In large-scale or long-term construction projects, changes are inevitable. In fact, original contract amendments affect an estimated 35% of projects. Completing project changes according to the amended scope of work can help minimize risks and ensure a positive outcome.
However, if changes are not satisfactory or contract parties cannot agree on how to proceed with the project, there is a potential for disputes that require the expertise of a construction litigation attorney.
What Is a Change Order in Construction?
A change order is an agreement between a client and contractor that requests modifications or alterations to the original scope of work. The change order document should detail what changes need to happen, how much the changes will cost, and the anticipated amount of time to complete.
A change of order serves as an amendment to an existing contract and therefore requires approval by all parties of the original agreement.
What Challenges Can a Change Order Pose?
Although a change order can be a valuable tool to meet evolving project needs, they are not without their challenges. Change orders can impact the following:
- Project Schedule: Change orders often require involved parties to allocate additional time for review, negotiations, and implementation of changes, resulting in possible project delays.
- Workflow Disruption: Changes in the scope of work can disrupt construction processes and negatively impact collaboration between different trades involved in the project.
- Cost Overrun: Construction project budgets have been carefully crafted to precisely reflect required materials, equipment, and labor. Change orders typically result in increased expenses that exceed the initial budget.
- Statutory Limits on Scope: Some contracts, such as public sector contracts, may impose statutes or other limitations that restrict the extent to which changes can be made in a project’s scope.
- Inadequate Coverage: A change of scope can affect what materials and equipment are needed to complete the project. Procuring additional materials or reserving equipment can lead to project delays.
- Design Issues: Changing the scope of work can create design challenges that must be addressed prior to the progression of the project. This can impact more than one trade, and lead to cost and time increases.
- Legal Considerations: If the proper steps are not taken by the required parties, a change order could expose a company to potential disputes or legal issues.
Can a Change Order Result in a Dispute?
Change order disputes are a common occurrence in the construction industry. The change order process generally begins with the owner, general contractor, or subcontractor requesting changes to the project’s scope of work, schedule, or contract.
If all parties agree to the request, a written change order is created, and authorization is provided to continue with the agreed-upon work.
Problems can occur when the contractor or subcontractor proceeds with changes to the scope of work, schedule, or contract without first securing authorization from the appropriate parties. Lack of authorization can result in disputes and the change order can become the subject of litigation.
When disputes occur due to a change order, it is typically the result of a disagreement in price expectations. Factors such as unforeseen project complexities, material cost fluctuations, and differing interpretations of contractual terms can exacerbate these disputes.
Resolving pricing discrepancies in change orders requires meticulous documentation, clear communication, and sometimes legal intervention to ensure equitable outcomes for all parties involved.
Unresolved, a contractor or subcontractor may threaten to suspend work or risk waiving their ability to collect payment due to not following the terms of the contract.
In some instances, a contractor or subcontractor may be terminated from the project for failure to complete the work as agreed upon. These types of repercussions can result in project delays, cost overruns, and potential litigation.
When Do Change Orders Result in Litigation?
The need for a litigation attorney may arise when disagreements or disputes occur. Some common reasons for change order disputes include:
1. Customer Requests a Verbal Change Order
Change orders in construction are not always formal documents. Instead, a change order can occur whenever the original contract is altered by increasing, decreasing, eliminating, or modifying certain aspects of the contracted work. In some instances, this may be a verbal request to make changes.
2. Customer Disputes Cost Increases
Contractors may encounter situations in which they need to perform additional work or purchase extra materials to complete a project. If these changes are not formally authorized by the client, the client may refuse to pay for the unexpected cost increase.
3. Contractor Disagrees with Changes to Schedules or Timelines
For a variety of reasons, a customer may attempt to speed up the project timeline or complete aspects of the project before the agreed-upon deadline. When this situation occurs, a contractor may not agree with the request as it may create unrealistic expectations, interrupt other projects, or create disruptions in multiple trades.
During large-scale construction projects, a single setback can result in a domino effect that leads to cost overrun, significant delays, and serious legal ramifications. Understanding how to navigate project changes can help prevent project disruptions, disputes and claims.
Trust KPPB LAW for Your Transactional and Litigation Needs
When change orders cause project delays or disputes, it is important to speak with an experienced litigation attorney as soon as possible about how to proceed.
The experienced construction litigation attorneys at KPPB LAW have experience with construction law and can help you explore appropriate legal strategies. Contact KPPB LAW for help navigating complex project changes.