Making modifications during a construction project comes with the territory. Your clients may request additions, or you may need to make changes due to unexpected issues. Whether you or the customer initiates a change, it’s essential to document any changes modifying a construction contract’s original scope of work.
Having an effective contract and change order process in place will ensure you receive appropriate payment, avoid running behind on agreed-upon schedules, and clearly communicate expectations with customers. In part one of a two-part series, we’ll discuss how to make modifications to a contract’s scope of work by using change orders, so that you can initiate the changes quickly and efficiently, causing the least frustration and confusion for you and your customers.
Step 1: Detailed Original Contract
The most integral factor in conducting an efficient business is having a thorough, secure contract agreement in place. By ensuring you have a detailed original contract, you not only protect your business, but you provide security and transparency for your customers, as well. Your contract is a written agreement between you and your customer and holds you both accountable to the terms upon which you agreed. According to eSUB Construction Software, “A construction contract can be full of clauses, but it has two key components: the scope of work, and the price,” and both pieces are important in managing your customers’ expectations about the amount of work they are having done and the costs associated with it.
In order to allow clients to make alterations during the construction process, a business must clearly define their change order process (i.e. the process of modifying an aspect of the original contract’s scope of work, etc.) in their original contract. Including change order processes in the original contractual agreement allows customers to know what to expect when modifying original plans later on. A change order process may include “requirements regarding the timeframe for initiating a change order, specific information and documentation required as well as the authorized agent to approve the change order for contractor initiated changes,” as mentioned by Kendall Jones of ConstructConnect.com.
Having a professional contract agreement defining your change order process is essential for a positive relationship between you and your clients. It may be helpful to seek the assistance of a business law attorney to ensure you protect your business now and in the future.
Step 2: Client Expectations & Understanding
When working with customers, remember that they do not work with contracts and contractual language as often as you do. You know your contract like the back of your hand. Spend time reviewing it with your customers, identifying what the scope of work is and how much it will cost. Because you’ve reviewed the contract with them before they sign it, you’ll have more confidence in getting started on the project at hand, knowing they understand the terms of the contract.
It is also helpful to manage your customers’ expectations and understanding of your change order process and how they go about making modifications. As suggested by eSUB Construction Software, review the change order process with the customer and “always be candid about the fact that additional work costs money.” Describe how making changes are done by submitting a change order, and explain how they are “simply an addendum or amendment to the original contract and scope of work,” as explained by Jones. Explaining the process of initiating a change and that each change order will be reviewed together will inform your customers that they not only have the option of making changes, but it will also manage their expectations that changes come with additional costs and potential schedule pushbacks, so there will be no surprises down the road.
In part II, of this series, we’ll discuss how to handle a change order and keep records to help protect your construction company.
Whether or not you have a contract in place, consider working with our knowledgeable business attorneys at KTF Law Firm. We’ll provide legal expertise and support for you and your business, as well as professional contract drafting services to help simplify your workflow and business processes. Contact us today to see how we can help you protect the incredible business you worked so hard to build!