As in any other industry, changes are a common factor in construction. Sometimes changes can be related to the project’s price and schedule, while other times changes can be pertaining the actual work being done. Regardless of what kind of change you may anticipate dealing with, you should familiarize yourself with the different kinds of changes that can occur and how your contract will deal with them. The three main terms that project changes typically fall into are change orders, construction change derivatives, and minor changes. But for purposes of this article, will focus solely on change orders and the process behind them.
A change order is a fancier way of naming an amendment made to a construction contract. It reflects a mutual consensus between the parties involved on whatever change is being made to the contract. Like all other contract amendments, a change order should also satisfy the requirements stipulated on the original contract and previous change orders. Change orders are usually the best way to go when making changes to a project since both parties get to agree formally on the amendment.
The first step in change orders is the consideration period. Here’s when the party who wants to request a change proposes a change order to the counterparty. The counterparty must then consider the pros and cons of this change order and ultimately decide on what they are willing to agree upon. Once both parties know what the requested changes will be, a change order must be drafted. When agreeing on a change order, all parties must take their time to clearly identify the changes the change order will in fact make (ie. price, schedule, etc.). Refer back to the original contract, other recent amendments, and any documents that can better help establish the changes being made. The clearer you are, the less controversies and disputes you will run into.
In terms of issuing an actual change order, it’s very important to know that no one can unilaterally issue or impose a change order. A change order must be a bilateral amendment where both parties issue the new terms. Lastly, keep in mind any third parties involved in the changes included in the change order or third parties involved in previous amendments. If there are any, these third parties must give consent on the proposed change order and ultimately sign the new change order, guaranteeing that the changes will be made as stipulated in the amendment.