The Mysteries of the Change Order
by Don Leighton-Burwell, AIA/Tenth Times April 1997

Very few things are more misunderstood within the construction phase of a project than the Change Order. According to the American Institute of Architects' (AIA) Handbook of Professional Practice , a Change Order is an "inevitable" part of the construction process arising from changes in the scope of work required by a Contractor, and is usually precipitated by one of the following reasons:

1) The owner may request a design change during construction,
2) The contractor may suggest a design change to facilitate construction,
3) Conditions requiring design changes may arise in the field once construction begins, or
4) It may be necessary to clarify the documents.
In other words, the Change Order is a modification to either the contract sum (cost of construction) and/or the time of completion of the project construction as a result of a change in the scope of work required to complete the project. Changes Orders can add or deduct amounts from the agreed to "contract sum", as well as extend or shorten the construction duration.

Change Orders only occur once the contract for construction has been signed and construction has commenced. Prior to that time, during bidding/negotiation phases of the project, changes may be made to the scope of work by two primary methods: Addenda issued by the Architect, or Value Engineering/Cost Control suggested by the Contractor. Addenda are typically issued by the Architect during bidding to clarify questions that arise as part of that process. The addenda are part of the construction documents, and are incorporated as a binding part of the Construction Contract. Also during the bidding process (especially within a negotiated contract), the Contractor may suggest alternate materials or means of construction to reduce costs to the Owner. If those are acceptable to the Owner and Architect, modifications to the drawings or specifications are issued to reflect those changes and are incorporated within the construction contract.

Once a contract is signed and construction has commenced, minor changes in the work -- changes that are "consistent" with the construction drawings/specifications, within the contract sum (cost), and do not extend the construction time -- may be ordered by the Architect. These are written changes that are binding on both the Owner and the Contractor.

If a more substantial change is required during construction, a Change Order is required to properly reflect the change in the scope of the work. Usually, this process is initiated by a Proposal Request (from the Architect to the Contractor) to obtain information on how the proposed change will affect the contract sum or construction timeline. If the information from the Contractor is found acceptable to the Owner and Architect, a Change Order is issued that may amend the drawings and/or specifications and becomes part of the revised Construction Contract.

A responsible Contractor will initiate as few Change Order requests as possible. If the Architect has thoroughly and conscientiously produced the construction documents, this will also minimize that need for excessive Change Orders. It is to the Owner's benefit to have "solidly" considered the design and material choices during the design/documentation phases to avoid costly "changes of mind" during construction. Remodels often have more Change Orders due to the implicit "unknowns" that are inherent in this type of construction.

How can you minimize Change Orders? Hire a highly reputable architect and trust his/her judgement as to the level of service that will best serve your project. Avoid "abbreviated" services in an attempt to save design costs; if you spend the money now to secure "full services" from your architect, you will likely save money in the long run. Consider "negotiating" your construction contract with one contractor who comes highly recommended by others that have done projects of similar scope. The contractor will still bid his/her sub-contracts, but is not having to "under-cut" his/her own profit margin to get the job. In competitive bidding among several general contractors, you are ensured only the "low" bid and a potentially "adversarial" relationship with your Contractor. No one likes to work for less than the service is worth, so if a contractor has reduced his/her profit below what is reasonable to secure the job, then it is "reasonable" to assume that they will need to make up the difference through a series of costly Change Orders. It is to your advantage to pay your Contractor fairly for their services and create a context of "partnership" in working toward your "collective" goal. Lastly, you can greatly reduce the possibility of "owner-generated" construction changes if you immerse yourself in the design process and thoughtfully make decisions that you can live with. It will serve you (and your budget) to set aside a percentage of the construction cost as a "contingency fund" for unforeseen items that may generate Change Orders.