Changes to the scope of work are one of the most disputed areas in relation to construction projects. The reason that this is often an issue is because changes usually increase costs and the parties are at odds regarding who is required to pay those costs. This type of conflict can stem from a number of factors including a lack of clarity or understanding of the parties’ obligations under the construction contract. In addition to a lack of understanding the parties can get also get themselves into trouble by failing to properly document any changes during the construction process.
One way to protect against such disputes is to clearly outline the included and excluded work within the agreement. If it is not clear within the contract what is truly a change the parties can end up spending meaningful time, energy and money debating an issue that could likely have been easily resolved at the contract drafting stage. Clearly outlining the specific scope of work for the project should give the parties a better understanding of what is in fact a legitimate change and allow them to focus on what needs to be done instead of which party is responsible for paying for it.
In addition, it is often helpful to include clauses that deal directly with changes to the scope of work. A typical change order provision will state which party is responsible for payments in relation to changes and determine how such changes are to be documented. In the majority of contracts, the owner will be required to pay for all changes to the project. It is often best to require any changes to be documented by written agreement prior to proceeding to avoid disputes later about who authorized the additional work. In some cases, the contractor may be required to submit a quote in relation to any changes, which will allow the parties to better understand the costs associated with any change prior to determining whether or not to proceed with it. This type of clause offers a layer of protection for the owner so that they can keep up to date on any additional costs as well, but can also protect the contractor by having the owner confirm the cost in advance.
In other cases, the contractor will simply require the authorization of the owner to proceed without providing a cost estimate. This can be effective when changes are required by third parties such as the local municipality, or when unforeseen items are discovered. Items that are easily calculable can also be undertaken without a specific quote, such as additional amounts of flooring or drywall. Although change order provisions can take on a number of forms, having them in place can add clarity and reduce conflict once the project is underway.
On the Ground
Once the project has commenced the contractual change order provisions should be followed to aid in avoiding potential disputes. Although having a change order signed by all parties is the best practice, this can be more difficult than you think while the project is ongoing. In many cases changes will be made during a quick discussion on site, or through a telephone conversation. When it is not practical or possible to get a signed change order prior to undertaking or authorizing additional work there are other ways to document that change to protect the parties. The use of simple follow up emails or text messages regarding discussions, changes or instructions can go a long way to document changes and avoid potential disputes in the future. In a number of recent cases these types of communications have even been seen as sufficient where written agreement was explicitly required by the contract documents.
These follow up or confirmation communications can also serve a second purpose, as site discussions or phone calls can often leave the parties with different impressions as to what was truly agreed upon at the time. These communications can allow the parties to articulate their understanding of the change and work out any items that may not have been clear at the time prior to undertaking any work in relation to the proposed change. Although there is no perfect system or solution, this is yet another way to potentially avoid or minimize future disputes between the parties.
Although changes can lead to disputes on site they do not have to. There are no perfect solutions when dealing with changes during a project, however taking some or all of the steps outlined above should provide some meaningful protection along the way. Properly clarifying the scope of work, and documenting changes can mean the difference between finding common ground or engaging in protracted debates with the other parties.The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.