Most standard forms of owner-contractor construction contracts include provisions for modifying the contract. The most common way to modify a contract is through a change order. Both the EJCDC C-700 and the AIA A-201 have specific provisions related to issuing change orders.
Generally, change orders are used when the owner orders additions, deletions, or revisions to the project, and all parties (owner, design professional, and contractor) agree to the price, time, and scope of the change.
The EJCDC C-700 document includes fairly straightforward change order process.
Without invalidating the Contract and without notice to any surety, Owner may, at any time or from time to time, order additions, deletions, or revisions in the Work by a Change Order, or a Work Change Directive. Upon receipt of any such document, Contractor shall promptly proceed with the Work involved which will be performed under the applicable conditions of the Contract Documents (except as otherwise specifically provided).
Similarly, the definition of a change order in the AIA A201 document is quite clear.
A Change Order is a written instrument prepared by the Architect and signed by the Owner, Contractor and Architect stating their agreement upon all of the following:
- The change in the Work;
- The amount of the adjustment, if any, in the Contract Sum; and
- The extent of the adjustment, if any, in the Contract Time.
The definitions for change orders in both sets of documents are fundamentally the same. Under each, the owner and contractor can mutually agree to modify the owner-contractor agreement by changing the contractor’s scope of work (either an addition or deletion), changing the amount of the contract (either increase or decrease the amount), and/or changing the contract time (either extend or shorten the time for performance).
Because a change order is a substantive modification to the original agreement between the owner and the contractor, the design professional does not have the authority to direct and approve this change without the agreement of the two parties to the contract (owner and contractor). However, there are limited circumstances where a design professional can order modifications without prior approval of the owner or contractor.
This is not to say that design professionals are not involved in the change order process. The design professional may be the party recommending a change order or, if the change order is requested by the contractor, the design professional is usually involved in the review and negotiation of the change order on behalf of the owner.
When the need for a modification arises, the parties can usually reach an agreement on the terms of a change order; however, this is not always the case. Disagreements can arise between the parties over the compensation to be paid or the amount of time that should be granted as a result of a modification.
If these disputes are not timely resolved, there is a risk that a project could be delayed. To avoid these types of delays, the EJCDC and the AIA documents both include a mechanism to allow the work included in a modification to proceed while the parties work out the terms of the modifications. In the AIA document, this is called a Construction Change Directive and in the EJCDC document it is called a Work Change Directive.
The definition of a Work Change Directive, as defined in the EJCDC C-700, does not change the contract price or contract times.
Work Change Directive -- A written statement to Contractor issued on or after the Effective Date of the Agreement and signed by Owner and recommended by Engineer ordering an addition, deletion, or revision in the Work, or responding to differing or unforeseen subsurface or physical conditions under which the Work is to be performed or to emergencies. A Work Change Directive will not change the Contract Price or the Contract Times but is evidence that the parties expect that the change ordered or documented by a Work Change Directive will be incorporated in a subsequently issued Change Order following negotiations by the parties as to its effect, if any, on the Contract price or Contract Times.
Likewise, a Construction Change Directive, as defined in the AIA A-201 document, may be issued before there is any agreement on the adjustment of the contract sum or the contract time.
A Construction Change Directive is a written order prepared by the Architect and signed by the Owner and Architect, directing a change in the Work prior to agreement on adjustment, if any, in the Contract Sum or Contract Time, or both. The Owner may by Construction Change Directive, without invalidating the Contract, order changes in the Work within the general scope of the Contract consisting of additions, deletions or other revisions, the Contract Sum and Contract Time being adjusted accordingly.
The Work Change Directive and Construction Change Directive have mutual benefits to the owner and the contractor. For the owner, these modification provisions allow the work to proceed without delays related to the negotiation of a change order. For the contractor, they allow the contractor to proceed with the work with the security of having owner authorization to perform the work.
When a work change directive or construction change directive is issued, the intent is that the parties will resolve the related issues through negotiation, which will result in a change order. However, in the event the parties are unable to successfully negotiate a change order, the parties may then resort to the dispute resolution procedures included in the contract documents for the project, which is a topic for an entirely different article.
The last type of modification is the simplest one; it allows the design professional to require minor changes in the work. The EJCDC document refers to this type of modification as a Field Work Order, and the AIA document refers to it as a Minor Changes in the Work Order. The purpose of this type of modification is to allow the design professional to order minor changes that are consistent with the original design. They are not intended to enable the design professional to add or delete scope to the project.
In the EJCDC C-700 document, a Field Work Order is defined in Paragraph 9.04.A.
Engineer may authorize minor variations in the Work from the requirements of the Contract Documents which do not involve an adjustment in the Contract Price or the Contract Times and are compatible with the design concept of the completed Project as a functioning whole as indicated by the Contract Documents. These may be accomplished by a Field Order and will be binding on Owner and also on Contractor, who shall perform the Work involved promptly.
The AIA A201 document defines Minor Changes in the Work in Section 7.4.
The Architect has the authority to order minor changes in the Work not involving adjustment in the Contract Sum or extension of the Contract Time and not inconsistent with the intent of the Contract Documents. Such changes will be effected by written order signed by the Architect and shall be binding on the Owner and Contractor.
The Field Work Order in the EJCDC C-700 document and the Minor Changes in the Work Order in the AIA A-201 document effectively operate the same way. They give the design professional the authority to order changes to the work, but only to the extent that these orders do not affect price or time. Further, the design professional can issue these orders without approval by the owner and/or agreement by the contractor.
It is possible that a contractor may disagree that the Field Work Order or Minor Changes in the Work Order do not impact time or price. If a contractor believes that he or she is entitled to either time or money for this type of order, the contractor should raise this issue at the time the order is issued and not after the work is performed. Most standard contracts do not give the design professional the authority to act on behalf of the owner without owner approval. More importantly, under Ohio law and on public projects, the contractor would likely be barred from recovery without prior approval by the owner.