What Is a Change Order Clause in a Construction Contract?

A change order clause is part of the construction contract that dictates how changes to the project should be handled. It’s important for you to read and understand the contracts you are signing so that you know how to proceed in the event that a change order is needed on the job.

You might feel that including them in your own contracts is unnecessary because your proposals are solid and you’ve never had to deal with change orders before – but therein lies the problem. You don’t know what issues or difficulties lie ahead in your next job and it’s best to prepare yourself and business against any disputes in the future.

Remember, when you signed your contract for the project, there was most likely language in it which spelled out, exactly, what you are to do when you encounter any kind of a change. You have an obligation, and you signed your name to it, pledging you would handle it in accordance with the contract provisions. You can’t just ignore it.

Also, when you are having a discussion with the project’s GC, construction manager (CM), or homeowner and there is an attempt to make you look bad or feel guilty for even suggesting the very idea of a change order, it’s a good time to bring up this fact. If it were extremely rare for change orders to occur, then it might not even be mentioned in your contract.

To illustrate the point, here are two examples from public agencies in California, the San Diego County Water Authority and Caltrans (California Division of Highways).

EXTRA WORK. ADD the following: 1. Any request by you for Extra Work shall be in writing to the Engineer and shall include itemized estimates. You shall fully itemize your Extra Work cost estimates such as labor and payroll costs, quantities, crew composition, production rates, material costs, Subcontractor and Supplier costs, equipment costs, supplemental costs, and time impact.

4-1.06 DIFFERING SITE CONDITIONS (23 CFR 635.109) 4-1.06A General Reserved
4-1.06B Contractor's Notification Promptly notify the Engineer if you find either of the following conditions: 1. Physical conditions differing materially from either of the following: 1.1. Contract documents 1.2. Job site examination 2. Physical conditions of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inherent in the work provided for in the Contract Include details explaining the information you relied on and the material differences you discovered.

SECTION 4 SCOPE OF WORK 38 If you fail to promptly notify the Engineer, you waive your claim of a differing site condition for the period between your discovery of the differing site condition and your notification to the Engineer. If you disturb the site after discovery and before the Engineer's investigation, you waive the differing-site condition claim.

The paragraphs above are examples of “change order clauses” in large construction contracts. They happen to be with public agencies, but similar clauses exist in the contract language of most private works as well. 

Private jobs between homeowners and contractors too often ignore these kinds of clauses or, for that matter, project contracts—all together. They do that at their peril! They are the most vulnerable yet take the most risks. Ever notice how the ‘big box’ home improvement stores, or window companies, or hvac and roofing companies NEVER ignore the paperwork when they deal with private, homeowner-type projects. There’s a reason for it. You shouldn’t ignore it, either.

The following sample clauses are from lawinsider.com.

Either Party may request changes within the general scope of this Agreement. If a requested change causes an increase or decrease in the cost or time required to perform this Agreement, the Parties will agree to an equitable adjustment of the Contract Price or applicable subscription fees, Performance Schedule, or both, and will reflect the adjustment in a change order or Addendum. Neither Party is obligated to perform requested changes unless both Parties execute a written change order.

From time to time during the term of this Agreement, the Parties may mutually agree on a change to the Work, which may require an extension or reduction in the schedule and/or an increase or decrease in the fees and expenses and/or the Work (each, a “Change”), including: (i) a change to the scope or functionality of the Deliverables; or (ii) a change to the scope of the Work. In the event the Parties agree on a Change, the Parties will seek to mutually agree on a change order identifying the impact and setting forth any applicable adjustments in the Statement of Work and/or payments to Contractor. An authorized representative of each Party shall promptly sign the mutually agreed upon change order to acknowledge the impact and to indicate that Party’s agreement to the adjustments.

The California’s Contractors State License Board also provides sample change order clauses verbiage to include when putting contracts together.

[A.9] CONSUMER NOTICES Continued Insert: “Note about Extra Work and Change Orders” followed by the following statement: “Extra Work and Change Orders become part of the contract once the order is prepared in writing and signed by the parties prior to the commencement of any work covered by the new change order. The order must describe the scope of the extra work or change, the cost to be added or subtracted from the contract, and the effect the order will have on the schedule of progress payments.”

[B.4] PERFORMANCE OF EXTRA OR CHANGE-ORDER WORK NOTICE (A) A statement telling the buyer that a contractor is not required to perform additional work or changes without written approval in a “Change Order” before any of the new work is started. (B) A statement informing the buyer that extra work or a change order is not enforceable against a buyer unless the change order also identifi es all of the following in writing prior to the commencement of any work covered by the new change order:
(i) The scope of work encompassed by the order.
(ii) The amount to be added or subtracted from the contract.
(iii) The effect the order will make in the progress payments or the completion date.

We aren’t attorneys, so we can’t give legal advice. That’s one of the advantages of using Trak Changes, it greatly simplifies the process of change, if and when it happens.

Final Thoughts About Change Order Clauses

One reason that many smaller and mid-size contractors and subs may be inclined to ignore change orders and the contract clauses dedicated to them is a mistaken belief that they are there for the use of general contractors—not a small sub—and they couldn’t be more wrong. Or, they may incorrectly believe that the GC they are working for will take care of them, will file the RFIs and the change order requests and sign the formal change orders. Wrong, again!

Too often, GCs can see a potential change order as a nuisance, and you have to guard against it. For instance, let’s assume you have a change worth $1,000.00 to you, but the markup for the GC might only be 5 or 10%, so $50 or $100, and it’s often a hassle.

This is why you need to be the shepherd of your own change orders. Keep them in your view. Fight for them. After all, it’s your money laying on the table. Using Trak Changes helps you create a transparent log of all requested and approved changes – ensuring that you get paid and don’t cause any unnecessary delays on the job. Click here to get started for free today.

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