As promised last week, here's the post about Change Orders.
So what's a change order?
A change order is the instrument by which the construction cost as stipulated in the contract is either increased or decreased.
When do you need a change order?
When the scope of works is changed, which can happen for any of a number of reasons. The homeowner can add scope by deciding they want something more than what was in the original scope, like say a jacuzzi, or another bedroom, which would be a straight add. A client can change from a more expensive to a less expensive building material (value-engineering), for example from a slate roof to an asphalt one. These are elective change orders that the client initiates and usually aren't that much of a problem. In the case of an add, the GC is happy because they get a mark-up on the additional work, so their profit increases. Similarly if the Architect has a design fee that is tied to construction cost, they get an increased fee to cover the additional design work that the change requires.
There are also change orders for "unforeseen circumstances", which are conditions that no one could justifiably have predicted. There could be rock ledge under the area where the basement is intended to be, termite damage in a wall that was meant to remain untouched, or even the discovery of hazardous materials like lead, mould or asbestos where none was anticipated. In these cases the team of the GC, Client and Architect come to a conclusion as a group to decide if the situation was truly "unforeseen" and a change in scope, or if the GC should've had a reasonable expectation that the problem was there and provided funds in the contract amount for it. These change orders can be hard for a Client to swallow, but usually they can be made to understand their necessity.
The worst kind of change order is for omissions in scope. This could be because the GC failed to understand the project as bid, or that the Architect either described the scope inadequately or omitted something that they Client had requested. Omissions in scope caused by the Architect are in my mind the worst (I'm biased) because it means that we've (I've) failed or misunderstood the Client in some way.
By the letter of the contract (depending on the form used), if the Architect and Client can show that a disputed area of scope was in fact in the original drawings or specifications then GC is bound to provide the scope without an increase in cost. It seems cut and dry, but it's actually pretty tough to deal with because it calls into question what else the GC has made mistake on. Inevitably there are arguments over who's responsible for the cost and it creates a contentious atmosphere at the job site, which leads to aggravation and discord that get in the way of making progress on the project.
The finger pointing can lead to any of the three parties to the contract being responsible for the cost. We've seen how the Client and the GC can be responsible, but at times (rather perversely) the Architect can be on the hook for the cost (Something that has happened to me quite a bit lately and is really hard).
With this as background I'll be writing future posts about my experiences in being on the butt-end of change orders, and all of the negativity that can go with them. It'll be good times.
So what's a change order?
A change order is the instrument by which the construction cost as stipulated in the contract is either increased or decreased.
When do you need a change order?
When the scope of works is changed, which can happen for any of a number of reasons. The homeowner can add scope by deciding they want something more than what was in the original scope, like say a jacuzzi, or another bedroom, which would be a straight add. A client can change from a more expensive to a less expensive building material (value-engineering), for example from a slate roof to an asphalt one. These are elective change orders that the client initiates and usually aren't that much of a problem. In the case of an add, the GC is happy because they get a mark-up on the additional work, so their profit increases. Similarly if the Architect has a design fee that is tied to construction cost, they get an increased fee to cover the additional design work that the change requires.
There are also change orders for "unforeseen circumstances", which are conditions that no one could justifiably have predicted. There could be rock ledge under the area where the basement is intended to be, termite damage in a wall that was meant to remain untouched, or even the discovery of hazardous materials like lead, mould or asbestos where none was anticipated. In these cases the team of the GC, Client and Architect come to a conclusion as a group to decide if the situation was truly "unforeseen" and a change in scope, or if the GC should've had a reasonable expectation that the problem was there and provided funds in the contract amount for it. These change orders can be hard for a Client to swallow, but usually they can be made to understand their necessity.
The worst kind of change order is for omissions in scope. This could be because the GC failed to understand the project as bid, or that the Architect either described the scope inadequately or omitted something that they Client had requested. Omissions in scope caused by the Architect are in my mind the worst (I'm biased) because it means that we've (I've) failed or misunderstood the Client in some way.
By the letter of the contract (depending on the form used), if the Architect and Client can show that a disputed area of scope was in fact in the original drawings or specifications then GC is bound to provide the scope without an increase in cost. It seems cut and dry, but it's actually pretty tough to deal with because it calls into question what else the GC has made mistake on. Inevitably there are arguments over who's responsible for the cost and it creates a contentious atmosphere at the job site, which leads to aggravation and discord that get in the way of making progress on the project.
The finger pointing can lead to any of the three parties to the contract being responsible for the cost. We've seen how the Client and the GC can be responsible, but at times (rather perversely) the Architect can be on the hook for the cost (Something that has happened to me quite a bit lately and is really hard).
With this as background I'll be writing future posts about my experiences in being on the butt-end of change orders, and all of the negativity that can go with them. It'll be good times.
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