When drafting construction contracts, it’s very important to consider project change orders. The procedures that should be followed need to be laid out in the contract. For example, some suggest notices have to be given at least 10 days in advance.
This can help both contractors and owners. The owner needs to make the contractor aware of any desired changes well in advance, and the contractor needs to give the same courtesy to the owner. This helps everyone stay on the same page regarding budgets, deadlines and more, and it can thereby reduce the amount of potential disagreements.
Contractors also need to remember that one change can impact other deadlines and push the entire project back. If the alteration to the project means that framing takes an extra week, for instance, all of the next steps will also be pushed back by a week. While contractors may be able to make up some of that time elsewhere, it’s unwise to assume that any delays can just be absorbed. Being locked into an inflexible end deadline can be problematic.
Changes can be requested for all manner of reasons, and they may often be both unexpected and unavoidable. For example, on a renovation project, the contractor may find that the sewer lines all need to be replaced, when it was originally thought they could be used. This may mean tearing up flooring, trenching through concrete, hiring subcontractors, putting in new lines, pouring replacement concrete and much more. This simple, unexpected change can add many man-hours of work and eat up some of the budget that was intended to be used elsewhere.
When drafting contracts, be sure to consider all useful clauses and how they can alter the obligations of both owners and contractors.
Source: American Bar Association, “Construction Basics: Top Ten Construction Contract Provisions to be Negotiated with the Owner-Part 1,” Frank A. Hess and Richard S. Robinson, accessed May 26, 2017