The Next Generation blog recently raised an interesting question about change orders. You can find the blog here. The blog was in response to an ENR article discussing how some low bidders increase their bid through change orders.
Not surprisingly, Plotnick notes that relationships built on trust are best and may often result in repeat business. But, in new relationships, the owner has concerns about being taken advantage of by the contractor, while the contractor fears that the owner may have skimped on designing the project.
For these new relationships, Plotnick discusses steps that an owner and contractor may take to minimize concerns with change orders. During the design phase, Plotnick recommends a second level of review for significant drawing to minimize unintended conflicts. He also recommends a mock CPM logic plan to ensure constructability. In the field, Plotnick recommends that the owner incorporate a contingency fund to address truly unforeseen conditions, but this fund is only shared with the engineer, not the contractor.
Plotnick also recommends a formal risk analysis before preparing risk shifting language in the contract. And, when you start drafting risk shifting language, make sure you understand the terms and the enforceability of all clauses, including change order pricing clauses.
These are all good points that should be considered to avoid difficulties with change orders. Of course, a relationship based on trust will always win out.
Craig, I’ve always said that it probably doesn’t matter what’s in the written contract if the parties have a good relationship, trust each other and cooperate when problems arise (which they always do). Conversely, the only thing that matters when you don’t have a good relationship is what’s in the written contract. I like your suggestions in this post.