Change orders are where margin is won back or lost. Most of the losses I see are not bad pricing; they are late notice, missing backup and work done before anything was signed.
What are the three ways to change the work under A201?
| Tool | A201-2017 | Who signs | Use it when |
|---|---|---|---|
| Change order | Section 7.2 | Owner, contractor and architect | Everyone agrees on scope, price and time |
| Construction change directive (CCD) | Section 7.3 | Owner and architect | Work must proceed before price or time is agreed |
| Minor change in the work | Section 7.4 | Architect | No change to price or time, consistent with the design intent |
How does a change order move, step by step?
- Change event. An RFI answer, owner request, design change or unforeseen condition.
- Notice. Give written notice within the time your contract requires. Late notice is the most common reason claims fail.
- Pricing. Get sub quotes, price labor, material and equipment, and add markup as the contract allows.
- Proposal. Send a change order request with backup and any time impact.
- Negotiation and approval. Agree scope, price and days.
- Execution. Sign the G701 or the owner's form.
- Billing. Add the approved change order as its own line on the G703 continuation sheet. Bill it only once it is signed.
How should you price markup?
Your contract sets it. Many owner agreements cap overhead and profit, set different percentages for your own work and for subcontracted work, and limit markup on markup. Under A201 Section 7.3.4, if the parties cannot agree, the architect determines the cost of a CCD from actual costs such as labor, materials, equipment rental, bond and insurance premiums and supervision, plus a reasonable allowance for overhead and profit. Track those costs daily on any directed work.
What are the common mistakes?
- Doing the work on a verbal instruction.
- Missing the notice deadline.
- Pricing without backup, so the owner rejects it.
- Forgetting the time impact, then losing the right to the days.
- Billing unapproved change orders on the pay application.
How does Fina help?
Fina, BAU AI's finance and budget agent, tracks every change event from the first notice, pulls sub quotes and costs into the change order request, checks the markup against your contract, and moves approved changes into the budget and the pay application. Your project manager reviews and submits. Fina is offered to the founding cohort and is not part of the published plans.
If change orders slip through the cracks on your jobs, join our US founding cohort and test Fina on one project.
Tushar Adsul, Founder and CEO, BAU AI
Frequently asked questions
What is the difference between a change order and a CCD? A change order is agreed by all three parties. A CCD lets the owner direct the work before price or time is agreed.
Is the G701 required? It is the standard AIA form for A201 contracts. Owners may use their own form; the contract decides.
Can a subcontractor use a change order? Yes, under its subcontract, often on the same form or the general contractor's form.
Sources
- AIA A201-2017, General Conditions of the Contract for Construction, Article 7, Changes in the Work.
- AIA G701-2017, Change Order.