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Constructive Candor

The Gray Area of Oral Change Orders

  • Rob Palena
  • Sep 21, 2017 11:07:34 AM
  • Energy

AdobeStock_67450055.jpegWhen an owner discusses issues with their contractor, unintentional oral change orders are something to be careful about. Even though the contract probably contains language requiring change orders to go through a formal written process, oral change orders can be a gray area.

Prior verbal changes by the owner followed up with an executed change order, establishes that a contractor reasonably could have counted on future verbal changes to be considered an oral change order. Therefore, owners should be especially careful about discussing items with the contractor that potentially alter the scope, schedule, or quality of their project.

Many projects run just fine with the owner providing oral change orders as they see fit. The key is understanding the consequences to those changes when they happen. This is one of the chief advantages of a formal written process, where the contractor is required to fully capture project impacts with modified pricing and/or milestone dates, allowing the owner to consider the impacts before agreeing to them.

Lesser experienced owners should be very cautious about issuing oral change orders. While this may seem like an obvious statement, some projects are severely constrained for time, and oral change orders followed by executed change orders, can be an effective means of keeping the project on schedule.

A recent example of the consequences of a verbal change occurred on a project heading into the rainy season without all of the dirt work completed. Contractor discussions with the owner resulted in delaying erosion control seeding in favor of completing additional grading work. An unfortunate early start to the rainy season proved costly as the contractor struggled to maintain the site without adequate grass coverage.

This example also highlights another danger not often considered when issuing oral change orders - such change orders are often embarked upon without the contractor's scrutiny of consequential risks. In other words, when the contractor knows the owner is accepting risks to the rest of the project associated with their oral change order, there is little incentive for them to point out complex ripple effects.

While oral change orders can be a practical tool for certain time-constrained projects, generally avoid them if you can. Your contractor is a valuable source of risk assessment. Make sure you get the benefit of this risk assessment by utilizing your contracts formal change order process whenever possible.

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Photo credit: Adobe / ndoeljindoel

Topics: Energy

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