Cause classification: owner scope, design gap, unforeseen, coordination
A change order carries a price, a time extension and a description. On a GMP contract it should also carry a cause. The cause is the one field that tells the owner which pocket the money comes from, and it is the field most often left blank.
Four causes cover nearly everything that happens on a CM at risk project: owner scope, design gap, unforeseen condition, and coordination. This post explains each one, why they point at different funds, and why an owner should assign the cause before the contractor's pricing arrives.
Why the cause matters more than the amount
Under most AIA A133 based agreements, a GMP contains a contractor contingency, and the owner often holds a separate owner contingency outside it. A change caused by the owner asking for something new is paid by the owner, usually through a change order that raises the GMP. A change caused by a coordination miss between trades is usually carried by the contractor contingency inside the GMP. The amount might be the same. The fund is not.
That is why classification has to come before pricing. Once a PCO has been priced and negotiated, the conversation is about the number. The question of who should have carried the cost gets quieter every week. An owner who assigns a cause on day one keeps that question alive.
The four causes, one at a time
Each cause has a plain test. If the test is not met, the change belongs somewhere else or needs more information.
Owner scope
The owner asked for something that was not in the documents the GMP was based on. A larger generator, a second elevator, a finish upgrade. The test is simple: would the change exist if the owner had stayed silent? If not, it is owner scope. The owner pays, typically from owner contingency, and the GMP moves by change order.
Design gap
The documents were incomplete or wrong, and the work was needed to build what was clearly intended. A missing detail at a roof edge, a structural member that does not appear on the drawings but has to be there. The owner usually pays the contractor for the work, but the cause sits with the design team. Recording it as design gap, not owner scope, keeps the door open for a later conversation with the architect.
Unforeseen condition
The site was different from what a careful contractor could have known. Rock where borings showed clay, an abandoned tank, a buried foundation. Check your contract for the notice period and the standard of care. Most agreements put this cost on the owner, but only if notice was given in time.
Coordination
Two trades needed the same space and nobody caught it before the work was in place. A duct run that hits a beam the structural drawings showed. This is the contractor's job under most CM at risk agreements, and it belongs in contractor contingency, not in a GMP increase.
A fictional example of the same change, classified three ways
Take a fictional $28 million elementary school. During rough in, a plumbing stack lands on top of a steel beam. The contractor submits a PCO for $31,000 to reroute it.
If the beam was on the structural set and the stack was on the plumbing set, and nobody overlaid them, the cause is coordination. The contractor contingency absorbs it. If the structural set was revised after the GMP and the beam moved, the cause is design gap. The owner pays now and records it against the architect. If the owner asked to relocate a restroom after the GMP and that moved the stack, the cause is owner scope. The owner pays and the GMP rises. Same pipe, same beam, three different ledgers.
What an unclassified change costs the owner
An unclassified change is treated by default as whatever is easiest. On most projects that means it drifts toward the owner. Nobody decides this. It happens because the pay application moves forward and the question is never asked.
An owner's ledger that requires a cause on every change order entry, and flags the ones that are still blank after a set number of days, changes the default. Costwitness keeps that register on the owner's side, separate from the contractor's books, and raises the flag when a cause is missing. The owner still decides the cause. The software just refuses to let the question disappear.
What to do this month
- Pull every open PCO and change order from the last three pay applications and write a cause next to each one, even a provisional cause.
- Read the notice and unforeseen conditions clauses in your agreement so you know the tests before the next one arrives.
- Ask the contractor to include a proposed cause on every future PCO cover sheet, and reserve the right to disagree.
Questions on this
Who decides the cause of a change order?
The owner should record a cause in the owner's own register, even if the contractor proposes a different one. The contract decides who pays in the end. A clearly recorded owner position makes that conversation shorter.
Can a change order have more than one cause?
Yes, and it happens often. A design gap discovered late can turn into a coordination problem. Record the primary cause and note the secondary one in the description. If the amount can be split, split it into two entries.
What if the cause is unknown when the PCO arrives?
Record it as unclassified and set a date to decide. The point is not to be right on day one. The point is to make sure the question is answered before the change is executed and paid.
In the product
Change order register, Contingency ledger, GMP baseline. Free tool: Change Order Exposure, Contingency Runway.
Keep reading
Earlier: Owner scope change or design gap: the same duct conflict, two different bills. Later: How the contingency runway calculator arrives at a month. All articles on change orders.
See the cause register on a project like yours.
Thirty minutes on a call. The change order register with causes, the audit trail, and the notice clock, on a fictional project.