Tuesday, March 23, 2010

Change Orders vs. Construction Change Directives

Change Orders vs. Construction Change Directives
Most of us are familiar with change orders. (AIA A201-207. Article 7.1-7.2) They allow the project team to adjust the deadline for substantial completion and/or the contract sum due to changes in the scope of work for construction. Change Orders can be the result of a number of different actions:
  • The contractor can send an RFI which results in the architect realizing that he did not detail out a specific portion of the project.
  • The civil contractor may find unsuitable soils while digging the foundations causing the need for increased shoring or a redesign of the foundation system.
  • Materials may not be available causing the project team to select a more/less expensive material with a longer lead-time.
By definition, change orders must be signed by the owner, architect and contractor signifying that everyone is in agreement with the changes. While, many architects and contractors have customized and proprietary forms, the AIA has produced the G701form as a standard template. You can see an example by clicking here or here. A simple Google search will also yield numerous results of completed forms. Teams often have a lot of flexibility with change order forms through the use of Exhibits. Team members can attach any prevalent information to the change order in order to convey the full extent of changes being made to the project.
I will begin my discussion of Construction Change Directives (CCD) with a confession: until I began studying for the ARE's, I did not know what a CCD was. I had never used one before on any of my projects. Change Orders only. (I guess I had also skipped Article 7.3 of the A201.) Typically, CCDs are used when there is no agreement on the necessary changes to schedule or budget. The owner and architect sign the CCD and the contractor is required to perform the work with the understanding that the team will figure out the issues later. If the owner and contractor cannot agree, the architect typically renders a decision on the amount that should be rewarded for the change in the work (AIA A201-2007. Article 7.3.6)
While this may help a project that is rushing to meet a deadline, I feel that it is irresponsible because it delays the decision making requirement and passes the buck. Here's a scenario: once the work has been performed, the owner will undoubtedly accuse the contractor of inflated pricing and the contractor will make threats of filing liens all while tempers begin to get thin. While this is an ugly scenario, it can show what can happen if decisions are postponed. In fact, many publicly funded projects do not allow CCDs to be used. The AIA publishes the G714 which is a standard form for Construction Change Directives. A template can be found here

As an Owner, you should work through the headache of determining appropriate costs. 
As a Contractor, you need to insist that the team work to establish costs. 
As an Architect, you need to be the peace mediator.