|The Mighty (Neglected) Change Order|
The Best Practices Method of Changing a Contract
I received a sticky from a fellow member requesting details for a "Change Order" form. (some nice comments too - thank you!) Hope this post helps.
Note: I am not a lawyer and this not legal advice. Please seek competent local legal advice before any use of the following.
My definition: A Change Order - (CO) is a written document signed by authorised persons, directing a contractor to make a change under the Changes clause of a valid contract.
Basically a CO is a description of an addition/change/deletion to a contract's scope of work and the addition/deletion/no change to the contracts quoted price.
So ... there must be a valid contract (a verbal contract can still be valid - well written and signed is much much better) and the contract must include a clause allowing for change. This clause is often omitted or poorly written, which can be a costly mistake.
My contract Changes clause includes at least the following:
- Any and all changes must be documented by a CO.
- The form(s) to be used are stipulated and included as an appendix to the contract.
- A CO can be initiated by either party (client or contractor). Note: Some contractors/clients use a separate specific form to Request a Change. I generally do not.
- That the contractor (me!) is the sole determinator of the work/time/cost requirements of the proposed changes.
- A CO must detail the changes to the work, the time, and the cost.
- That a CO must be signed as accepted by an authorised authority of each party involved (at least the client and contractor) to be in effect.
- That there is no requirement to sign and accept a CO just because one party requests - the contract remains the contract.
- The names, positions, companies, and addresses of all authorised signators to a CO.
- The actual authority of each signer. (some companies only allow certain people to sign certain levels of change/cost)
- The option for the contractor (me!) to claim that the change is enough to require an entire separate quote and contract - that it is materially outside of and therefore additional and separate to the current contract.
- That without the signed consent of all/both parties there is no change.
- That without the signed consent of all/both parties no work on a proposed change will be done.
I recommend that you prepare (ahead of time) a proper CO form. Mine includes at least the following:
- A number sequence i.e. 0001.
- The effective date.
- The contractors name and address.
- The clients name and address.
- The contract name/number/etc. to which the CO applies.
- The clause(s) of the contract to which the CO applies.
- A description of each change. - (I prefer 1-CO == 1-change as it keeps things very simple but it can increase the paper with some clients)
- A note (I use checkboxes on the form) to whether the "change" is additional work, decreased work, or no change to work. - (poor but simple example: deciding to change the font style after the design stage but prior to actual css coding is a change that adds no work/time/cost contraint to the contract)
- A note to whether the "change" is additional time, decreased time, or no change to time.
- A note to whether the "change" is additional cost, decreased cost, or no change to cost.
- A description of the revised project milestones (if required).
- The cost amount of each "change".
- The total cost of change (if multiple changes per CO).
- The revised total project cost.
- The revised payment schedule.
- The signature line with name, position, company of the client's authorised signer.
- The signature line with name, position, company of the contractor's authorised signer.
- The signature lines with name, position, company of the witnesses to each authorised signer.
- Dates for each signature.
- Various legal references put in by my law-type-person to comply with whatever.
I hope this is helpful. Far too many people are very talented in their technical expertise but very ignorant of business best practices.
Be a company - not an individual - if you are contracting work.
Have a Business Plan - update it at least yearly.
Have a lawyer and an accountant that you can communicate with - and do so.
Learn to write Proposals.
Learn to write contracts - and change orders.
Learn ... learn ... learn ...
[edited by: stuntdubl at 11:18 pm (utc) on Nov. 14, 2004]
[edit reason] generalized member [/edit]
awesome food for thought.
I was working on something like this just an hour ago; you made is much easier for me Big Guy! thanks!
iamlost - Great post... thanks.
This is the kind of information that makes me glad WebmasterWorld is here, and prompted me to renew my Supporters subscription. It doesn't have to be in the private forum to be invaluable.
|This is the kind of information that makes me glad WebmasterWorld is here |
My exact thoughts - second time in two days (the Xenu recommendation being the other) - thanks iamlost for a great post.
It never ceases to amaze me that just as I'm looking for something, sometimes DESPERATELY looking for it!, it will get posted in these fora.
iamlost, I repeat, you NEED to change your nick - how about IAMFOUND? You are ANYTHING but "lost"....
Great post - I can speak to the value of change control due to painful experience. Not long ago, we did a software development project for a reputable client. As our programmer was getting into the project, he suggested using a different database than originally specified; the client agreed. We completed the development phase, installed a demo, and trained the client's staff, incorporating some of their suggestions for improvement. About this time, a new senior boss took over IT at the client.
We sent the client a bill for the work, and ultimately were told they wouldn't pay. Our software didn't meet the specification, and they hired another company (buddy of new boss?) to complete the job. The client guy who approved our change developed a convenient case of amnesia, and denied approving any changes in the spec.
We ended up eating the entire project cost. For a variety of reasons, we decided not to sue the client. The overriding factor, though, was that we had no proof at all that the client approved the change.
That's a costly lesson in why formal change control is necessary.
Scope creep is another big factor. As you are going forward in a project, it's easy for the client to say, "Hey, can you do this, too?" When he gets the bill with the additional work added, amnesia strikes again. "I'm sure I never approved any cost beyond what was quoted... " I've got a contested bill right now due to that kind of thing - and the client is an attorney, of all things.
Change orders are your friend! Don't neglect them!
|When he gets the bill with the additional work added, amnesia strikes again |
There was a time when no IBM employee who walked among customers was without a little pad of potentially billable forms.
At the first hint that you were asking for something that might be extra to the contract, they'd pop a hand into a pocket and tear off a nice blank form.
They'd full it out with the details, and you'd sign and agree that you might be charged for the work being discussed,
It only said potentially billable so the charge might get waived or overruled by their superior. But it certainly put a sudden edge on whatever was being discussed.
We've split off a new thread, to keep this one on topic:
When a Change Order (CO) won't work [webmasterworld.com] - what to do with a clent who just won't commit