Changes to the Contract: Differences Between Change Orders and Construction Change Directives

By Sara Bour, Esq., Manager and Counsel, AIA Contract Documents

November 1, 2021

Construction projects rarely go according to initial plans. Projects of all shapes and sizes will need alterations that impact the original contract terms. Today, we see supply chain disruptions and labor shortages driving a need for changes to the work, which is often leading to disputes and claims. Changes in the work should be properly documented on the project. There are two primary ways to memorialize changes in the scope of work and resulting changes in the Contract Sum and Contract Time: Change Orders and Construction Change Directives. AIA offers the AIA Document G701-2017, Change Order and AIA Document G714-2017, Construction Change Directive that, when executed, properly document changes implemented during construction. These documents modify the original contract without invalidating or abandoning the terms and obligations therein. But how and when should each of these documents be used?

Change Orders

Change Orders are used for implementing changes in the work agreed to by the owner, contractor, and architect. Change Orders may also be used with subcontractors, construction managers, and design-builders. When executed by the necessary parties, a Change Order signifies an agreement upon all terms of the change, including changes in the Contract Sum and Contract Time.

Change Orders may derive from a variety of occurrences. The typical starting point includes Change Order Requests, Architect’s Supplemental Instructions, Requests for Information, and Proposal Requests. The Fundamental of Change Orders in Construction, written by Salvatore Verrastro, AIA and Mark I. Baum, AIA, details the process of completing a Change Order.  Fundamentally, change order requests typically seek an adjustment to the Contract Sum or Contract Time, based on a change in the scope of work or some other condition impacting the contractor. A common example is when the owner desires a change in the design of the project. Once the design change is determined, the architect may issue a proposal request or a modification to the scope to the contractor. The changed design may not only delay the contractor’s performance, but may involve extra costs that were not originally anticipated in the contractor’s bid. If an agreement is reached about the proposed modification to the original contract, the owner, architect, and contractor sign and retain the Change Order. The Contract Sum and Contract Time of the original contract are then adjusted accordingly.

Construction Change Directives

What happens when the parties do not agree to the terms surrounding the changed work? Construction Change Directives should be used when changes must be promptly implemented on the project, but the parties have not yet agreed to adjustments in the Contract Sum or Contract Time. These directives flow downstream from the owner and architect to the contractor. When a contractor receives the directive, he must promptly proceed with the changed work. Construction Change Directives can be used to direct changes in the work which, if not promptly performed, may delay completion of the project. Failure to promptly undertake the changed work may result in a claim or dispute.

Typically, a Construction Change Directive is signed by only the owner and architect. It will describe the changed work and may propose an adjustment to the Contract Sum and the Contract Time. If the contractor agrees to the proposal, he may then execute the directive and a Change Order should be issued to make a clear record of the adjustment.

How does a contractor get paid for the changed work after issuances of a Construction Change Directive? The contract should specify the payment process. Under the AIA Document A201-2017, General Conditions of Contract for Construction, when determination of the total cost from the Construction Change Directive is pending, a contractor may still request payment for the changed work in its applications for payment. The architect is then tasked with making an interim determination of the costs and certifying for payment the amount determined to be reasonably justified. In turn, the Contract Sum is adjusted on the same basis as a Change Order.

In addition to offering the AIA Document G701-2017, Change Order and AIA Document G714-2017, Construction Change Directive , the AIA offers variations to be used with subcontractors, design-builders and projects with construction managers.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.