Zero dollar change orders: time extensions and scope swaps that still need a cause
Some change orders carry no money. A fourteen day extension for weather. A substitution of one manufacturer's light fixture for another at no change in price. A revision to the drawings that moves a wall and is agreed to cost nothing because the framing has not started. The pay application does not change, the GMP does not move, and it is tempting to leave them out of the register, or to file them and forget them.
Every one of them changes the contract. The extension changes the date from which liquidated damages run. The substitution changes what the owner is getting for the price. The no cost revision is a record that the contractor agreed the change was free, which is the record that stops a claim for it later. They need a cause, a date and a reference like any other change.
Time extensions
A time extension is the change order most likely to cost the owner money without ever showing a dollar. Fourteen days of extension is fourteen days of general conditions if the contractor later claims them, fourteen days of the owner's own carrying cost, and fourteen days less of liquidated damages if the project runs late. The cause matters as much as on a money change: weather days under the contract's definition are one thing; days caused by an owner decision are another; days claimed for a coordination problem are a contractor risk under most agreements and should not extend the date at all.
The register should record the days granted, the cause, the event dates the days relate to, and whether the extension was granted with or without cost. The running total of days against the original completion date, by cause, is a number the owner will want at the end, when the contractor's delay claim and the owner's liquidated damages position are being reconciled against each other.
Substitutions at no cost
A substitution at no change in price is a statement that two things are equivalent. Sometimes they are. Often the substitute is cheaper to the contractor, and the difference is a saving that should have appeared as a credit. The owner's record of a no cost substitution should carry the original specification, the substitute, and the contractor's statement that the cost is equal. On a fictional $12 million clinic, eleven no cost substitutions over the job might be worth nothing or might be worth $60,000 of credits nobody asked for, and the only way to know is to have the list.
The specification the owner will live with
A substitution also changes the building. The facilities manager in five years will want to know why the fixtures are not the ones in the drawings, and the register with the substitution, the date and the approval is where that answer lives. A substitution that was approved by email and never entered is a question with no answer.
No cost revisions
A drawing revision agreed at no cost is the cheapest change order there is, and it is the one the owner most needs to record, because it is the contractor's agreement that the revision cost nothing. Six months later, when the same revision is cited in a claim for the coordination it caused, the executed no cost change order is the answer. Without it, the owner is relying on an email from a project engineer who has since left.
The cause on a no cost revision is usually design gap or owner scope, and it should be recorded even though no fund is drawn, because the count of design gaps by the end of the job is part of the owner's conversation with the architect, and the count is wrong if the free ones are left out.
In the register, in the report
Zero dollar changes go in the same register as every other, with the same fields and an amount of zero. The monthly report should list them, usually in a line at the bottom of the change order section: three no cost changes this month, one time extension of fourteen days for weather. The board does not need to read them. It needs to know they exist, so that the completion date it is being told is the one the contract now says.
What to do this month
- Enter every time extension with the days, the cause, the event dates and whether it carries cost.
- Enter every substitution with the original specification, the substitute and the contractor's statement of equal cost.
- Execute no cost drawing revisions as change orders rather than accepting them by email.
- Keep a running total of days by cause against the original completion date, and put it in the report.
Questions on this
Does a time extension need a change order?
Under most contracts, yes. It changes the completion date, which changes the liquidated damages position and the general conditions period. It needs a cause and a record like any money change.
Is a no cost substitution really free?
Sometimes. Often the substitute is cheaper to the contractor and the difference should have been a credit. The record of the original specification and the substitute is what lets the owner ask.
Why record a change with no money on it?
Because it changes the contract or the building. The no cost revision is the contractor's agreement that it was free; the substitution is the reason the building differs from the drawings; the extension is the new completion date.
In the product
Change order register, Monthly owner report. Free tool: Change Order Exposure.
Keep reading
Earlier: Restoring contingency: when a change order is withdrawn or a draw is reversed. Later: Shared savings when the GMP was amended: which ceiling the split is measured against. All articles on change orders.
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