We have discussed Change Work Orders for several years now, but new stuff keeps cropping up. Let’s take a look at some of the new things that have come our way.
First – We continue to hear from contractors that insist on sending out invoices and bills for their work, and that includes CWO’s. Sooner or later, probably sooner, that practice is going to bite you right in your assets. When you do change work orders, get paid up front, BEFORE you do any work. Anything up to $2,500 should be paid in full before you start. If the job is larger than $2,500, then split the payment and get the second half at the next progress payment for the original contract or as soon as the change is complete, whichever is sooner.
If you work in California, follow your state laws on payment schedules, but make darned sure you get paid when your contract or CWO says you will get paid. As I said the last time we talked about California Laws, they were not written to protect the contractor. For protection, have your attorney advise you on the payment schedules you can and should use for the type of work you are doing.
Second – Include language in your original contract as well as on the change work order that states you may refuse to make changes if the owner doesn’t sign the CWO in a timely manner. This must be done to assure that the workflow will not be disrupted.
You can also force this issue by adding 15 percent to 20 percent to the price of the change if it isn’t signed in a reasonable time frame that allows you to keep the job humming along. Added expense tends to get attention. Reasonable to me is within 24 hours of presentation.
Third – If you write a CWO, automatically re-write the completion date for the contract. Whatever the change, extend the job time schedule. A good rule of thumb is 2 to 1. For every day the job may extend, add two days extension to the CWO. Something may come up while making the change that will delay the job and you will need that buffer. This is a CYA mechanism if you get behind or need some breathing room.
Fourth – Protect yourself on changes that may result in problems and/or additional cost because of third or fourth party involvement. Say the owner decides they don’t like the 8′ width of the arch leading to the new family room. They want the archway 16′ wide. Experience tells you that you are going to need an engineered plan for that change, and it will have to be approved by the city/county.
You need language in your original contract that states you will charge for all costs incurred with any change work order. This includes your time to assemble all the documentation, the engineering involved, your time to run through the hoops for the permit, your estimating time and any other costs you might incur. It doesn’t need to be itemized, just list what you are going to do and put a price on it. Good enough.
In addition, if the change causes any delays such as holding up the job or incurs unforeseen costs due to delays for or by subs, extensions on leased or rented equipment, or any other costs you can’t control, include a statement in the change work order that you will be reimbursed either per hour or per day for the delays. If, on a given change, the owner or someone they have employed such as an architect, designer, or engineer causes a delay, you will also be reimbursed for any documented down time or delays. Be sure if you give an hourly rate that it includes your overhead and any profit. Those reimbursements should be due and payable at the next progress payment for the job or the next payment on the change work order.
If you don’t establish and follow a procedure for each change work order, and include language in each contract for change work orders, you will spend a lot of time and money on change work orders that cost you money. Do your homework and stop making changes for free.