It is common for construction contracts to be modified during the course of the project itself. A change order, a modification in the construction contract, is the document through which the parties agree on new scopes of work to be carried out. They usually arise due to changes in the originally agreed-upon tasks.
Regardless of the reasons that give rise to these changes, it is important to establish processes to document them clearly and correctly for all signing parties. It should be noted that once the change order is approved, it becomes part of the contract.
Now, let’s take a look at the reasons that may lead to a change in the construction contract.
When are change orders in construction necessary?
Change orders are necessary when the project requires modifications that impact the initially estimated or quoted costs and completion times.
It is important that the original construction contract clearly details and explains the materials and type of work quoted, as well as the stipulated timelines. If a change order is necessary, after discussing the new scopes of the contract with the client, they should be described in a document prepared by the construction company or contractor. This change order must then be signed by the parties and after doing so, it becomes part of the construction contract.
Change orders are usually originated due to the following reasons:
- Errors or omissions in the original budgets
- Client’s decision to expand the project
- Unexpected construction site conditions: field conditions, weather conditions
- Inaccurate or incomplete specifications: materials, sketches and plans, etc.
- Other changes related to contractors or workforce
In all cases, these are modifications that have a concrete impact on the project’s development, whether it’s regarding construction material or labor costs, or the time required for carrying out tasks.
Since the original contract is the basis upon which the client will consider the work completed, it is important to detail the changes to avoid future disputes between the involved parties.
Who should manage change orders and how?
The request to carry out a change order can come from the client. However, it can also come from on-site personnel who have encountered an unspecified situation that was not estimated in the original plans and documents.
Likewise, the person responsible for creating and completing the document specifying the modification to be made should be from the construction company. Once detailed with the necessary information, the change order should be sent to the client for review.
While many people tend to consider avoiding this type of modification in construction projects, the truth is that it can be beneficial. As we will see towards the end of this article, expanding the original scope of the project through these contract modifications can mean more and better business opportunities for the construction company.
What information should be included in a construction contract that was modified?
As the original project scopes are being modified, it is important for change orders to include the following information:
- Reference to the original contract: number, title, chapters
- Indicate the client to who it is directed, specifying the address and any other relevant information
- Specify the contact person or person in charge
- Date of issuance: indicating when it was approved by the parties
- Change order number, indicating how many change orders have been requested
- Space at the bottom of the page for parties’ signatures
In addition, work change orders must detail the following information:
- Changes in project delivery times: how many days are added to or subtracted from the initially agreed delivery timeline.
- The total cost of changes
- List of construction items required with their description, quantities, and prices propery detailed.
Advantages of optimal change order management
Is a change order always a problem? Well, this is not always the case. What is for sure is that they should be taken into account, as efficient management of change orders can actually be a new opportunity.
It may be the case that the client decided, for whatever reason, to invest more money to expand the work. It may also be that the project requires modifications that were not initially estimated in order to continue.
Either way, the ability of construction project managers to respond to these changes in a fast and efficient manner is a competitive advantage. Responding positively to these situations fosters relationships with clients, generates recommendations, and positions the company better for new projects.
To achieve this, part of the solution is to have a platform that allows for comprehensive, detailed, and online management of these types of modifications. By having all the project information, such as contracts, purchases, sales, and price databases, managing such changes becomes more efficient and cost-effective.
BrickControl is tailored to making construction management agile, featuring solutions for construction estimates, work order management and managing change orders all in one app. Learn more about how to take your construction business to the next level, contact our specialists and start using BrickControl today.
