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Navigating change orders in construction projects or large-scale undertakings requires careful management to ensure that all changes and associated costs are accurately recorded and agreed upon by all parties involved. A robust change order process, where all changes are carefully documented and approved by all stakeholders, is central to reducing the potential for disputes. Despite efforts to maintain clarity and consensus, disagreements can still arise that cast a shadow over project schedules and budgets. With this in mind, taking strategic steps to prevent these disputes before they escalate is crucial. This article provides five important tips to help you avoid change order disputes, ensure smoother project execution, and maintain a harmonious relationship between all parties involved.
1. Define the scope, terms, and process in advance
Before starting a construction project, it is imperative to negotiate and agree on a realistic and fair change order clause that reflects the actual scope of work and takes into account potential changes. Relying on outdated or generic contract templates can lead to disputes, especially when changes come under pressure or require immediate decisions across time zones, burdening industry representatives with unconfirmed financial decisions. To avoid such problems, all parties—contractors, subcontractors, and owners—must work together to define the scope and terms of the project, including specifications, schedules, payment methods, and requesting, approving, and documenting change orders. Including a clear clause in the contract that describes the process for making changes based on the reality of the project’s requirements can significantly reduce the likelihood of misunderstandings, ambiguities, and later disputes, ensuring a smoother project flow and more precise communication channels.
2. Don’t rely on handshake agreements
In the construction industry, relying on verbal agreements or “handshake deals” for change orders can lead to significant legal and financial risks. While such informal agreements might seem sufficient, especially in long-standing relationships, they lack the legal solidity of written contracts and may not be upheld in court. To mitigate the risk of disputes, it is crucial to pause any ongoing work to review and understand the contract’s stipulations for change orders, including requirements for timing, format, content, and approval processes. Formalizing any changes in writing ensures that all parties clearly understand the scope, additional costs, and time extensions involved. This documentation should include comprehensive details of the change, agreed-upon compensation for extra work, and any adjustments to the project’s timeline to accommodate the new work. Finalizing this process with the signatures of all involved parties before proceeding with the modified work plan is essential. This approach provides a solid foundation for fair compensation, timeline adjustments, and safeguards against potential disputes, ensuring smooth project completion.
3. Leverage Digital Documentation with Bauwise
Effective documentation is crucial for ensuring compliance and maintaining project quality. A streamlined record-keeping system that offers easy access to the latest construction documents is vital. By adopting Bauwise’s construction change order software, contractors can digitize and simplify the change order process. This cloud-based platform not only automates the documentation of change orders but also secures them in one accessible location. With Bauwise, managing the intricacies of construction change orders becomes more efficient, ensuring all project stakeholders have immediate access to vital information and updates.
4. Communicate with relevant parties
Effective communication and collaboration are fundamental in preventing disputes and claims related to change orders in construction projects. Establishing open lines of communication among all stakeholders—owners, contractors, designers, subcontractors, and suppliers—is essential. This can be achieved through regular meetings, emails, phone calls, and reports to keep everyone updated on the project’s status, progress, and any issues that arise. Creating a culture of teamwork, where problems are collectively addressed and opportunities are identified, contributes to the project’s success. Scheduled stakeholder meetings at key project phases ensure that all team members are aligned, helping to avoid unexpected surprises, delays, and conflicts. This approach not only streamlines project execution but also fosters an environment where quality results are delivered through mutual cooperation.
5. Evaluate and negotiate change orders
Evaluating and negotiating each request carefully is critical to minimize disputes and claims arising from change orders. Thoroughly investigate each change order’s need, feasibility, impact, and rationale, ensuring that cost and time estimates are accurate and reasonable. Engage in discussions with the owner and contractor or designer to clarify the terms of the change order to reach an agreement that benefits all parties. This careful evaluation and negotiation process is critical to avoiding problems such as overcharging, underpricing, and disagreements.
Written by
Taavi Kaiv
Taavi Kaiv is a construction specialist with over ten years of experience in the construction industry. Taavi is an accomplished construction project manager with many successful projects that have been completed under his guidance. Taavi holds a master’s degree in construction management from the Tallinn University of Technology. View profile
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