Change orders or Pocket Change?
Written by Mike Frost
Understanding CHANGE ORDERS, sometimes called CHANGE REQUESTS or ADDITIONAL WORK ORDERS is not difficult and is a must for any homeowner contemplating a remodeling project. Not realizing how Change Orders work, especially if they are not used, can affect your pocket change in a very bad way.
Letâ€™s start with the basics. Every project should have a contract and every contract should spell out exactly what is to be done, usually called the Scope of Work. Included in the contractâ€™s Terms and Conditions should be sections that describe what it means to deviate from the Scope of Work, what Change Orders are, who is authorized to sign them, and a sample copy of the Change Order form should be attached to the contract.
At the beginning of the project, all agreements are in and everyone understands each other. The unknowns are not yet known and the normal has not been tested. As the project progresses, the visible changes may prompt you to desire a change in the way things were originally drawn or specified. Budgetary changes, availability of materials chosen for fit and finish, and even input from others outside of the project may dictate a deviation from the Scope of Work. Also, not every possible condition that may arise during construction could have been foreseen. Hidden structural damage, mold, improper methods used in previous renovations, unsafe conditions, and any number of other situations may present themselves during construction. No matter what the issue or what the reason, when a deviation from the Scope occurs or unknown construction conditions happen, they must be dealt with promptly and correctly. Remember, though, that not all Change Orders mean an increase in costs.
First off, you as a homeowner should only deal with the contractor or his designated representative as specified in the contract. When either party requests a change of any type, this should be in writing using the form provided by the contractor and signed by the appropriate authorized people. Only then will the contractor proceed with the changes. This form should list the desired or necessary changes, cost for these changes, how long it will take to accomplish them, and whether this time will impact the duration of the project and by how much. Up-front payments may be required or a timetable for payments may be established. Some record of the impact these cost changes have on the overall cost of the project should also be included. An accounting of all cumulative changes and their impact of the overall costs enable you to see at a glance how far over or under the original budget you are at any given time.
What happens if you donâ€™t follow these procedures as spelled out in the contract? Well, letâ€™s say you ask the electrical subcontractor if it is possible to add an outlet in a specific location. He says itâ€™s no problem and you say great and walk away. Electrician installs the extra outlet and adds the extra cost on to his bill to the contractor. Contractor refuses to pay him as a Change Order was not completed and also the electrician was not authorized to sign one even if a Change Order is produced. Electrician puts a lien on your house. You lose. Contractor is within his rights, though, to pay the electrician and present you with a bill at the end of the project, a bill you are obligated to pay. One or two of these small bills may not be a problem but they add up over time on a large project. Another scenario occurs when you discuss several changes with the contractor and verbally tell him to proceed. He does the work and presents you with a bill at the end of the project. Without a signed Change Order, you may not be obligated to pay him. No one really wants any of these possibilities to happen so it is best to follow the procedures as directed in the contract. Failure to do so results in misunderstandings and possibly significant additional charges at the end.
Is a Change Order needed for every little change that may take place? Maybe, maybe not but a little common sense goes a long way. If the contractor figures you to be a flake, you can bet he will insist on one for every little change you request as that is the best way for him to protect himself. If you feel the contractor is a bit of a sleaze ball, you also will want to document every change to keep yourself from getting taken. Bottom line, make sure the contract addresses Change orders, use them and only work with reputable and professional contractors.
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