Construction 101: Change Orders

[Doc Holliday]

At the risk of looking stupid, I am asking for some guidance here.

Currently undergoing a major renovation.

GC presented a quote/contract. We signed.

Now we are in the midst of the job, and little things keep coming up. Oh this is an inch off from what the design firm drew up, so now we need more material. That will be a change order for $400.

We ran into a second slab/footer during demo that was not expected to be there, that took us an extra day. Change order.

We can't do one step as shown in the drawings, we have to do 2 because of code. Now that is more concrete and forming boards and labor. Change order for $1,500.

etc.

In my mind a change order should be when WE go to the GC and ask for a wall to be somewhere other than where it was in the drawing, or ask for a window to be put somewhere where there wasn't one. Some change of scope that we create by our desires to make a change to the previous plan.

What I am getting now is a weekly "Oh, hey, can we talk about this detail/problem we ran into?" Which leads to another few hundred dollars here or there.....none of it is stuff we came to him with. I like my GC and generally think he is a good guy, but am starting to feel nickeled and dimed, possibly taken advantage of. My view is he should bid jobs with a healthy margin for little stuff he wasn't planning on. That's the whole reason we wanted a bid and not "cost plus".

(We did not include finishes in the scope, so if we feel at the end of this main stage that he has screwed us, we will not have him do any of the finishes. That's really the only possible leverage we might have at this point.)

I'd like some guidance or advice from the slide from folks who know more about this than me on if this is just how it goes, or if it sounds like my GC smells an inexperienced (true) client.

 

[wyosteve]

In my experience, change orders typically occur if the owner requests something different, or if a detail that couldn't have reasonably been discovered prior to the bid is revealed. I agree, I think he's 'padding' his bid now that he's got you on the hook.

 

[wnelson14]

Man, this is such a tough thing to go through I've seen and been on both sides.
I also have never heard of anyone doing a remodel or house build stay in "budget".
Was the house originally built by You? if not, I would have padded my budget for the unknowns because there is always some especially if the house was built under the supervision of someone else.

From your story to me it sounds like you gave him an inch on the first change order and now he is taking a mile. I probably would of at the first change order stopped him and said we need to re assess our budget, so let's stop work and we will go from there, and you could have seen how fast he backtracks or needed the work.

Or you could totally drop him pay him for what he has done and say thank you and go in a different direction, again this will show how fast he backtracks etc. etc.

 

[mlchase]

You are right to question, but if the drawings didn't show and he didn't have in his bid, he is entitled to a change order. In most residential builds and some commercial builds, you are correct and there is some padding so they usually don't do them (more paperwork and time for them to manage), and they try to just do the big ones. That is how my GC handled on my large home build....if he is being that tight on change orders you should also request any credits for anything in construction that is done with less material or easier than in plan. Nothing in this process is fun for sure!

 

[Justin Crossley]

What does your contract say?

 

[woods89]

At the risk of looking stupid, I am asking for some guidance here.

Currently undergoing a major renovation.

GC presented a quote/contract. We signed.

Now we are in the midst of the job, and little things keep coming up. Oh this is an inch off from what the design firm drew up, so now we need more material. That will be a change order for $400.

We ran into a second slab/footer during demo that was not expected to be there, that took us an extra day. Change order.

We can't do one step as shown in the drawings, we have to do 2 because of code. Now that is more concrete and forming boards and labor. Change order for $1,500.

etc.

In my mind a change order should be when WE go to the GC and ask for a wall to be somewhere other than where it was in the drawing, or ask for a window to be put somewhere where there wasn't one. Some change of scope that we create by our desires to make a change to the previous plan.

What I am getting now is a weekly "Oh, hey, can we talk about this detail/problem we ran into?" Which leads to another few hundred dollars here or there.....none of it is stuff we came to him with. I like my GC and generally think he is a good guy, but am starting to feel nickeled and dimed, possibly taken advantage of. My view is he should bid jobs with a healthy margin for little stuff he wasn't planning on. That's the whole reason we wanted a bid and not "cost plus".

(We did not include finishes in the scope, so if we feel at the end of this main stage that he has screwed us, we will not have him do any of the finishes. That's really the only possible leverage we might have at this point.)

I'd like some guidance or advice from the slide from folks who know more about this than me on if this is just how it goes, or if it sounds like my GC smells an inexperienced (true) client.

Hard to know without seeing the situation, really.

It's nigh onto impossible to bid remodel work with all possibilities accounted for, and stay in business. I try to account for the things I think are possible, but every project brings unknowns.

That said, an extra inch of wall or an extra step probably isn't going to trigger extra billing for me.

Much of this arises from most contractors being poor communicators pre-project, but again, hard to say without being there.

 

[westslopelaker]

Three things. One is ask for all COs to be on a time and material basis, not lump sum. That way you can review and push back if you think it's padded or should already be cover. Second, changed conditions and scope creep are valid reasons for COs. If the contractor missed something in their bid that was included in the design, that's on them. Third, all COs should be communicated and agreed to in writing BEFORE the work is completed. The contractor is at risk by completing the work prior to having it authorized.

Do you have any contingency or minor contract revisions build into contract with the GC?

