Play by the Rules to Get Paid for Extras by American Subcontractors Association, Inc.
It's not hard to see why change orders often are the subject of disputes among construction owners, construction managers and general contractors, and subcontractors. Consider the numerous ways in which understanding can break down. Was there a formal, written directive or approved change order in place before work began? When must payment for change orders be made? How will compensation for the work be determined? The list could go on.
From the subcontractor's perspective, the best strategy to prevent change order disputes requires understanding the procedures that are in place for change order authorizations and claims before work begins and then sticking to those procedures during the execution of the work, according to a white paper published by the American Subcontractors Association, Inc. (ASA). The subcontractor has leverage to gain payment for its work when it follows procedures, but that leverage diminishes when it fails to follow procedures:
"Where a seller of construction services fails to follow proper procedures, the courts will often be more sympathetic to the buyer's lost opportunity to "evaluate the situation before the work is performed and the costs are incurred," than to the subcontractor's claim for payment. On the other hand, where work stoppage is threatened by the buyer's failure to timely process paperwork that has been properly submitted by the seller to authorize extra work, then the seller has little reason to proceed without the required, written authorization."
To preserve rights to suspend work or make claims for extra work, it is critical for subcontractors to familiarize themselves with the procedures for change orders and claims as early as possible.
The main challenge for the subcontractor that wants to "play by the rules" therefore may be "infoglut," since there are so many different contract forms, and the procedures vary among them. For example, the ASA white paper points out that the Associated General Contractors of America's 650 (1998) subcontract document (at paragraph 7.1) requires that "No adjustments shall be made for any changes performed by the Subcontractor that have not been ordered by the Contractor," without specifying that the change must be ordered in writing, whereas authorized change orders in the American Institute of Architects' A401-1997 document must be made in writing. In a claim situation in which the general contractor made a verbal directive, the possible outcomes for the subcontractor are very different.
ASA's white paper offers numerous suggestions that will help subcontractors protect their rights to make claims for extra work, including:
* The best time for a subcontractor to establish its billing rates for extra time, and mark-up on extra materials, is before the subcontractor submits a bid.
* A "change" might not really be extra if the subcontract includes broad, scope-expanding language, or incorporates a broad performance specification.
* If a requested change is denied after extra work has been performed, subcontractors should immediately assert a written claim.
Learn more about change orders.
American Subcontractors Association, Inc.,
1004 Duke Street
Alexandria, VA 22314-3588
Telephone: 703-684-3450
Fax: 703-836-3482
Web site: www.asaonline.com |
