Contractors... When properly used, a change order will do more to prevent customer disputes than ANY OTHER FORM... yet most contractors consider it merely a bothersome and time-consuming addition to their paperwork load...
A CHANGE ORDER is used whenever a change is made to a signed, valid contract that has a provision allowing changes. This is where it is important that ALL the construction forms you use for your contracting business work together. All the forms, especially including your change order form, that are used to manage your project must work with, be provided for, and be referenced in the contract or agreement signed between you and your customer. To be effective, change orders become part of the original contract so the original contract must contain the correct provisions for changes!
Equally important, a properly written change order provision for "unexpected circumstances or conditions" or "uncovered conditions or problems" built into the contract will protect you from a potentially costly situation. For example, you have a job to replace the wood siding on a house. You start tearing off the siding and immediately notice that the sheathing underneath is dry rotted and needs to be replaced so that your work can be done! The owner will see this and, being the good fellow he is, certainly give you the extra money you need to replace the sheathing since it was not charged for in the contract....right!?? Without the right contract provisions the owner might not have to pay you. The owner might insist on the contract being completed AS IS with no increase in the price to pay for re-sheathing. You argue that you could not see the damage until the wall was "opened up"! The owner argues that you are the "expert" not him and that you should have foreseen the possibility that more damage existed under the siding. Further the owner tells you he has only budgeted for the amount of your contract and if you do not do the work as agreed upon, he will sue you for damages. You are then faced with two choices.
1. "Eat" the extra costs to replace the dryrot in order to get the job done correctly. or...
2. Get involved in a costly lawsuit that your own poorly written paperwork makes it almost impossible for you to win!
These seemingly small details in your construction forms can make the difference between a profitable job and a loser or worse, a job that costs YOU money!
Changes can have one of three impacts on the total contract price.
1. Change Orders can INCREASE the contract price. An example of a change order increasing the contract price would be the example given in the paragraph above. An EXTRA WORK ORDER is just a type of change order where the contract price can only increase.
2. Change Orders can DECREASE the contract price. An example of a change order decreasing the contract price would be if during a hardwood flooring job, the customer decides to cut back on the square footage to be installed.
3. Change Orders can keep the contract price the same. An example of a change order keeping the contract price the same would be if a customer changes the color of his paint job (assuming the paint is not a custom color that has already been purchased).
CAN THERE BE ONE TYPE OF CHANGE ORDER THAT FITS EVERY SITUATION?.... NO!