19.6 Change Orders, Construction Change Directives & Instrument Comparison

Change Orders (AIA Document G701)

When a change in the work impacts the project scope, cost, or timeline, the standard instrument for modifying the contract is AIA Document G701™ (Change Order). AIA A201 Section 7.2.1 defines a Change Order as a written instrument prepared by the architect and signed by the Owner, Architect, and Contractor.

The Tripartite Agreement Rule

A Change Order is a consensual, tripartite contract amendment. It requires the agreement and signatures of all three primary project participants:

1. The Owner: Authorizes the expenditure of capital and/or schedule alteration.
2. The Contractor: Agrees to perform the modified work for the agreed cost and time adjustments.
3. The Architect: Certifies that the change is consistent with the design concept, verifies that proposed unit costs or labor rates are fair and reasonable, and coordinates documentation.

┌────────────────────────────────────────────────────────────────────────┐
│                     THE CHANGE ORDER TRIAD                             │
│                       (AIA Document G701)                              │
├────────────────────────────────────────────────────────────────────────┤
│ Complete mutual agreement on ALL THREE components is legally required: │
│                                                                        │
│           1. The CHANGE IN THE WORK (Scope Definition)                 │
│                             ▲                                          │
│                            ╱ ╲                                         │
│                           ╱   ╲                                        │
│                          ▼     ▼                                       │
│ 2. ADJUSTMENT IN CONTRACT SUM  3. ADJUSTMENT IN CONTRACT TIME          │
│    (Agreed Dollar Amount)         (Agreed Number of Calendar Days)     │
└────────────────────────────────────────────────────────────────────────┘

The Change Order Processing Lifecycle

1. Proposal Request (AIA Document G709™): The architect issues a formal Proposal Request (PR) or Bulletin to the contractor, describing the contemplated scope change with accompanying sketches. The PR is not an instruction to stop work or execute changes; it is a request for a detailed cost and schedule quotation.
2. Contractor's Change Proposal: The contractor compiles an itemized cost estimate from subcontractors and suppliers, detailing direct labor hours, wage rates, material quantities, equipment rental, taxes, insurance, and allowable contractor overhead and profit markup.
3. Architectural Evaluation: The architect evaluates the contractor's quotation against independent cost estimates, verifies that overhead and profit markups comply with contractual caps, and advises the owner.
4. Execution of G701: Upon owner approval, the architect prepares AIA Document G701, detailing the original Contract Sum, net change by previous Change Orders, Contract Sum prior to this Change Order, sum adjustment, new Contract Sum, and new Substantial Completion date. All three parties execute the document.

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Construction Change Directives (AIA Document G714)

In fast-track construction or complex projects, situations frequently arise where work must proceed immediately to maintain the critical-path schedule, but the owner and contractor cannot agree on the price or time adjustment. Alternatively, emergency conditions (such as encountering unanticipated buried bedrock or contaminated soil) may require immediate action before an itemized cost proposal can be prepared.

To resolve this dilemma and prevent project paralysis, AIA A201 Section 7.3 provides the Construction Change Directive (CCD), documented on AIA Document G714™.

Legal Nature & Signatures of a CCD

Under AIA A201 Section 7.3.1, a Construction Change Directive is a written order prepared by the architect and signed by the Owner and Architect only (a bilateral instrument). It bypasses the contractor's signature.

Contractor's Mandatory Duty to Proceed (A201 Section 7.3.5)

Upon receipt of a Construction Change Directive signed by the owner and architect, the contractor MUST promptly proceed with the change in the work. The contractor has no contractual right to halt operations, delay construction, or stage a work stoppage pending price negotiation. Refusal to proceed constitutes a material breach of contract.

Contractor Agreement with CCD (A201 Section 7.3.6)

If the CCD includes a proposed basis for adjusting the Contract Sum and Contract Time, and the contractor agrees with that proposal, the contractor signs the CCD. Under Section 7.3.6, such agreement becomes effective immediately as a Change Order, formally amending the Contract Sum and Contract Time.

Determining Cost under A201 Section 7.3.4 (Disputed or Unknown Costs)

If the contractor does not agree with the proposed adjustment or if no method was agreed upon in advance, AIA A201 Section 7.3.4 dictates that the cost adjustment shall be determined by the architect on the basis of actual reasonable expenditures and savings:

┌────────────────────────────────────────────────────────────────────────┐
│               ALLOWABLE DIRECT COSTS UNDER A201 § 7.3.4                │
├────────────────────────────────────────────────────────────────────────┤
│ 1. LABOR: Hourly wages, payroll taxes, fringe benefits, workers' comp. │
│ 2. MATERIALS: Actual cost of materials, supplies, equipment, freight.  │
│ 3. EQUIPMENT RENTAL: Rental cost of machinery and hand tools.          │
│ 4. INSURANCE & BONDS: Premiums for additional bonds and liability.    │
│ 5. FIELD SUPERVISION: Additional job site supervisory personnel costs  │
│    directly attributable to the change.                                │
│ 6. OVERHEAD & PROFIT: Standard contractor markup as defined in contract│
└────────────────────────────────────────────────────────────────────────┘

The contractor must submit detailed, itemized daily records—certified payroll slips, material invoices, equipment rental receipts, and subcontractor billings—to document actual expenditures.

Interim Payment Certification under a CCD (A201 Section 7.3.9)

A common ARE 5.0 scenario tests how the contractor gets paid while a CCD cost dispute is being resolved. Under AIA A201 Section 7.3.9:

"Pending final determination of the total cost of a Construction Change Directive to the Owner, the Contractor may request payment for Work completed under the Construction Change Directive in Applications for Payment. The Architect will make an interim determination for purposes of monthly certification for payment for those costs and certify for payment the amount that the Architect determines, in the Architect's professional judgment, to be reasonably justified."

The architect certifies undisputed amounts on interim pay applications (AIA G702), ensuring the contractor's cash flow is maintained while disputed balance items are adjudicated through claims and dispute resolution.

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Comparison of Contract Administration Instruments