Change Orders

By Morgan King

I. The Importance of the Scope of Work Most small subcontractors understand that there is little room for negotiation when it comes to the terms of a construction contract. Arbitration clauses, indemnity provisions and even the contract price are often "predetermined" for the Project. This reality makes it imperative that a subcontractor understand the provisions of the contract, even if he cannot change them.
The scope of work defines your responsibility, and therefore, your liability in the event of a dispute. It will govern whether you are entitled to additional funds for a change made during construction. The more general the scope, the less likely you will be able to obtain a change order when the unexpected happens and the less likely you will be entitled to payment for any additional costs. The scope of work can even determine liability for a charge back. Again, the more general the scope, the easier it is to be held responsible for issues that technically fit under your scope's description.
For example, suppose you contract to "install a flat roof on a building in accordance with Exhibit A - The Plans." Then after commencement, the plans are changed to include a vaulted roof. Because this is a significant change, not contemplated in the scope of work, you would be entitled to submission of a change order for the additional cost of the vaulted roof. However, if your scope of work was simply "install a roof to the GC's standards," or "provide all labor and materials necessary to install the roof," you may not be entitled to a change order under the contract. You may also be charged back for any other expenses connected to the roof, even if those expenses were not supposed to be a part of your responsibility on the Project.
It's important to keep in mind that side agreements or communications outside of the written contract may not be enforceable and you should try to make sure your scope of work is as clear as possible, without alienating your GC. A few things you should always clarify:

  • Whether the contract includes Labor only OR Labor and Material. Contracts often include inconsistent language regarding this issue. For example, the "scope" section may say labor only but the form language of the contract states that the "subcontractor is to provide all labor and materials."
  • Who will provide which Equipment? If you need a specific lift to perform a portion of the Project, the contract should include what's needed and who will provide it.
  • Manpower requirements. Contracts often state that the sub must have a particular number of workers on the Project "at all times." What does this mean to the GC? Can you meet that expectation?

II. Failure to Obtain Written Change Orders when Warranted So you are entitled to a change order for a change in scope. What happens if you don't get it in writing? A general contractor will often make changes as the Project progresses. If the changes fall within the original scope of your contract and don't cause increased costs, this may not be a problem. However, failure to obtain a written change order on items outside the original scope, or for changes that increase your cost, can make it very difficult to get paid.
If the work you did was an "Extra" then you might be able to recover.... If the work was "additional," then probably not. Under Texas Law, "additional work" is that required in the performance of your contract and without which, your contract scope could not be completed. This work is governed by the terms in your contract, including the likely requirement that changes be in writing. Failure to obtain a written change order for "additional work" will make recovery of any extra costs unlikely.
"Extra work" is work outside of the scope of your contract and not required in performance of your contract. Generally, work that is considered "Extra" can be recovered because it is work that is not necessarily governed by your written contract with the GC, not governed by any provision that requires written change orders, and may create a separate oral contract.
For example, say a contractor agrees to "provide labor and material necessary to complete all framing work." Upon visiting the site and starting the Project, he finds that the cost for materials and labor has increased and he underbid the job. These would be considered "additional costs" and would not be recoverable unless written change orders had been executed. However, had the GC asked that the contractor provide the drywall labor as well, or dig a trench for the plumbing contractor, those expenses would be recoverable as "extras," even if no written change order had been executed.
As a subcontractor you should always remember that Contracts protect the ones who draft them. However, if you understand the expectations from the beginning, you can generally avoid conflict or at least, prepare and create records to support any potential claim. As morbid as it seems, the best way to prevent litigation is to prepare for it from the outset.

This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, please consult an attorney.