The Construction Change Order Manifesto

The Construction Change Order Manifesto

 

We can all agree the construction change order process is very slow. When a change request comes in from an owner or general contractor, most times contractors start work and incur the costs and don’t receive revenue until much later during the project or sometimes not at all.

How do we fix this? It starts with a review of your contract. This is the Construction Change Order Manifesto.

Boy wearing hard hat looking at blueprints

As a contractor, I should…

 

  • Check my contract provisions for the change request process including authorization and specific terms about timelines for responses to change requests.

If there is nothing in the contract about change requests, I should…

  • Set a goal to memorialize a process including timelines for response at the start of a project. The wording will include what all parties will work towards. This will get memorialized in minutes of meeting or correspondence.

Almost all construction contracts in Canada state that the contractor must have a signed change order before billing and commencing work. It’s extremely rare to bill for change order work prior to issuance of the change order.

 

 

As a contractor, I should…

 

  • Provide written notice upon the change arising.

In the written notice, I should…

  • Explain why the change was not part of my original contractual scope.
  • Refer to drawings, specifications or contract wordings. This is where clear scope is key.
  • Promptly provide detailed quotes for the work.

 

 

4 important items to include in the quote process

 

  1. An expiry date on all quotations.
  2. Use a standard corporate form and log to follow up if you hear nothing back.
  3. Include any extension of time required, if applicable.
  4. An agreement when the work is required and confirmation to proceed before you execute or warn parties when site conditions are changing and authority to proceed was not received.

 

 

As a contractor, I should…

 

  • Follow up on quotes before work commences in affected areas.
  • Follow up in monthly meetings, or during two-week look-ahead schedule meetings.
  • Respond promptly in writing to any comments received.
  • Include a log of pending items as an attachment to meeting minutes.
  • Raise past-due responses in monthly meetings or call a special meeting if a large number are outstanding or if it is impacting work progress.
  • Note any long-term lead items that will impact execution of work, such as delivery of materials after shop drawing approval or fabrication time.
  • Suggest to my subcontractors and suppliers they follow the same good practices with us.

The quote should refer to any change in contract time. If there is a disagreement about the changes, I will…

  • Include written agreement to reserve rights to claim extension of time later.

 

 

As a contractor, I should…

 

  • Keep track on the status of all changes by project.
  • Add any change order as an item on the agenda for site meetings or send the change order items to the architect or general contractor so that they can cover them during meetings with the owners.
  • Tie the change orders to a schedule, if possible, to understand when they are mission-critical to project execution

 

 

Serving Notice

 

If the contractual work cannot continue due to outstanding answers on changes, I should…

  • Consider serving notice that work will continue as per the contract without change.

Additional costs do not go on account. I should…

  • Document. Document.
  • Serve written notice if work is stopped or if someone directed work to stop in a particular area/room and document same in writing and take photos/videos of site conditions.
  • Ensure to write to parties if work cannot proceed due to lack of clarity.

In the notice, I should…

  • State specifically the workforce (trade, staff member/class of trade) impacted and the room or area of impact and reference the earlier change quotation and follow ups.
  • I will attempt to mitigate the loss of time or productivity but memorialize associated costs.

If the notice is not approved or denied, I should…

  • Consider pursuing and promptly follow the dispute resolution mechanism in my contract, especially if forced to work for no compensation.
  • Reserve my rights and state I am doing the work under protest.
  • Suggest that someone keep track of materials, quantities and time spent executing the disputed work. This will be important for future proceedings.
  • Consider holding off on completion of the work, or stop work altogether with regards to the proposed change order only after consideration of contract language and perhaps consultation with construction lawyer as could have significant impact.
  • Or, send a follow up notice that estimated costs have increased since the work status has changed since the change request has been priced.

Pictures are worth a thousand words but there should be a “what, where, when and taken by whom” description for them.

 

 

Disputes

 

Almost all contracts state that you must complete the work when there are disputes and the consultant has ordered same. This includes arguments about whether something is considered a change or not.  I should…

  • Reserve rights in writing about each issue and proceed.
  • Refer to the contract schedule provisions first.
  • Always talk with my construction lawyer, if necessary.
  • Keep track of the change work in schedule updates. The original planned schedule versus the actual schedule, aka “as built schedule” will be key.
  • Continue tracking through any disputes.

