Understanding Construction Change Directives for Subcontractors
The backbone of a construction contract is the scope of work. Once the agreed upon scope of work is defined, most construction contracts address both change orders to the scope of work and work outside of the scope of work.
These provisions are designed to protect (1) the owner from unexpected charges and (2) the contractor from taking a loss on work not originally anticipated in the construction contract. More often than not, unexpected issues on the project are negotiated and reduced to signed change orders. The effect of a mutually signed change order is to modify the original scope of work and, in most cases, change some other terms such as scope of work, contract price, or the timeframe to complete the work.
However, what happens when the owner, general contractor, or subcontractor cannot come to an agreement on how the new circumstances should change the deal? To handle construction disputes on the job, most construction contracts contain procedures for the owner (or the architect) to keep the work moving by issuing a construction change directive (CCD) to the general contractor and selecting a payment option for the extra work.
A valid construction change directive must be in the general scope of your work. In other words, a contractor receiving a constructive change directive should ask themselves: was this a possible change I signed up for when I bid this job? If not, there may be a basis to terminate the contact while retaining contract earnings up to the issuance of the CCD.
Because the other party has changed the deal beyond what anyone could or should expect, it is possible that they have abandoned the contract. A contractor or subcontractor faced with a CCD should read the CCD carefully to ensure that the scope of the work directed is consistent with work they intend to perform. Most construction contracts contain strict clauses that prohibit extra work that is not directed in writing by a general owner or the general contractor. Performing work that is not covered by the CCD could open the contractor up to getting stiffed on all extra work outside the scope of the CCD.
Another important consideration is the adjustment to price or the contract time for completion. Many construction contracts provide strict deadlines for which the contractor must contest the CCD's stated adjustment.
Usually the process for contesting is spelled out in the notice and claims procedures. Failure to follow the notice and claims procedures may leave a contractor stuck with an unfair CCD.
Therefore, it always important to send notices disagreeing with a CCD as soon as one is received or send written questions if the scope of the CCD covers less extra work than you believe you are being asked to do by the owner or general contractor.
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