Practical Tips About Change Orders and Backcharges

By: Rex A. Christensen, Esq.

General contractors are often reluctant to withhold payment owed under a subcontract, because each party's obligations are clearly spelled out. This clarity is often lacking when additional work is done, either because the additional work was never requested in writing, or because appropriate signatures were not obtained, or the like. Many of these problems can be avoided or minimized by following these practical tips.

1. Don't Start Any Work Until You Have a Signed Contract. If you never had a signed contract to begin with, how will you prove that the additional work was not included in your original agreement? Insist on a written agreement with a clearly defined scope of work.

2. Make Sure The General Contractor's On-Site Superintendent Has Authority to Execute Change Orders. The reality of construction projects is that additional work often must be started immediately. If the on-site project manager or superintendent is given authority to sign change orders, the delay will be minimal.

3. Never Do Any Additional Work Until You Have a Signed Change Order. Always obtain signatures on requests for additional work or materials. You may have to wait for the general contractor's president to sign the change order, but it will be almost impossible to get the signature after you have done the work. To avoid liability for delays while waiting for the signatures, you should include a provision in the original contract that states that you are never required to do additional work until the general has signed the change order, and that you will not be responsible for any delays in the project caused by the general's delay in signing.

4. Investigate the General Contractor's History of Backcharges. Legitimate backcharges should be issued at the time they are incurred. The practice of issuing multiple backcharges at the end of a project, relating to defects or omissions that allegedly took place months earlier, is dubious at best. Before signing a contract, ask the general for a list of subcontractors from its most recently completed project. Ask your competitors and colleagues about this general's reputation concerning backcharges. If you have any doubts, don't proceed. While it may be hard to turn down the work, the contract will do more harm than good if the general issues unexpected and unjustified backcharges that eliminate your profit on the job.

5. Don't Forget to Update Your Preliminary Lien Notices. Within twenty days of beginning your work on the project, you should have executed and served a Preliminary Twenty-Day Lien Notice. Whenever a Change Order is executed, an additional preliminary lien notice should be served. If you don't do this, and if your final contract amount, including all change orders, exceeds the amount listed in your first preliminary notice by more than twenty percent (20%), then you won't have any lien rights for the additional amounts.

None of these steps will guarantee payment for extra work. However, if you follow these tips, the general contractor will have more incentive to pay, and you will have an advantage if you ever end up in court fighting for payment for the extra work.

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By: Rex A. Christensen, Esq.
Rex A. Christensen, Esq.
2168 East Williams Field Road, Suite 200-A
Gilbert, Arizona 85295
(480) 378-2400