Section 1.61 Changes

• Library: Construction Law 2016 Supp

K. (§1.61) Changes

Owners will typically want to unilaterally direct either increases or decreases in the work. They may also want to suspend performance of the work or otherwise make changes that extend outside the original scope of the contract that was bid by the general contractor and its subcontractors. Appropriate provisions for adjusting time and money must be integral parts of any such contract clause. Difficulties arise because it is not always practical at the time the change order process is begun to reach an agreement on the extent of time or the amount of money needed to make the change.

Change clauses are one of the best examples of how contract documents are interrelated. The subcontractor will typically be bound by the changes that the owner is allowed to make in its contract with the general contractor. For example, when a general contractor is allowed to unilaterally add quantities of material, the subcontractor will possibly not want the price of the added material to be the same as the price used by the subcontractor for determining the original subcontract amount. On a project where the subcontractor is losing money, such a change might only add to the subcontractor’s loss. Therefore, a subcontractor will want to have the negotiating room to obtain payment based on either a cost-plus formula or a negotiated price.

Frequently, changes are instigated in the field while a project is progressing rather than at the negotiating table. Commonly, there is pressure beginning with the owner that runs to and through the architect, general contractor, and down to the subcontractors and suppliers to “keep the job moving.” In this atmosphere, there are often tendencies to pressure the person to do the work first and worry about the price later. Contractors and subcontractors are well advised to use their own forms in the field for changes and to refuse to perform changes unless an authorized representative of the party requesting the work signs off on the form. Nearly all contractors and subcontractors have these forms, but most of these forms do not contain provisions for payment because it is difficult to compute the cost and reach an agreement in the field. But these forms, at a minimum, should have a provision that states that the work requested on the form is extra work to the contract for which extra compensation will be made on a fair and equitable basis. This will avoid the subsequent argument that the execution of the form was merely confirmation that certain work was done, not that it was the type of work for which extra compensation would be paid.

Frequently, there is tension between contract language dealing with changes and the practice in the field. Contractors and subcontractors are accustomed to being encouraged, if not forced, to proceed with change order work without written authorization even though contract language may require written authorization as a condition to receiving payment. Because contractors are always thinking about where their next job will come from, they, generally speaking, want to accommodate the customer and perform the work first and deal with the contract technicalities later. One way for contractors and subcontractors to receive protection in this regard is to place in their contracts language by which the owner warrants...