Contract Change Management
Change orders can arise for several different reasons such as:
- regulatory code changes
- a request by the owner for additional work
- unforeseen circumstances, such as poor soil conditions
- an error on the part of the designer or the contractor, which causes some of the work to be redone or replaced
- a delay caused by some event outside the control of the owner or the contractor, such as an unusually severe storm
- or forced acceleration for some reason.
Any of these, or similar situations, will likely give rise to claims for additional compensation from the contractor, and/or additional time to perform the work. In each of these situations, the owner and the contractor will have certain claims to make upon each other. If we assume that both parties act in good faith, then if the owner requests the change, he or she wi1l be prepared to pay for it and extend the schedule if necessary to complete any additional work required.
However, in many situations, the full extent of responsibility for each party is not totally c1ear. For example, the contractor may have performed part of the work incorrectly and faced with a need to make changes to correct the problem. At the same time, the owner may recognize this correction as an opportunity to improve or modify the work and therefore request that other improvements or modifications be made. In this situation each party now bears some responsibility for the added cost and the delay, and the only way to resolve each party's responsibility is through negotiation.
This is the actual situation more often than not, so the program manager will establish a formal process for handling any and all claims. Typically, after the contractor submits a request for a change, the program manager evaluates it and determines which category it falls into and whether or not it is justified. This may involve modification of the contractor's request in terms of the work that he will do, the payment that he or she will receive, and/or the schedule required to implement the change. After evaluating the request for change, the owner authorizes the contractor to proceed.
This authorization will ultimately take the form of a change order to the contract, which provides the contactor additional funds and direction for the performance of the work.
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Project Management Information Control
