Construction projects rarely proceed exactly as planned. Designs change, site conditions differ from expectations, materials become unavailable, and owners may decide to expand or modify the original scope of work. A change order provides a formal mechanism for addressing those changes and modifying the parties’ original agreement. Without proper authorization and documentation, however, a change that appears routine can quickly become a construction dispute involving additional costs, project delays, or competing interpretations of the contract.
For owners and contractors alike, understanding the change-order process and documenting changes as they occur can help protect contractual rights and reduce the risk that a project adjustment becomes a costly legal problem.
What Is a Change Order?
A change order is a formal modification to an existing construction contract. It generally changes some aspect of the work originally agreed upon and may affect the scope of work, contract price, completion date, or some combination of the three.
A change order might be necessary when:
- An owner requests additional work
- The owner removes work from the original scope
- Design plans or specifications change
- Unforeseen site conditions require a different scope of work
- A specified material or product becomes unavailable
- A code or regulatory requirement requires a modification
- The contractor encounters conditions that were materially different from those anticipated when the contract was originally signed
A properly documented change order should make clear what is changing and how that change affects the parties’ obligations.
That may sound straightforward, but problems arise when the parties begin making changes or performing additional work before they agree on the consequences of the change.
When Is a Change Order Necessary?
Not every adjustment to a project necessarily requires a formal change order. The answer depends largely on the construction contract.
Construction contracts often establish procedures for handling changes, including who may authorize them, how changes must be documented, and how adjustments to the contract price and schedule will be calculated.
For that reason, parties should review the contract’s change-order provisions before assuming that a particular instruction constitutes an authorized change.
For example, a project manager might tell a subcontractor to perform additional work in the field. The subcontractor may reasonably believe that the instruction means it will be paid for the additional work. But if the contract requires written authorization from a particular party before additional compensation can be awarded, the subcontractor may later have difficulty establishing its right to payment.
The practical lesson: Before performing work outside the original scope, determine what the contract requires for authorization.
Written vs. Verbal Change Orders
One of the most common sources of construction disputes is the verbal change order.
Construction projects move quickly. Owners, contractors, architects, engineers, and subcontractors may communicate constantly by phone, email, text message, or in the field. It can be tempting to treat a verbal instruction as sufficient and address the paperwork later, but that approach creates risk. A contract may require changes to be documented in writing. It may also specify who has the authority to approve a change. Even where a verbal modification may potentially be enforceable under applicable law, proving what the parties agreed to can be difficult after the work has been completed.
Who Has Authority to Approve a Change?
Another important question is who actually has authority to authorize a change.
Construction projects frequently involve multiple decision-makers. An owner may have an architect or construction manager. A general contractor may have project managers and superintendents. A subcontractor may receive instructions from several people on the project.
The fact that someone working on the project requests additional work does not necessarily mean that person has authority to modify the contract.
Before proceeding with a significant change, parties should understand:
- Who is authorized to approve changes?
- Does the contract require approval from the owner?
- Can a project manager or superintendent authorize additional work?
- Does the subcontract require the general contractor’s written authorization?
- Is approval required before the work begins?
- Does the contract establish a specific process for pricing or documenting the change?
Change Orders and Additional Costs
A change in scope frequently means a change in price.
A change order should therefore identify how the contract price will be adjusted. Depending on the contract, the adjustment may be based on:
- A lump-sum price
- A unit price established in the contract
- Time and materials
- Agreed labor and material rates
- Another pricing method established by the parties’ agreement
The parties should also consider costs that may not be immediately apparent.
For example, additional work could result in:
- Additional labor
- Material costs
- Equipment expenses
- Subcontractor costs
- Extended supervision
- Additional project management costs
- Costs associated with delays or project extensions
A contractor should be cautious about simply performing additional work and assuming that the final invoice will resolve the issue. If the parties disagree about the applicable pricing method, the dispute may become significantly more difficult to resolve after the work has been completed.
Change Orders Can Affect the Project Schedule
A change order is not necessarily just about money.
Additional or modified work may affect the time required to complete a project. An owner may request substantial additional work, for example, without realizing that the request will require additional labor, material lead times, or coordination with other trades.
For that reason, a change order should address whether the change affects the project’s completion date or other contractual milestones.
Contractors should identify schedule impacts as soon as they become apparent. Owners, meanwhile, should understand that changes to the scope of work may have corresponding effects on the project schedule.
Failing to address the time impact of a change can create a second dispute later, particularly if the project is completed after the original contractual deadline.
Documentation Is Critical
Good documentation is one of the most effective ways to reduce change-order disputes.