Don’t forget about asking for additional time to complete the contract.  Be careful when the owner’s change order forms ask you to waive rights including extensions of time. I should…

  • Always reserve rights, if possible.

It goes without saying, but if someone gives you verbal direction in the field, and they will not send direction in writing, I should…

  • As soon as possible confirm in writing to the individual whom directed work from the contracting party, especially if there is a change in the scope of work.
  • Promptly create a quote and log it.

Know who, what, when and where someone told you something if it is not already in writing.  For example, “On the phone, on this date, at this time and location, I was talking with this individual from the party you have contracted.”  Do not take direction from the consultant before confirming with your contracting party.  Without this, it is less convincing.

 

 

Keeping Records

 

It’s important in court and to a surety company that you keep timely records in a manner described in this article because if ever a dispute arises, your surety (or the surety you are claiming against) or the judge in future litigation or during a mediation or during an adjudication will More likely give you  credit for it.

A contractor should avoid the buildup of work-in-progress on projects due to unapproved change orders.  The backlog of unapproved change orders can lead to Work in Process or Unbillable costs on a contractor client’s balance sheet.  If the amount is large and therefore potentially not collectible (or without a good story), your Surety Underwriter or Bank might apply a reserve allowance which therefore might impact Tangible Net Worth and Working Capital. Both items effect the surety’s assessment of capacity or effect bank line covenants.

 

Contact the author:

Victor Bandiera | Vice President, Construction Services

416.607.2123

Doing it Right

Doing it Right

Many of you will have heard the news that following an incredibly successful and impactful career, including nearly 13 years of building Trisura, our very own John Garner will be retiring on June 30.

Now, knowing John as well as I do, I can virtually guarantee you that this is not the end, but rather the start of his next beginning.  I have no idea what that might entail, but am pretty sure neither does he right now, but more on that later.

John’s retirement has made me think about a lot of things.  How do you become successful in business?  How do you measure career success?  What really, truly matters in the end when one is ready to call it a career?   Now, I am not going to get all philosophical on you and talk about achieving success in life, although if I did, I could by using John as a shining example.   Rather, I would like to use John and his approach to work as a shining example for all those folks currently on their career paths, trying to figure out how to achieve success in business.  Gen’s X, Y, Z and Alpha take note.

 

  • Be an expert. This word describes John to a tee.  John is an absolute expert in finance and accounting for insurance companies (brokers too).  He is also an expert in regulatory and industry issues surrounding the insurance industry.  John’s quest for continuous improvement and knowledge means that if John doesn’t know something, you can always count on him to find out the answer and fast.
  • Love what you do. John has a life-long passion for the industry.  If you ask him, I bet you he would say he hasn’t really worked a day in his life!  I also bet he would suggest that if you don’t love what you do then keep on looking.
  • Put in effort and work hard. Much easier to do if you love what you do!  If you look up the word “workhorse” in Webster’s, you will find John’s picture.  All kidding aside, John has been absolutely tireless in his approach to work and has always done more than his fair share.  He has always set the bar high.

So there you have it.  Be an expert, find something you love to do, and then put in the effort and work hard.  Nice and simple.  Do all three and I think you are well on your way to achieving career success.  I do however believe there is one more thing, and if you do this well in addition to the other three, your career success is a virtual certainty.

I am reminded of Maya Angelou’s quote when I think of John.  “People will forget what you said, people will forget what you did, but people will never forget how you made them feel”.

John is a true gentleman.  He has a kind and generous soul.  He does not possess a mean bone in his body.  He is an absolute gem of a human being.  I don’t know of anyone who doesn’t genuinely like him.

And he has always made us feel great.

Congratulations John and well done.  Thanks for showing us how to do it right.  Thank you for everything.  And the very best of luck in the next chapter of your success, whatever that may be.

 

Trisura House Party Gallery

Trisura House Party Gallery

Ringing in the Summer with Trisura

The Trisura House Party took place on May 30th, 2018, and was a lot of fun for everyone who attended. Renting out the Addison’s Residence for a night made for a less than typical industry cocktail mixer. What better way to ring in the summer with a backyard BBQ, a refreshing beverage in hand and some great conversation with some great people? We couldn’t have pictured it any better. It was great to catch up with all those who attended. Check out some snapshots of the evening below. See you next time!