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Change order considerations

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Recent events have reminded me of a few things that are worth sharing.

Starting at the beginning, a contract defines the scope of work.  A  well developed contract, will define the cost, the time, and any other relevant terms pertaining to how that scope is delivered.  Anything that changes the terms of that agreement requires contract modification which is typically initiated by a change order.

It's very important to note that there are many cases where the contract terms change without affecting the cost. A good example is when drawings are approved by the building department with no changes.  The contract is often written on the "For construction" set, because some material will need to be ordered before the permit set will be ready.  

Generally speaking, change orders are associated with a formal directive from the owners representative. For example, if the answer to a question leads to additional work, the change order for that work would reference the answered question.

Somewhat like the rules at a 4 way traffic stop, most people never consider more complex situations, because it's easier to just follow the lead of whoever got there first.

Because of this thinking, there's a tendency for contractors to conceptualize change orders in terms of client instruction and answers.  To be sure, it's easier to validate the change order if you can attach a document from the client telling you to add something.  However, this approach is easily delayed or defeated by clients and representatives who simply refuse to answer the question.

It's pretty common to find yourself in a situation where you've spent hours, days, and weeks trying to "help" a client or their representative to determine what their best course of action is.  Some decisions lead to a reduction in scope which results in a change order to credit the value back to the client.

All of that time sunk into consulting the client has value, yet many contractors are unwilling to present that work because they do not distinguish between management which is part of the contractual scope,  and consulting, which is not.  

It's therefore not surprising, that many experienced clients and their representatives demand consulting services from their contractors without offering to pay for them.

Before I go any further, I think it's important to touch on some common assumptions about change orders.  Broadly speaking, many clients assume that all change order work is overpriced.  Many contractors price change order work assuming that the work in question, will be harder to do than it really should be.

It's my opinion that the cost of "free" consulting, is getting rolled into change order costs.  

It's also my informed opinion, that most contractors would actually charge less for consulting, than they're adding to the additional scope change orders, because they'd know they were getting paid before they did all the consulting work.

Now, it bears mentioning, that most clients hire their design teams to do "Contract administration".  This means that the design team should be acting as the clients consultant and representative.  The problem with combining these roles, is that the design team has no incentive to accept financial responsibility for fixing their mistakes.  

Like just about anything else involving people, it's important to manage expectations as soon as possible.  It might be a good idea to respond to a clients request for consultation, with a change order proposal for consulting services.  Even if the client rejects it, they will likely proceed with a better understanding of the contract terms, and the value of your time.  Every change order proposal should define the changes to the scope, the conditions pertinent to the changes, and an expiration date.

 I hope that helps.

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