5.3 Change Orders & Modifications

The Change Order Process

Quick Answer: A change order is a written, signed, priced modification to the contract that adjusts the scope, price, or schedule. Arizona contractors should never proceed with extra work without a signed change order.

A change order is the formal mechanism for modifying a construction contract after it is signed. A proper change order should be:

1. In writing — A written document avoids the evidentiary problems of oral modifications
2. Signed by both parties — The owner (or architect on the owner's behalf) and the contractor must both sign; for subcontracted work, the subcontractor signs as well
3. Priced — The change order must state the cost adjustment (additive or deductive) and any schedule impact
4. Dated — The date establishes when the modified work is authorized and when schedule impact begins to run

Standard Change Order Steps

1. Identify the need — The owner, architect, contractor, or code official identifies a required change
2. Document the change — Describe the added, deleted, or modified work in writing
3. Price the change — The contractor prepares a cost proposal including labor, materials, equipment, subcontractor costs, and overhead/profit
4. Negotiate and sign — Both parties agree on price and schedule impact; both sign the change order
5. Perform the work — The contractor performs only after the signed change order is issued (or under a written authorization to proceed pending final pricing, if the contract allows)
6. Update the schedule and budget — The change order's cost and time adjustments are reflected in the project's Critical Path Method (CPM) schedule and pay applications

Oral Change Orders and Risk

Oral change orders — where the owner tells the contractor to do extra work without a signed document — are not automatically invalid in Arizona. If the contractor performs the work and the owner accepts it, the contractor may be able to recover under quantum meruit or an implied-contract theory. But oral changes create severe risks:

• Proof problems — The contractor must prove the owner authorized the work and agreed to pay for it
• Scope disputes — Without a written description, the parties may disagree on what was included
• Price disputes — An oral "we'll figure out the price later" leaves the contractor with weak leverage
• Schedule disruption — Undocumented changes break the CPM schedule's integrity

Quick Answer: Oral change orders are not forbidden by Arizona law, but they are hard to prove and expose the contractor to payment and scope disputes. Always confirm extra work in writing.

Arizona Notice Requirements

Arizona does not impose a single statutory change-order notice rule on private construction contracts, but the underlying contract often does. AIA-style A201 General Conditions require the contractor to give written notice of a claim for additional cost or time within a defined period (commonly 14 or 21 days) after the contractor recognizes the change. Missing the contract's notice deadline can bar the claim.

For projects involving Arizona's mechanics' lien framework (A.R.S. Title 33, Chapter 1), undocumented changes can weaken lien enforcement because the lien amount must be tied to the labor and materials actually furnished under the contract as modified.

Impact on Schedule and Price

A change order affects two project systems simultaneously:

• Price — The contract sum is adjusted up or down; progress payments must reflect the new total
• Schedule — The change may add work to the critical path, consuming float or extending the completion date

When a change consumes float on non-critical activities, the contractor may not be entitled to a time extension but has a stronger delay-impact claim if the float was owner-reserved. When a change adds work to the critical path, the contractor should request a corresponding extension of the contract time in the change order itself.

Constructive Changes

A constructive change occurs when the owner's conduct — not a formal change order — causes the contractor to perform extra work or perform work differently from the contract. Examples include:

• The owner's representative gives oral directions that differ from the plans
• Defective owner-furnished plans force the contractor to rework
• The owner fails to provide site access on schedule
• A code official requires work beyond the plan-approved scope

Constructive changes are harder to prove than formal change orders. The contractor must show that the owner's conduct was the cause and that the extra work was reasonable.

Claim Documentation

To preserve a change-order or constructive-change claim, the contractor should document contemporaneously:

1. Written notice — A letter or email to the owner or architect identifying the change and its anticipated cost and schedule impact, sent within the contract's notice deadline
2. Cost records — Labor time records, material invoices, equipment logs, and subcontractor invoices tied to the change
3. Schedule impact — A fragnet or schedule update showing how the change affects the critical path
4. Correspondence — Emails, meeting minutes, and field notes showing authorization and direction
5. Photographs — Visual evidence of conditions before, during, and after the changed work

Proper documentation is the difference between a paid change order and a denied claim. Arizona contractors should treat every change — even small ones — with the same documentation discipline.