 

[GMann]

Rehabs/remodels are difficult.

Without getting into the weeds too much; if it's a known condition that the contractor had access to see, measure, etc and verify the actual condition against the plans, it's on him and he shouldn't be coming to you with an open hand. They should always verify the field conditions against the plans during pricing.

If it's an unknown condition such as the slab/footer that couldn't be seen or known of until demo; that's probably legitimate. This stuff pops up all the time and is normal during remodels.

Never hurts to push back and don't be afraid to if you think they're in the wrong.


Hope this helps!

Sent from my moto g power using Tapatalk

 

[cnelk]

In most construction contracts, its not uncommon for C.O.s to be 3-5% of the contract amount

 

[TxLite]

Three things. One is ask for all COs to be on a time and material basis, not lump sum. That way you can review and push back if you think it's padded or should already be cover. Second, changed conditions and scope creep are valid reasons for COs. If the contractor missed something in their bid that was included in the design, that's on them. Third, all COs should be communicated and agreed to in writing BEFORE the work is completed. The contractor is at risk by completing the work prior to having it authorized.

Do you have any contingency or minor contract revisions build into contract with the GC?

Step 1 in any case is read your contract and see what it says about change orders and how they need to be handled.

The one thing I disagree with is the T&M. Depending on your contractor, they might see that as an opportunity to drag their ass and rack up extra time if they aren't being monitored. Lump sum avoids that and gives you a known cost to fix the issue. I'd evaluate the trust you have in your contractor (and see what your contract allows).

Other than that I agree with what was said.

 

[hikenhunt]

In my view, change orders should be for owner requested changes AND for circumstances that the contractor could not reasonably foresee/anticipate in their bid costs. Did the contractor do a walk through with the design plans in hand?

From the description above, I see "We ran into a second slab/footer during demo that was not expected to be there" as something the contractor could not anticipate. So change order is probably justified.

As far as the "inch" example, he might have been testing the waters with you on that one. That seems like a stretch for a change order but hard to know without more details.

For the stair example, I'd get more details on that from the contractor and go back to the design firm that drew them up. If they screwed up, I'd try putting the costs on them.

As others mentioned, hopefully you had some extra funding for changes along the way. All projects, but especially remodels rarely stay on budget.

 

[cnelk]

And then there's this.....

 

[grfox92]

Did he warn you of the possibility that other expenses may arise?

Coming from a builder here. If the change orders are due to things that could not have been known prior to demolition, then the change order is justified. There is no way for a contractor to know what is behind your walls or under your floors.

Why should the Contractor loose money for something that's not his fault?

Some guys bid tight to try and get jobs by keeping the price down and will need to charge more when those type of issues arise. That's better for you as the customer, as long as it was explained before you agreed.

I know guys who will tack on a SIGNIFICANT percentage to cover their asses when issues arise and only issue changer orders when the customer makes changes. If no issues arise they pocket the surplus and make out like kings.

So it really depends on the agreement you had before the work started. I hope that makes sense.

Sent from my SM-G990U using Tapatalk

 

[woods89]

I know guys who will tack on a SIGNIFICANT percentage to cover their asses when issues arise and only issue changer orders when the customer makes changes. If no issues arise they pocket the surplus and make out like kings.

Honestly, I'm probably a little bit in this camp, although the making out like kings doesn't happen as often as I wish. I comes down to understanding your customers needs. Some want harder numbers that they can plan on, some are willing to assume some risk to keep that final number down. I'm rarely the low guy in the bidding process, but I'd like to think that having a reputation for only asking for extra charges when it's unquestionably legitimate gets me some projects with the kind of customers I want to work for anyway.

And it should go without saying that change order work is fully discussed with the customer before the work is performed.

 

[bigbuckbuster]

Haven’t read every post so may have missed some context.
I have worked in industrial contracting the past few years. As a contractor we clarify everything especially on retrofit work because there are so many unknowns.
If the contract does not clarify against unknown conditions it should be on the contractor. They should have verified site conditions or put in enough fluff to cover their lack of detail when putting together the bid.

The co regarding code should be on them completely.
Biggest issue is when the design was wrong. Then if it’s determined that the design was bad you are stuck trying to get money out of whoever did the drawings. We run into this a lot where the engineering firms oversight requires extra work that is neither the customer or the contractors fault.


Sent from my iPhone using Tapatalk

 

[southLA]

Why should the Contractor loose money for something that's not his fault?

This.

 

[WV Mountaineer]

At the risk of looking stupid, I am asking for some guidance here.

Currently undergoing a major renovation.

GC presented a quote/contract. We signed.

Now we are in the midst of the job, and little things keep coming up. Oh this is an inch off from what the design firm drew up, so now we need more material. That will be a change order for $400.

We ran into a second slab/footer during demo that was not expected to be there, that took us an extra day. Change order.

We can't do one step as shown in the drawings, we have to do 2 because of code. Now that is more concrete and forming boards and labor. Change order for $1,500.

etc.

In my mind a change order should be when WE go to the GC and ask for a wall to be somewhere other than where it was in the drawing, or ask for a window to be put somewhere where there wasn't one. Some change of scope that we create by our desires to make a change to the previous plan.

