4.4 Payment Practices, Change Orders & Public Bidding

Payment Practices, Change Orders & Public Bidding

Prompt Payment Practices

Construction runs on a chain of payment obligations: an owner pays a general contractor, who in turn pays subcontractors and material suppliers, who in turn pay their own employees and vendors. When any link in that chain breaks -- most often when a general contractor is slow to pay a subcontractor, even after being paid by the owner -- the consequences cascade through the entire project.

Prompt payment is both a business best practice and a risk-management necessity. A contractor who pays subcontractors and suppliers promptly for completed work:

• Maintains trust and reliability with the trades needed for future projects
• Reduces the likelihood of work slowdowns, walk-offs, or refusal to complete a job
• Substantially reduces the risk that an unpaid subcontractor or supplier will assert a mechanics lien against the property, as discussed in Section 4.3
• Protects the contracting business's reputation, which matters directly to a licensed construction supervisor's ability to win future work

The link between late payment and mechanics liens deserves emphasis: an unpaid subcontractor's most direct and powerful remedy is often to lien the property, and Massachusetts lien deadlines run on a strict clock. A general contractor who is slow to pay is not just risking a strained business relationship -- it is inviting exactly the kind of lien exposure covered in Section 4.3, potentially against a property where the owner has already paid the general contractor in full.

Change Orders

A change order is a written modification to an existing construction contract that changes the scope of work, the price, the timeline, or some combination of the three. Change orders are a normal and expected part of construction -- conditions get uncovered, owners change their minds, materials become unavailable -- but how they are handled separates well-run projects from disputed ones.

Why Change Orders Must Be Documented

A verbal instruction to "just add a window while you're at it" or "go ahead and upgrade the countertops" feels efficient in the moment, but it creates real risk for both parties:

Best Practice for Change Orders

A properly handled change order should, at minimum:

• Be put in writing before the changed work proceeds, or as close to that as practically possible
• Clearly describe the change in scope
• State the price adjustment, whether an increase or decrease
• State any adjustment to the completion timeline
• Be signed or otherwise affirmatively approved by both the owner and the contractor

Requiring documentation is not about distrust -- it protects the contractor's right to be paid for extra work AND protects the consumer from being charged for work they did not actually authorize. This is the same principle underlying the essential-terms discussion in Section 4.2: a written record removes ambiguity before a dispute has the chance to form.

Public Bidding and Procurement

Everything discussed so far in this chapter concerns private construction contracting -- an owner and a contractor negotiating directly. Public construction, meaning building or renovation projects funded and owned by a city, town, or the state, operates under a meaningfully different set of rules.

Massachusetts public construction procurement generally requires competitive bidding for public building projects, rather than a negotiated private contract. This reflects the basic public-policy goal of procurement law: public money must be spent through a fair, transparent, competitive process, not awarded based on a public official's personal relationships or preferences.

Common features of Massachusetts public construction procurement include:

• Sealed/competitive bidding -- contractors submit bids under defined rules and timelines, and the awarding authority selects among qualifying bidders according to statutory criteria rather than private negotiation
• Prevailing wage considerations -- public construction work is commonly subject to prevailing-wage requirements, meaning workers must be paid according to wage rates established for the type of work and location, rather than whatever the contractor and worker privately agree
• Bonding requirements -- public projects commonly require the contractor to post bonds, such as performance and payment bonds, that protect the public awarding authority and the project's subcontractors and suppliers if the contractor fails to perform or fails to pay

A construction supervisor who has only worked on private residential projects should not assume public-project rules work the same way. Public work carries formal procurement obligations, and generally stricter compliance expectations, that do not apply to a private homeowner remodel.

Bringing the Chapter Together

Across this chapter, a consistent theme runs through Massachusetts construction business law: documentation and timeliness protect everyone. HIC registration, covered in Section 4.1, protects consumers and gives them a path to recovery. Clear written contracts, covered in Section 4.2, prevent scope and price disputes before they start. Mechanics lien law, covered in Section 4.3, gives unpaid parties a powerful remedy, but only if strict deadlines are met. Prompt payment and documented change orders, covered in this section, prevent disputes from escalating into lien claims or litigation in the first place, and public bidding rules impose an even stricter layer of process where public money is at stake. A licensed construction supervisor who internalizes this theme -- document it, and do it on time -- will avoid the large majority of the business-law problems this chapter tests.