A strong change-order record should establish:
- What changed
- Why the change was necessary
- Who requested the change
- Who authorized the change
- How the contract price will change
- Whether additional time is required
- When the change was authorized
- What supporting documents establish the cost and schedule impact
Documentation should not stop with the change order itself. Parties should also maintain relevant emails, meeting minutes, photographs, revised plans and specifications, field reports, invoices, time records, delivery records, and other project documentation.
Telephone conversations about significant changes should also be documented. A brief follow-up email confirming the substance of a conversation can create a much cleaner record than relying on everyone’s recollection months later.
What Happens When a Change Order Is Disputed?
A dispute may arise before the work begins, while the work is being performed, or after the project is completed.
Common disputes include disagreements over:
- Whether the work was outside the original scope
- Whether the change was properly authorized
- Whether the proposed price is reasonable
- Whether the contractor is entitled to additional compensation
- Whether the change justified additional time
- Whether the owner caused a delay
- Whether the contractor properly documented its costs
- Whether a subcontractor was authorized to perform the additional work
The first place to look is the contract itself.
The parties should review the change-order provisions, notice requirements, pricing provisions, dispute-resolution procedures, and any provisions addressing delays or unforeseen conditions.
Importantly, parties should not assume that performing the work first and negotiating the price later will eliminate the problem. Depending on the contract and applicable law, failure to follow contractual procedures can affect a party’s ability to recover additional compensation.
Change Orders and Subcontractors
Change orders can become particularly complicated when multiple tiers of contractors are involved. An owner may authorize additional work with the general contractor, while the general contractor must separately obtain pricing and authorization from one or more subcontractors.
That creates an important distinction:
An owner’s approval of a change does not necessarily resolve the subcontractor’s entitlement to additional compensation.
The general contractor and subcontractor must also consider the terms of their own agreement, including provisions concerning written authorization, notice, pricing, documentation, and payment.
Subcontractors should be especially cautious about performing significant extra work based solely on informal instructions from a superintendent or other project representative. If additional work is requested, the subcontractor should determine whether the person making the request has authority to approve the change and whether the subcontract requires written notice or authorization before the work begins.
Common Change Order Mistakes
Many change-order disputes could be avoided by addressing the issue before the additional work is performed.
Common mistakes include:
Performing extra work without written authorization
A contractor may believe that everyone understands the change, only to discover later that the owner disputes the additional charge.
Failing to identify the price impact
A change order that says work will be added but does not clearly establish how the contract price will change can leave an important monetary issue unresolved.
Ignoring schedule impacts
Additional work can affect completion dates, but parties sometimes focus exclusively on cost and fail to document the corresponding time impact.
Assuming anyone on the project can approve changes
Project personnel may provide instructions without having contractual authority to modify the agreement.
Waiting until the end of the project to document changes
Reconstructing months of project changes after the fact is far more difficult than documenting them as they occur.
Failing to preserve supporting records
Labor records, material invoices, photographs, correspondence, and other documentation may become critical if the parties later disagree about the cost or necessity of a change.
Best Practices for Owners and Contractors
Owners and contractors can reduce the risk associated with change orders by establishing a consistent process from the beginning of the project.
Before work begins:
- Review the contract’s change-order provisions
- Identify who has authority to approve changes
- Establish how changes will be priced
- Understand notice and documentation requirements
When a change is proposed:
- Clearly identify the change in scope
- Determine why the change is necessary
- Evaluate the cost impact
- Evaluate the schedule impact
- Obtain the required authorization
- Document the agreement before proceeding whenever possible
After the change is approved:
- Maintain the executed change order with the project records
- Track labor and material costs
- Preserve relevant correspondence and project documentation
- Update schedules and project budgets as necessary
- Make sure subcontractors receive appropriate documentation and authorization
When Should You Involve a Construction Lawyer?
Most routine project changes do not require an attorney.
However, legal guidance can become particularly valuable when a proposed change involves substantial additional costs, disputed responsibility, significant delays, contract interpretation, or a disagreement over whether work was authorized.
An attorney can review the governing contract, evaluate the applicable notice and change-order requirements, assess the parties’ rights and obligations, and help address a dispute before it escalates into litigation.
For contractors and owners, the goal is not simply to document a change after a disagreement develops. The goal is to create a clear record before the disagreement develops.
The Bottom Line
Change orders are a normal part of construction, but they should not be treated casually. A seemingly simple change in the field can affect the project’s scope, cost, schedule, and ultimately the parties’ contractual rights.
A practical approach is straightforward: follow the contract, document changes promptly, confirm who has authority to approve them, and address both cost and schedule impacts before the work proceeds whenever possible.
Harpst Becker, LLC is here for your company’s legal needs. If you have questions or need further information, please feel free to contact a member of our team.