September PAY!
Change Orders:
You Don’t Have To Chase Payment Any More
In a perfect world, there would be no change orders. Every construction
contractor knows this, because every construction contractor has spent
time and resources unsuccessfully chasing the "change-order
chameleon."
The change-order chameleon looks different to everyone who sees it.
According to the GC/CM, your company started work without the proper,
contractual authorization, so there never was a real "change
order." The construction owner says that it was aware of the
so-called "change," but considered what you were doing as part
of the original scope of work — the owner just hadn’t gotten around to
informing you yet. Your employees say that they submitted the request for
an "authorized change" properly but were told by an authorized
employee of the GC/CM to proceed with the work, to prevent delaying the
project, and to negotiate whatever payment there might be later. The
change-order chameleon blends into any background very quickly!
The problem is that, until everyone finally agrees on what the
change-order chameleon looks like, they may not pay for your work. So take
the time to ask yourself a few questions about change orders before
bidding your next job, and finally start getting paid for out-of-scope
work.
Does the contract language state that all orders changing the scope
of work must be made in writing prior to your commencement of
out-of-scope work?
If the contract allows the owner to direct changes to the scope of
work without advance agreement on prices, does it give you the right to
negotiate prices later, including overhead?
Does the contract give you the right to be paid overhead costs for
delays caused by delayed authorization of out-of-scope work?
Does the contract language require the GC/CM to confirm in writing
that you have made a claim that the requested work was not contained in
the original scope of work? If not, consider will happen if the GC/CM
later says that you did the work without a mutual agreement that the
work was a "change."
Before commencement of work, did you establish who in your company
has the authority to negotiate change orders, and determine who has the
authority on the GC’s/CM’s end?
Consider how your subcontract agreements address these questions. ASA’s
Payment Advocacy Year (PAY!) Web page at www.asaonline.com/pay.htm
contains many more suggestions, ideas and payment resources. This
article is provided in conjunction with ASA’s Payment Advocacy Year
(PAY!).
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