How do you handle disputes and claims related to change orders?

The most important thing you can do as a Construction Management professional is read your contract! It is shocking how many managers have not read the contract documents. It does little good to define scope if no one reads it.

One system I found helpful is to outline not just what is to be done, but what is not included in the SOW that may become a challenge further down in the project. This helps to minimize scope creep and demonstrate your forecasting abilities as well.

Sit down with the contractors prior to bidding to vet the CD's to confirm they fully grasp what they are bidding on and what items need clarification prior to signing a contract.

Sometimes defining the scope comprehensively can be a challenge, especially when 'boiler plate' specs are used that are able to be interpreted and applied to just about any contingency. It is an ongoing challenge in the industry. One very effective way to hedge against this is during the 'discovery' phase of the bidding process, which includes attending the pre-bid prepared, multiple site visits if possible, and utilizing a checklist for relative items requiring an RFI. A thorough examination of the site along with the CD's can help 'define' the scope prior to the contract being awarded while simultaneously clarifying the terms. Beginning a project on this solid footing can help all parties avoid a dispute when a necessary change arises.

Make sure to communicate early. Failure to provide timely notification is a big contributor to disputes. Submit the notice of change early in the process to notify and preserve your rights. Do this before you even finalize the price or time impacts. Then follow up in a timely manner.

As a project manager how can you be prepared to deal effectively when there is a proposed change? One way is by sharing meeting minutes from the weekly on site meeting with the architect. It is in those meetings where many times the project owner is present that you can identify and anticipate possible changes. By having this weekly interaction you are better able to communicate possible changes, clearly explaining the 'why' and 'how' they will be accomplished. This type of 'engaged' project management can help you avoid costly delays that can occur when subcontractors think the project manager is not engaged and their number for the change in their scope reflects it, thus beginning unnecessary negotiations to rein in cost. Stay engaged!

Documentation is the key to success when it comes to negotiating and successfully processing change orders. Hopefully at this level you are utilizing a project management software system that documents and keeps a log of all proposed changes, including those that end up being promoted and added to the contract. If you are at the point in your business where you need to document these types of transactions but are not yet able to invest in a project management system develop your own system for organized documentation utilizing resources like Google Docs, Microsoft Excel, etc. Also, take advantage of email. Some apps allow you to build a schedule and create folders to store documents, while creating a time stamp. Be creative, be consistent!

This is critical to providing support documentation when disputes arise. Also, It helps to create the Form and add it to the Inception documents that are approved at kickoff.

Don't forget that scope creep is one of the biggest risks we face in construction. Know your contract and scope. Track and notify about changes, even if you don't intend to make a claim. It makes it easier to avoid scope creep when those little changes start to add up.

Not always, but often the key metric affected by changes is time. Make sure you are not overlooking how a proposed change will affect the amount of time needed to complete the overall project. Adding complex changes without adding days to the contract length can leave you in a tight spot and possibly responsible for liquidated damages. And since we are discussing the importance of time and not losing it. Make sure you are tracking 'rain days' and documenting them. They can be costly, but if you have them well documented you can make a strong case for being reimbursed for those lost days.

The time to document weather days is when they happen. Don’t be searching your memory and asking the owners rep to do the same months later. Even a simple email saves a multitude of future issues.

Don't forget to take advantage of the resources at your disposal. If you are a project manager working for a General Contractor it is likely that the owner, (if it is a smaller company), or your direct supervisor in a larger company has plenty of experience dealing with changes and can help coach you through the process. If you and your company have the practice of doing a 'post-mortem' on a project once it is closed out, this would be a great opportunity to look at each change that occurred and analyze how they unfolded and what you can improve on going forward. At the forefront of all strategies for success though should always be good communication.

A meaningful way to learn and improve I would say would be tol have a Change Order templates folder, with all the possible outcomes you have encountered described in the title. That speeds up the process of writing the next Change Orders, just keep the draft key areas in red such as [insert client], [insert quantity], etc, and carefully change back to black (or the base color chosen color for change orders) or the base color, as the proper real information is added. At least that's how I do it.

If you are small business, without counsel, never-ever sign a contract without having a lawyer review. It's the best to spend a little money now in lieu of risking a lot of money later. Pro Tip: Subcontractors are held to the language in the master contract. If you are a second tier subcontractor or below, always request copies of the GC and/or master contracts BEFORE signing your contract.

Don't forget that changes can have a monetary impact, a time impact, or both. Don't forget to claim time extensions when they are due, even if you don't think you need them. Don't wait till the end of the project.

One of the biggest contributors to conflicts surrounding change orders, in my experience, is proceeding with the work before the change order has been approved. Clients often push to “just get it done” and then complain about price / time impact afterwards. This puts the construction manager immediately on the defensive. If CO’s are required to be signed before work commences, there may be push back at first, but it sets a tone that will eradicate CO conflicts in the future.

If you have the ability to give your client some change order credits here and there as you are hitting them with new change orders, it helps them feel you are honest and it will help the mental cost sting of the additions of the charges for the added change orders.

Do not allow yourself to accept a Change Directive. Always go through the Contemplated Change Order process which will - when it goes through the proper channels - become a formalized and approved Change Order. Doing it this way avoids any after the fact negotiations. Don’t get sucked into the client or contractor using the scarcity of time tactic. If they weren’t organized to begin with, it’s not your problem. All changes can be scoped, priced, understood and approved in a timely manner where clarity and surety are the end results. P.S. If it were up to me, I would eliminate the Change Directives from the contract. We always do in ours.