Nothing's perfect out in the construction field. You can have an absolutely legitimate claim, but you must be able to prove it to collect. To ensure you get paid for extra work, document situations as soon as the problem becomes known, or at least within the maximum number of days allowed by your contract.
I have served as an arbitrator for the American Arbitration Association on a number of construction lawsuits. In most disputes, problems could have been avoided if the subcontractor had notified the general contractor or owner in a timely manner. The majority of problems occur when contractors try to request money for extra work done weeks or months after the fact, without timely documentation to back up their request. An example of a situation needing documentation:
A contractor digs a footing, discovers an unforeseen concrete vault and removes it. Then, several weeks later notifies the owner they hit the underground structure, spent money remedying the problem and now expects to get paid for additional work. The owner does not have any contractual liability to pay for extra work performed, installed or completed without proper notice, documentation and authorization per the contract.
Your contract will specify how many days you have to notify the owner upon discovering a jobsite's differing condition. Document it, including written proof and photos, show how you mitigated or intend to mitigate the problem, and submit a change order claim within the number of days specified by your contract.
Change Orders Are Not "Extras"
They are additions, changes and deletions from the contract scope of work. Somebody changed the scope of work, not you. The project owner, architect or engineer didn't prepare proper or complete plans or specifications. Never give your work away. Your company has a right to collect for additional work and extended time when somebody else changes or modifies your scope of work or schedule.
The Two Types of Changes
- Wanted - requested changes - those requested by the owner, architect or builder -- such as upgrades and additions.
- Unwanted - constructive changes - those caused by differing conditions, field problems, conflicts, poor plans and specifications, errors and omissions.
Needless to say, changes that are unwanted or unexpected tend to make people unhappy. These changes present more problems for budgeting, scheduling and getting paid. Make sure your project manager keeps a log of potential or proposed change orders as well as executed change orders. Match each project's monthly budget report to the executed change order log to ensure accurate committed costs, estimated final costs and anticipated profit.
On every project, review your contract, general conditions and specifications to look for timeframes allowed to request additional money and time extensions for change orders. These requirements may be different for owner-requested changes or constructive changes. Follow procedures established in the contract, and establish your own management procedures to track these incidents carefully and completely.
Train Your Customers
Meet with your customers at the beginning of every project and tell them exactly how you want to do business with them. Tell them up front, before problems occur, you will require signatures in order to proceed with extra work. Then follow the contract and stick to it. When you play hardball and are firm but fair, customers will respect and treat you professionally. When you don't require the customer to honor their contract and go ahead and do extra work without signatures, the customer won't respect you and will take advantage of your weakness.
George Hedley is a professional business coach, popular speaker and best-selling author of "Get Your Business to Work!" and "The Business Success Blueprint For Contractors" available at his online bookstore. He works with business owners to build profitable growing companies. E-mail: firstname.lastname@example.org to request your free copy of "Winning Ways To Win More Work!" or sign up for his free monthly e-newsletter. To hire George to speak, be part of his ongoing BIZCOACH program, or join one of his ongoing Roundtable Peer Groups, call 800-851-8553 or visit www.HardhatPresentations.com.