Change Orders Part 1
March 20, 2003
Change order procedures
Project managers and their firms should have standardized procedures for managing the change order process including coverage of the following:
Prior to beginning a new project, a pre-job conference should be held with the general contractor and owner’s representative. You should assure them that your firm is not a claims-oriented organization, and that you will fully abide by the contractual agreement, but that it is an absolute necessity that all parties to the contract completely agree upon how changes and modifications to the work will be handled.
Clear agreements at this stage of the project will minimize conflicts and misunderstandings during the course of the project. This is best negotiated during contract negotiations and prior to the execution of the contract.
Contract terminology will often contain clauses which state, in effect, that there will be no changes, time extensions, or similar deviations. The same documents will then go on to state that the owner retains the right to make changes as the work progresses. While it is not always possible, conflicts and disagreements about contract language such as this need to be resolved during contract negotiations.
A clear understanding of the change order submittal/approval process must be reached among all concerned parties in advance of construction. You need to be absolutely certain who will take responsibility for issuing changes to you.
Be certain that you understand your contractual responsibilities with regard to allowable markup percentage, overhead allowances, requirements for unit pricing, and pricing substantiation. Seek agreement to your standard change order format long in advance of your first change order proposal.
Billing and Payment Guidelines
During preconstruction negotiations, reach an accord as to how change work will be invoiced and paid. This must include an agreement on what documentation material will be necessary to substantiate change order pricing. Compliance with those agreed-upon terms will be necessary to expedite payment to your firm.
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