If you want to learn more about Change Orders, don’t ask Google! Typing “Change Order” into Google produces over 8 billion results! I almost fell out of my chair when I saw the results. Who on earth can make sense of that?
What is a Change Order? A Change Order is work that adds or subtracts from the original scope of work of a contract. It can add or delete from the original amount of the contract. Moreover, Change Orders can add or subtract from the original completion date.
What about a Change Order that substantially alters the scope of the original project? Changes that substantially alter the project should be in the form of a new contract, not a change order.
Why Do I Need a Change Order?
If something changes in the original contract, California Business and Professionals Code (B&P) Section 7159.6 requires that a Change Order be executed prior to performing the work. All Change Orders must be in writing and signed by all parties to the contract. Signatures must be obtained prior to the commencement of all work and changes covered by the Change Order. They must include all of the following information:
- Description and scope of the added or subtracted work.
- The amount to be added or subtracted from the contract.
- Changes in progress payments.
- Revised completion dates.
All contracts must include the heading “Note About Extra Work and Change Orders” and be followed by the aforementioned information.
Every contract must include a sample Change Order. In this manner, the Client becomes apprised of Change Orders and knows what it looks like. There is no standard Change Order form. The only requirements are those listed above. After a Change Order is signed by the Client and Contractor, it becomes part of the original contract. It must be signed by both parties prior to any Change Order work being performed.
Can I Request Extra Work Without a Change Order?
Legally, no. California B&P states that a Client (buyer) may not require a Contractor to perform extra or Change Order work without written authorization.
What If There is No Change Order? Do I Pay For The Work?
Here is where it can get a bit tricky. B&P 7159.6 specifically states “Failure to comply with the requirements of this section does not preclude the recovery of compensation for work performed based upon legal or equitable remedies designed to prevent unjust enrichment.” In English, this means if you accept, use, or take possession of any work performed or materials provided, you must pay the Contractor for it.
Don’t Contractors Use Change Orders to Jack Up the Price?
Clients think Contractors use Change Orders to jack up the price. This is true for many “Contractors” who are not licensed, insured, and simply have no morals or ethics. I placed “Contractors” in quotes because only a truly licensed Contractor can call themselves a Contractor. Unfortunately, there are tens of thousands of fake Contractors in California. Do not hire unlicensed Contractors!
Try as you might to eliminate them, Change Orders are part of the home remodeling process. Many Clients believe every remodeler uses them to jack up the price and extend the schedule. Remodelers; however, know them to be an inevitable part of the remodeling process for a range of other reasons. Least of which are robbery of profits from Clients and throwing schedules out of whack. Change Orders are not necessarily a bad thing. Having a Contractor bring to your attention a dangerous situation rather than ignore it is admirable.
What are Sources of Change Orders?
Hidden conditions. Almost every job of any size and complexity generates changes due to concealed conditions – pipes or wires in the wall, for example. No one can anticipate or see hidden conditions until the work is under way.
Customer-induced changes. Beyond hidden conditions, most other changes start with the Client. Product swaps are common – this sink instead of that one.
Allowances are even more common. What are allowances? Allowances are delayed specifications for products and materials. Before work begins, all product and material details should be resolved. There are some exceptions such as paint colors. The general rule; however, is do not start the job until all product selections are made.
Inability to visualize the project. The costliest changes result from the Clients’ inability to visualize the project from a three-dimensional set of plans. Do not even consider any Contractor who does not provide design/build remodeling services. Without a complete set of plans and specifications before the work begins, you are heading for serious trouble.
Should I Budget for Change Orders?
Yes. Building into the budget a 10% buffer can often save the day. While Change Order costs are sometimes higher than 10% of project cost, they are rarely lower. Therefore, this is a good place to start. If Clients budget an additional 10% to cover potential Change Order costs, the inevitable will be a lot easier to swallow.
Remodelers should not wait until the end of the job to ask for additional money for Change Orders. With proper documentation, most Clients will gladly pay for the additional repairs. This includes changes with no costs. No cost changes include things like paint and tile color. Recording no cost changes prevents misunderstandings later.
Extend the schedule. Time is one of the hidden costs of Change Orders. It is important to understand that all Change Orders will impact the time to complete the job.
Anything Else I Should Know About Change Orders?
Change Orders increase costs – both project and administrative. They can be very disruptive. It is not unusual for Contractors to add an additional 10-20% to their overhead rate for Change Orders.
Never use your Contractor as an estimating service. It should come as no surprise when your Contractor charges an administrative fee for changes you request. Putting together Change Order estimates is time consuming and expensive. Contractors typically charge up to $300 per Change Order request to cover their administrative costs. These fees are non-refundable whether or not you approve the Change Order.
Change Orders are always payable in full at the time of signing. Also known as “Pay as you go”. Change Orders should never accumulate until the end of the job.
How Can I Receive More Information?
If you would like more information on enjoying the best bathroom, kitchen, and interior remodeling experience in Orange County, call Dan at (949) 380-0177 or at firstname.lastname@example.org for a free in home consultation. DAD’s serves all of South Orange County California. This includes Lake Forest, Mission Viejo, Foothill Ranch, Portola Hills, Ladera Ranch, Irvine, San Clemente, Dana Point, San Juan Capistrano, Rancho Santa Margarita, Coto de Caza, Dove Canyon, Laguna Niguel, Laguna Hills, Newport Beach, and Aliso Viejo.
“Taking Care of Your Home . . . The Way We Would Our Own”
Daniel A. Derkum is the owner of DAD’s Construction. DAD’s is a leading South Orange County, California design-and-build remodeling and renovation Contractor. See https://www.dadsconstruction.com. © DAD’s Home Services & Construction, Inc. All Rights Reserved.