What is a change order?
A change to the work, or change order, is an amendment that is permitted to occur through contract administration. A change order can change contractor tasks, standards or methods, and as a consequence may require adjustment to the contract price or contract schedule for the changed work.
An agency may execute a change order only if the contract contains specific change provisions and must execute the change order according to those provisions. The contract administrator must be aware of the allowable change provisions in the contract, which may include one or both of the following two types:
- Change request – A mutually agreed upon change in the contracted work within the general scope of a contract. A change request may be initiated by the agency, the contractor or both parties and must be mutually agreed to by both parties.
- Change order – A unilateral written order or directive issued by the agency to the contractor requiring a change in the contracted work within the general scope of a contract.
While the differences between the two may be subtle, the effect they have in a contract is vastly different. For instance, in less complex public improvement projects a change request may be effective to control changes and cost overruns in projects. However, in complex construction projects where action is required and a delay in decision-making may cost money or cause rework, a change order may be more effective.
When to use change orders
A change order is generally only used in construction and public improvement projects. Change orders require specific contract change provisions to be used. Contract administrators may only use a change order if the contract provisions allow for it.
All public improvement, and other contract types that anticipate a need for change orders, must have change provisions that:
- detail the scope of the changes allowed.
- provide details of the pricing mechanism to be used to compute cost associated with the change.
- authorize the agency to issue change requests and/or change orders.
- provide a procedure that addresses contractor claims for additional time or compensation.
An agency should use a change order when it seeks to change the services, materials, equipment, labor and incidentals necessary to successfully complete any individual item or the entire contract. An agency should establish fiscal controls to ensure that authorizations for changes to the work performed by the contractor are managed according to contract amendment requirements for the specific procurement method.
How to execute change orders
The process for executing a change order is specified in the change provisions of the original contract. A contract administrator must review the change provisions of the contract, and if a change order is allowed, the administrator must follow the specified process.
Agencies may have established internal restrictions and specific delegations for authorizing change orders, including dollar limitations. Contract administrators should review agency limitations prior to initiating a change order.
Once fully executed, the change order must be provided to the agency or DAS procurement representative and filed in the contract file along with any supporting documentation.
Note: If at any point a change order, or the aggregate of change orders, causes the value of the original contract and all amendments to exceed $150,000, the agency must execute an amendment to the original contract. The agency must submit the original contract and all amendments to the Attorney General for the required legal sufficiency review.