Revising Construction Payment Provisions: Addressing Change Orders, Extra or Nonconforming Work, and Other Costs

Description

No architect or engineer ever produced a perfect set of plans and specifications. Every construction project is different, and each is built by a combination of contractors, subcontractors, and trades persons. Work is often affected by the unforeseeable, such as inclement weather, subsurface conditions, labor issues, new building codes, or availability of materials. Change orders exist to address many of these unforeseen and unforeseeable items.

Nearly all construction contracts have a "changes in the work" or "change order" clause that establishes procedures for revising a contractor's scope of work and which usually provides for extra money and extra time in connection with such changes. A changes in the work or change order clause is an essential part of any construction contract and allows the parties to agree, in advance, to a process for changing the work and pricing those changes without invalidating the contract as such changes are made. In light of this, a little time exploring and revising such clauses before entering into the contract could go a long way toward obtaining the extra time and money associated with costly construction contract changes.

All major standard form agreements address changes in the work, usually as part of the general conditions. The current AIA AIA-A201, amended last in 2017, addresses changes in Article 7. The standard form agreements all assume that change orders are written documents. Custom or manuscript contracts often explicitly state that there can be no oral modification of the contract, and only signed, written change orders will bind the parties. However, despite their widespread use, AIA standard provisions often need to be tailored to the specific project at issue and particular circumstances of the parties.

Listen as our authoritative panel guides construction practitioners in differentiating between real versus perceived changes and addressing undocumented change orders; changes due to defective plans and specifications; the effects of previously unknown site conditions; additional, unauthorized, or nonconforming work; changes because of external factors; and change order impact costs. The panel will also discuss the current AIA standard contract documents and best practices for amending these standard provisions to address payment issues.