5.4 Change Orders & Change Directives

Managing Changes in Construction

No matter how perfect the design or how thorough the pre-construction planning, changes during a construction project are inevitable. Unforeseen site conditions, Owner-requested additions, design errors, or regulatory changes will necessitate modifications to the original contract. Managing these changes effectively is one of the Construction Manager's most critical, and often most adversarial, responsibilities.

Contract documents establish formal procedures for executing changes. Failing to follow these procedures can result in the Contractor performing work without getting paid, or the Owner paying for unauthorized scope.

The Change Order (CO)

A Change Order (CO) is a formal, written modification to the contract. Crucially, a standard Change Order requires mutual agreement. It must be signed by the Owner, the Architect (typically), and the Contractor.

A fully executed Change Order establishes an agreement on three specific elements:

1. The Scope of the Change: Exactly what work is being added, deleted, or modified.
2. The Adjustment to the Contract Sum: How much money is being added to or deducted from the contract.
3. The Adjustment to the Contract Time: How many days are being added to the schedule.

Once executed, a Change Order represents a final settlement of all claims (direct and indirect) related to that specific change.

The Construction Change Directive (CCD)

What happens when a critical change must happen immediately to prevent stopping the project, but the Owner and Contractor cannot agree on the cost or time impact? The contract provides a powerful tool for this scenario: the Construction Change Directive (CCD) (sometimes called a Work Directive Change).

A CCD is a unilateral order signed only by the Owner and the Architect, directing the Contractor to perform the changed work immediately.

• The Obligation: The Contractor is contractually obligated to proceed with the work described in the CCD promptly, even if they disagree with the proposed price or schedule adjustment.
• Payment Method: Because the final price isn't agreed upon, CCD work is typically tracked and paid on a "Time and Materials" (T&M) or "Force Account" basis. The Contractor must keep meticulous daily records of all labor hours, equipment use, and materials consumed, signed daily by the CM's field inspector.
• Resolution: Eventually, once the actual costs are known and agreed upon, the CCD is converted into a standard Change Order.

Constructive Changes

Not all changes are formally directed. A Constructive Change occurs when the Owner's, Architect's, or CM's actions (or inactions) effectively force the Contractor to perform work outside the original scope, even though no formal change was issued.

Examples of constructive changes include:

• Defective Plans and Specs: The Contractor must expend extra effort to work around errors in the design.
• Interference or Hindrance: The Owner denies the Contractor access to the site as promised in the schedule.
• Overzealous Inspection: An inspector demands a standard of quality that exceeds what is required by the specifications.

To successfully claim compensation for a constructive change, the Contractor must generally prove that the work was outside the contract scope, that the Owner ordered or caused the work (by action or inaction), and crucially, the Contractor must provide formal written notice to the Owner within the time limits specified in the contract before proceeding with the disputed work.

The Change Process Workflow

The CM manages the lifecycle of a change to maintain tight control over the project budget.

1. Identification and Potential Change Order (PCO): A change is identified (via an RFI response, field condition, or Owner request). The CM logs it as a PCO to track the potential financial exposure before any work is authorized.
2. Request for Proposal (RFP) / Proposal Request (PR): The Architect issues a formal description of the proposed change to the Contractor, asking for a price and schedule impact.
3. Contractor's Proposal (Change Order Request - COR): The Contractor submits their pricing. The CM's job here is critical: they must rigorously scrutinize the COR.
   • Is the work truly out of scope?
   • Are the labor rates correct?
   • Are the material quantities accurate?
   • Are the overhead and profit markups within the contractual limits (e.g., 10% overhead, 5% profit)?
4. Negotiation and Execution: The CM negotiates the final cost and time impact with the Contractor. Once agreed, the formal Change Order is drafted, signed by all parties, and added to the Contractor's Schedule of Values so they can bill for the work.

By demanding detailed, itemized breakdowns for all changes and rigorously enforcing the contract's notice and markup provisions, the CM prevents cost escalation and protects the Owner's contingency funds.