Kind
In every construction contract there are duties for which the owner
is obliged. They could be as simple as making the space available
by a certain date or be very complex with the owner furnishing salvaged
items for re-installation and/or having his own subcontractors perform
schedule critical activities within the order of work. Some potential
problems with owner performed work:
- Delays by owner's subs in performing their work
within the schedule window provided by the GC.
- Incomplete or damaged items provided to the GC
by the owner for installation which invariably causes additional
cost and time delay
Sequencing change orders arise when the contractor
is directed to perform in a manner not customary for the industry
and, more importantly, not addressed in the contract. In bidding
for and subsequently fulfilling his contract, the contractor has
the expressed duty and implied right to direct the work in the manner
he deems most beneficial to himself and, absent any provision to
the contrary in the bid documents, bids and performs the work accordingly.
- A very common sequencing problem arises from
the owner's direction to start work in advance of the
permit being issued - which in many instances saves time.
However, in some cases the cities can take too long in the plan
review process and delay completion of a job already started –
and stopped - pending the permit being issued and subsequent inspections.
The contractor would experience an increase in his costs because
the project could not be completed within the time the contractor
could have finished it had the permit been issued prior to the
start of work or issued within his critical window.
- Sometimes project delays, caused for any of the
reasons in this article, are simply untenable for the owner or
tenant and a portion (or all) of the project requires acceleration to meet the original completion date. Acceleration might involve
overtime for the construction team, finishing portions of the
work out of the sequence intended, or both.
These 'Change orders of the Third Kind' are the thorniest ones, with the potential of creating
an adversarial relationship between a contractor and his owner/client.
Prevention is the best solution for all parties:
- Maintenance of a master schedule showing delays
and accelerations and their causes
- Weekly propagation of a rolling schedule to
the owner's subs as well as the general contractor's
- When using salvage materials and equipment the
owner must survey those items for entirety and fitness as soon
as possible, especially if their replacements require lead time.
A good contracting practice is to establish in the
contract a provision to resolve any disputed change order amounts
on a T&M basis. Such a provision would stipulate (in advance)
the general contractor's markup on subcontracts, materials and equipment,
rates for supervisory labor and general conditions (phone, trailer,
insurance). With this provision in place the work could be done
on a T&M basis with a 'not to exceed' threshold where practical.
Although the best of plans can go awry the more
time spent up front in surveying the condition of existing items
to be re-used, site investigation, conferring with city planners
and plan checkers, stipulating phasing concerns with bidders and
having contractors bid city approved plans will minimize the risk
of change order claims.
This boat probably belongs to a
contractor (with a sense of humor) who did quite well on a job
that, for one or more of the reasons listed above, widened far
beyond the scope of the 'original contract'; - name on the dinghy.
TiCon - You get it on
time or you get my car keys - Sam Burkhouse
We Never Charge For Quotations
From Your Plans And Specs
Pre-Construction Services Available
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