Thinking about a change order in your construction contract? Write it down!

Construction projects are notoriously difficult to execute without changes.  It is the natural state of affairs that while a contractor is busy doing the work on the contract, changes arise.  Often, these changes are not due to his preference, but required by local municipalities, general contractor (if he/she is a subcontractor), or even the contract owner.

For example: a construction contract for a home may initially call for wooden shingles for the roof.  The parties may later discover that in fact the home owner’s association prohibits this, and instead, requires asphalt shingles.  Obviously, this can be a significant change depending on the anticipated budget outlined by the contract owner.  Even if your contract does not contain a provision that requires written, pre-approved change orders, it is imperative that you generate written documentation anyway.

This does not have to be difficult.  The contractor is not expected to draft a Shakespearean-level treatise, outlining all of the intricate details about the proposed change.  Rather, I recommend using a rule of thumb: the more significant the change, the more documentation is required.  If, as discussed above, the roof change comprises and additional $30,000 to the overall contract price, the contractor (and contract owner, if he is smart) should generate something akin to a contract amendment or addendum which outlines in great detail the change (including, the “why” the change had to take place…this can be quite useful down the road).  To the contrary, if the change is for something minor, like the type of garage door opener to be installed (which hypothetically adds $100 to the overall price), then less documentation is needed.  In that instance, a simple email that memorializes the (1) “why” the change was called for, (2) price difference, and a (3) narrative of the negotiations between the parties (meaning, how and when they came to agree to the change) should be sufficient.

Given that projects can assume a life of their own, and contractors and contract owners (or general contractors) can often fall victim to the habit of discarding change order formalities, then it is vital that at least some record be established of the change.  Though it may not seem like much, a short email stating “Bob and I discussed the HOA”s requirement that the roof be asphalt shingle instead of cedar and we agreed that the price would increase $30,000” can do wonders in court, should the change be disputed down the line.

(Note: I recommend utilizing emails for several reasons: (1) they are automatically date-stamped, (2) they show who was sent the message, (3) they are written, and (4) they are very difficult to get rid of.)