Posted on February 02, 2015
Regardless of scope and complexity, it is inevitable that the need to make a change to some aspect of a construction project – whether it be to the design, specifications, or schedule – is going to arise. Generally speaking, a design professional (architect, engineer, etc.) may authorize changes to a construction contract that do not increase the contract price or time for completion. Other changes, those that result in major alterations to the project cost, timeline, or design, are almost always required by the construction contract to be in writing and approved by the owner before the modified work is performed.
In practice, obtaining written approval for changes in work can be difficult given the narrow time frames and breakneck pace at which most construction projects progress. Often, this leads to contractors and subcontractors relying on verbal approval for necessary alterations, with the expectation that the changes will be written up later. This type of situation leaves the contractor in a perilous position, on the one hand, risking delay while the change order is obtained in writing – which will invariably cause friction with the owner – or taking the chance of not getting paid for failing to comply with nearly ubiquitous contract provisions that require that all changes be made in writing.
This type of situation was specifically addressed by the Ohio Supreme Court case Foster Wheeler Enviresponse, Inc. v. Franklin County Convention Facilities Auth., 78 Ohio St. 3d 353, 678 N.E.2d 519 (1997), which has become a seminal decision in contract dispute stemming from change order confusion. In Foster Wheeler, a contractor was hired to remove what was estimated to be 140 cubic yards of contaminated earth from what is now the site of the Greater Columbus Convention Center for the contract price of $165,000.
After commencing work, the contractor discovered that the contamination was far more widespread than was originally anticipated. The contractor continued removing the contaminated soil, however, eventually excavating 3,546 cubic yards at a cost of $939,000. The Ohio Supreme Court rejected the contractor’s attempt to recover the extra cost because it failed to obtain written change orders for the extra removal as required by the contract.
The takeaway from Foster Wheeler is simple – always stick to the terms of the construction contract. Getting change orders is to everyone’s benefit. When a change order is in writing, there can be little dispute that an owner knew that additional or different work was going to be required, and a contractor/subcontractor can take comfort in knowing that it has put itself in the best position to guarantee payment for the change order work. Just as important as getting the change order in writing, is making sure that it sufficiently details the additional work that is being requested. If possible, change orders should incorporate specifications, estimates, payment terms, drawings, and projected schedules, to ensure that all of the parties are on the same page as to the specific work which the change order involves.
For questions regarding change orders, construction contracts, or any other aspect of Ohio construction law, please contact Todd Harpst or Nick Horrigan, at Harpst Ross, Ltd. – Business Lawyers for the Construction Industry®, at (330) 983-9971 or firstname.lastname@example.org or email@example.com.
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