What I am getting now is a weekly "Oh, hey, can we talk about this detail/problem we ran into?" Which leads to another few hundred dollars here or there.....none of it is stuff we came to him with. I like my GC and generally think he is a good guy, but am starting to feel nickeled and dimed, possibly taken advantage of. My view is he should bid jobs with a healthy margin for little stuff he wasn't planning on. That's the whole reason we wanted a bid and not "cost plus".

(We did not include finishes in the scope, so if we feel at the end of this main stage that he has screwed us, we will not have him do any of the finishes. That's really the only possible leverage we might have at this point.)

I'd like some guidance or advice from the slide from folks who know more about this than me on if this is just how it goes, or if it sounds like my GC smells an inexperienced (true) client.

Doc, I think there might be a couple scenarios going on that’s causing this. Let me explain both.

First, it’s important to get the right architect. This is the biggest hurdle in building anything. People trash contractors all the time. But, if the drawing are not to scale or correct, then things change.

If you acquired the architect, the GC is going to look at it like this. The architects mistakes shouldn’t penalize him. So, if the architect did a lousy job, then it’s on him. And, I’m my experience, that’s usually the case. But, the GC is left to make it work. Which usually entails more money.

The way Building works is an architect draws to scale, the project. He dictates the material, the build design, the sizing, etc…. The builder just follows his plans. If they are wrong and not caught early, then that’s what you get during the build. A lot of changes and unforseen challenges.


The second possibility is the architect is lazy, the GC knows it, and is taking advantage of you due to that.

Every GC expeCT’s unforeseen. But, you aren’t going to get a big cushy margin built in by the GC because it likely would have priced him out initially. So, his concern of looking over the plans before starting is negated by having change orders as an option. He’s going to look over them. But, you can’t expect him to catch a 34” shower stall as not fitting in a bathroom instead of a 32”. He will catch it when building but, not when over looking the plans a lot of times.

The incompetence of architects is simply beyond comprehension sometimes. These guys would foul up a doghouse. Why? Because most have rarely if ever driven a nail but, are in charge of those that have.

From what I’m hearing I believe the GC is not doing anything to negate costs and capitalizing on every opportunity to make off those errors or situations. But, he may not be at fault either if he’s booked x amount of yards of concrete, then has to pay for more due to an architect error.

Todays Building world is completely different than 20 years ago. The hired help makes way more, is often less skilled, and the extra burden lays on the builders shoulders. Or, the GC if his crew is doing it. Architects rarely do good work. Ands GC is often pulled 9 directions at once.

The last advice I’ll give from first hand experience is that no one has made money Building turn key custom homes. No one. They may make some off this one or the next one but, in the end they’ve worked to feed everyone and just enough into their business to survive Building custom homes is not something most people want to do. It sounds like your GC has figured this out and his making his money that way.


That may sound off the wall but, it’s consumers driving this. No one wants to pay the cost to get 100% attention from any GC or sub contractor. If the home owner did, his house would be 30% higher minimum.

I’m not saying it’s your fault. I’m not blaming you. I’m just telling you how it is and why this might be happening to you. Good luck but, address it. If not it’s going to be a lot of money when this is over.

 

[JeffP_Or]

All very good info especially @hikenhunt and @WV Mountaineer - CO's go both ways for sure.

Do read your contract and do contact/discuss with the designer assuming he is retained for CA. Also, there can be some responsibility on the Contractor's side to have investigated the site while working bids to 'discover' items that may be of concern; certainly footings could not be considered obvious and fall into the 'existing conditions' category. Similar to a main electrical feed buried inside a wall. A 1-inch blow in existing dimensions; not so much.
A few more things to consider depending on what your contract might read:

Consider "Not-to-Exceed on T&M basis" for changes: this basically means you have arrived at a maximum value but require back-up. The side note to this is you need to be there [or someone does] to account for the 'T&M' portion or the contractor(s) can do as noted above and pad the hours. Keep in mind too - if he is on site already and has that excavator sitting over there in the corner, added site trips and site delivery should not be present in each and every claim [double dipping so-to-speak'].

Consider reviewing proposed solutions with the contractor [and perhaps the designer if so engaged]: as everyone knows there are many ways to skin a cat and a different perspective may present an alternative and amicable [and even less expensive] solution. Using the step as an example - instead of a second step, maybe a regrade of that area or you building a deck/platform after the fact solves that issue; a different slope on a sidewalk? Thinking outside the box.

 

[Dos Perros]

If it's an unknown condition such as the slab/footer that couldn't be seen or known of until demo; that's probably legitimate. This stuff pops up all the time and is normal during remodels.

Does the contractor note their conditions assumptions in their bid?

 

[Clarkdale17]

There are many GC's who will price only the drawings knowing they will likely run into change order work down the road. This is the only way they can be in the ball park on bid prices and win jobs.

There are other GC's who will price the job on the drawings and also based on assumed issues encountered or experience and will "cost" more on bid day. Most of the time these GC's wont nickel and dime you for every issue that arises.

Often the GC that accounts for issues end up completing the job for less than the GC that requests numerous change orders.