The Inside Outside Guys: Change Orders
By Ken Calverley and Chuck Breidenstein
DETROIT, October 13, 2022 ~ You finally found that perfect remodeler for the project you’ve dreamed of for years.
You, your spouse and company personnel went through it together from early design to specification, budgeting and build out.
It was a lot of effort, time and emotional investment that pushed the project to completion and now it is done and done well.
Your builder. Your “Guy.” A friendship has developed during the construction, and you look forward to settling up and moving on. When the final invoice is presented for payment, the world goes quiet.
This amount is a lot more than you figured was left on the original balance.
Your builder explains it succinctly; the additional monies owed are the result of change orders executed during the project at your request.
Remember when you went from ceramic to marble tile in the foyer? A $2,000 upgrade.
That rotted portion of the frame that was uncovered during demolition was an additional $1,800.
And that seemingly simple change from hollow cast metal to solid brushed stainless-steel hardware on the kitchen cabinets was nearly a $1,000 modification.
Your new “friend” has just become a nemesis. He is claiming you owe an additional $10,000 and has the documentation to prove it. Ouch!
The Guys first response to the many emails we receive regarding additional costs is to look at your contract. License law says the builder is required to specify the work to be done and to present the total cost of such work in the contract you sign.
A good contract should have language dealing with different types of potential changes. There are those requested by the owner, changes required by a manufacturer specification change and those that may be mandated by an enforcing authority. You may also see language that addresses unanticipated material cost increases to be “passed on” to the owner.
The contract should include a sample change order form and should also indicate if there are fees associated with changes. Some builders, recognizing the financial impact to the company of modifications during the job, will have a standard flat fee for initiating any upgrades in addition to the actual cost of the change.
In some cases, those fees may be intended to be punitive, or so high that they discourage the owner from making any changes. The contract may also indicate that “monies dedicated to the performance of the original contract may not be otherwise used for changes or modifications to the agreement.”
This is intended to prevent a buyer from coming up short when the job is complete.
That same law also goes on to say that any material changes to the original agreement must be in writing and initialed by all parties to the agreement. Those change orders should not only indicate what additional work and monies are involved but should also clearly show the revised contract total because of the change.
The change order document should “run parallel” to the original agreement; that is, it should not alter or change original terms or conditions other than the specification and money the change order addresses.
In the past, courts have indicated any written change to the contract becomes the effective new date of the contract and this can affect required warranty and other scheduling parameters in the agreement as well.
There are some in the industry that will merely guess at costs in the initial agreement and defer actual specifications to a later date. “Let’s get the job started and worry about product selections later” is the attitude, but it is generally a recipe for problems.
If you don’t specify product, you can’t lock in a budget and money is always the proverbial elephant-in- the-room when it comes to such relationships.
There are also contracts that disallow any specification changes after a certain period of time or job progress other than those mandated by law. The intent is to minimize disruption caused by changes as well as schedule extensions typically associated with them.
Change policy should be clearly defined in the contract in terms of money and time impact on the schedule.
Good contractors will nearly always try to specify and budget 100% of the job prior to start to keep the schedule predictable and to help assure owner satisfaction at job completion. A prime indicator of disputes and lawsuits in construction is a history of many change orders.
Deal with contractors that are hesitant to begin a job until it is fully specified and costed. On time, on budget is truly a key to job satisfaction for all parties.
If you are looking for good contractors, you can find them at InsideOutsideGuys.com.
For housing advice and more, listen to “The Inside Outside Guys” every Saturday and Sunday on 760 WJR, from 10 a.m. to noon, or contact us at InsideOutsideGuys.com.