Change orders are a common aspect of Florida construction projects, often necessitated by unforeseen circumstances or changes in project plans. For subcontractors seeking additional compensation through a change order, understanding their rights and obligations can mean the difference between success and failure. This article discusses 5 best practices for requesting additional compensation under a change order.
- Review the Subcontract to Determine Your Rights and Obligations
Before initiating a change order request, subcontractors should thoroughly examine the subcontract agreement and any addenda for provisions related to change orders. These documents outline the procedures, requirements, and responsibilities for change orders, including the process for submitting and approving them. Look for contract terms discussing the following points:
- Any specific conditions or events triggering the right to request a change order.
- The procedures for obtaining a valid change order, such as GC approval in writing.
- Any limitations on the timing for requesting a change order.
Understanding these contractual ground rules ensures that subcontractors have a solid basis for their change order requests and helps prevent potential compensation disputes.
- Identify Any Unexpected or Unanticipated Project Conditions
Change orders often stem from unexpected conditions encountered during the construction project. Many subcontracts make allowances for additional compensation under these conditions. Therefore, subcontractors should diligently assess the project conditions and attempt to determine whether any events have occurred that may support their change order request. For example, the following conditions may support a change order request for additional compensation:
- Subsurface obstructions or soil instability.
- Delays or repair work caused by the GC, owner, or other subcontractors.
- Environmental factors resulting in additional costs (e.g., rain prolonging equipment rental contracts).
By identifying and raising these conditions early on, subcontractors maximize their chances of success in obtaining approved change orders.
- Identify Changes in Project Plans or Specifications
Changes in project plans or specifications typically entitle subcontractors to additional compensation under their subcontracts. Therefore, subcontractors seeking a change order would be wise to identify and document any such changes and present them to the GC along with their request for compensation. Examples of changes that could result in additional compensation include:
- Expanded scope of work or quantity of services/materials.
- Design enhancements affecting the quality of finish work or materials.
- Changes necessitated by code compliance or environmental factors.
As with unanticipated conditions, identifying and presenting these causes early on will increase subcontractors’ chances of success when requesting a change order.
- Document the Basis for the Change Order
No matter the cause, proper documentation is crucial to substantiate the basis for a change order. Subcontractors should maintain detailed records, including written descriptions, photographs, and other relevant evidence, to demonstrate the necessity for additional compensation. Key documentation may include:
- Photos or reports evidencing the existence of an unforeseen condition.
- Meeting minutes and correspondence discussing the basis for the change order.
- Impact assessments demonstrating delays caused by weather or other subcontractors.
- Records of increased costs, such as rental costs, resulting from adverse conditions.
Well-documented change order requests enhance credibility, facilitate effective communication with the GC, and strengthen the subcontractor’s position in negotiations or potential disputes.
- Be Prepared to Respond to Rejection
Throughout the change order process, subcontractors should document all communications and negotiations with the GC regarding the proposed changes. It’s essential to maintain a record of discussions, agreements, and any disagreements that arise during the negotiation process.
In the event of a rejected change order, subcontractors should carefully assess their options and potential responses. Depending on the circumstances, actions may include:
- Suspending work affected by the proposed changes until resolution is reached.
- Seeking mediation or dispute resolution mechanisms outlined in the subcontract.
- Involving legal counsel to evaluate the subcontractor’s rights and obligations.
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