How to Make your Construction Change Order Claims Successful

"Almost every construction project will have changes and delays. Contractors must understand the process to successfully claim for their costs and delays."

On almost every one of the 120 plus construction projects I’ve been involved in we have encountered variations which have resulted in us submitting change order claims. Some were for extension of time due to delays caused by our client. Other claims were for increased scope of work, changes in the scope, new specifications or altered project conditions. Many of these claims were for millions of dollars and some projects almost doubled in value. Yet, in most cases we received the full value of our claim or the full extension of time requested. Furthermore we resolved 99% of the claims amicably without resorting to arbitration or legal processes, and we maintained a good relationship with our customers, almost always going on to complete other projects with them.
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So why were we so successful submitting construction change order claims and why do so many contractors’ change order claims end up not being accepted, or if they are it’s only after an expensive and time-consuming legal process?

Know your client as they are vital to settling change order claims amicably

The ease of settling a construction change order claim starts with your customer, your relationship with your customer and sometimes relates to their budget. Some customers are adversarial with their contractors and will dispute every change order submitted. Do you really want to work for these customers? It’s essential you understand your customer when bidding for a construction project. Don’t work for those who have a reputation for frequent legal disputes with their contractors. In construction it’s important to know your clients. It could save you.

Having a good relationship with your customer is essential. If you are adversarial they will take the same approach. Continually talking to your customer keeps them informed so when change orders are submitted they aren’t taken by surprise. If customers think they can trust you and that generally you’re honest with them they’ll often be more receptive to your variation claim. However, if you have a habit of submitting spurious or inflated claims they’re likely to oppose your claims immediately.
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It helps if your customer has money in their budget to pay for change orders. Some clients have no funds to pay change orders and will do everything possible not to pay extra to their contractors. Try and ensure your customer remains within their budget and resist pricing projects where you know their budget is too tight.

Understand your construction contract

Contractors often get into trouble because they sign and agree to construction contract conditions which offer them little protection. Before pricing a construction project ensure the terms and conditions of the contract are equitable and that the risks you have to take on are reasonable and manageable. The terms of some construction contracts may make it very difficult to submit a claim or the contract may confer the risk of many variations on the contractor, even when they have little control of these risks. Don’t start construction projects without a proper contract

It’s essential you understand the contract document, that you are familiar with the scope, and know both your obligations and your customer’s. Claims need to be submitted in the time frames in the contract and risk being refused if they aren’t. An introduction to construction variation claims for construction project managers video 14 - The Construction Contract Document

Presenting your construction change order claim

I’ve seen many poorly put together change order requests. Some for millions of dollars, yet contractors often apply minimal time and effort to formulating their claims. Some even delegate their variation claim preparation to junior inexperienced quantity surveyors or contract administrators. Sometimes the construction project manager isn’t even aware a variation claim has been submitted and is blindsided when their client takes offence to a spurious or unsupported claim. ​Should construction project managers take the lead with variation claims?

I’ve seen variation and delay claims with math errors, spelling mistakes (even incorrectly spelling the client’s name), factual errors, contradictory information, confusing language and unsupported evidence.

Contractors should ensure that a knowledgeable and experienced person is allocated to draft the claim (familiar with the contract, the client and the work that’s been done) and that it’s reviewed and checked by the project manager before it’s submitted.

It’s preferable to keep variation claims separate unless they are linked, and one impacts another. Combining different change orders and variation claims in the same submission can be confusing for the customer. Rejection of one claim could delay approval of the others.

Image courtesy of stockimages at FreeDigitalPhotos.net

"Construction variation claims are usually worth lots of money so put the effort in to preparing a successful claim."

What to include in your variation claim

A properly drafted and well thought out construction change order claim will be hard for your client to refute and it’s likely to be successful. Claims should be clear, concise and logical.

Successful change order claims should have:

• A description of the event
• The cause of the event
• The date of the event, where relevant
• The impact of the event
• Steps taken to mitigate the impact An introduction to construction variation claims video 18 -  Mitigating Variation Claims
• The cost and time impacts of the event
• All supporting documentation attached, or should refer to supporting documentation correctly referencing the relevant contract clause numbers, construction drawing numbers, schedule or program item numbers, correspondence, Bill of Quantity items or construction contract specifications as required.

As part of formulating the impact of the event all calculations and schedules should be included. The change order claim schedule should reference the approved contract construction schedule (construction programme). Calculations should reference where the facts and figures came from and how they were put together. The calculations should be checked for math errors (which can occur all too frequently).

Remember to include all of your legitimate and claimable costs. It’s usually difficult to add in extra forgotten costs after you have submitted your claim. It’s unprofessional and will annoy your client. It may even cast doubts on the legitimacy of your original claim. Construction project variations – have you included all your costs?
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It’s useful to discuss your change order claim with others in the project construction team to ensure you have the facts set down correctly and that you have referenced the relevant documents and included all of the costs. Get someone to check your claim for errors and to see if they can follow your logic. If your logic is flawed, or can’t be easily followed your customer will be inclined to reject it first, before asking questions. Once a change order claim is rejected it becomes more difficult to change their mind and convince your customer you’re entitled to the variation.
An introduction to construction variation claims video 16 - Documents required to support your claim

"An easy-to-read book that will help you submit winning variation claims."

Submitting your change order claim

The client must be notified of variations as soon as you become aware of them, and certainly within the time specified in the contract. Failure to do so may mean the contractor loses the right to claim.
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The variation claim must:

• Be lodged within the time-frame specified in the contract
• Be addressed to the correct person
• Be delivered to the correct address

​It’s often a good idea to discuss large or contentious variation claims with your client before submitting them. This not only forewarns the client the claim is coming, but also provides an opportunity to discuss the reasons and the merits of the variation.

Successfully negotiating your change order

As much as you may consider your variation claim as complete, final and non-negotiable, it’s almost certain that your customer will come back with questions, counterarguments and try and negotiate the quantum of the variation claim down, or even reject it completely.

In responding to questions from the client ensure that your replies remain factual and stick to the original arguments presented in your claim. It’s easy to introduce other arguments and ideas which could be contradictory or confusing.

Reply to all questions in writing referencing the original variation claim. If the questions are raised in a meeting take notes of the questions and your answers and confirm them afterwards in writing.
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It goes without saying that all correspondence relating to the variation claim and change order needs to be filed where it’s readily able to be retrieved. Some claims can take months to resolve, and if the claim follows the legal or arbitration route it could even take years. But even when a change order is approved it may still be subject to audit by a third party at the end of the project.
Negotiating a construction variation claim – read this first to improve your success

Image courtesy of Ambro at FreeDigitalPhotos.net

"Ensure all agreements are confirmed in writing."

Ensure your construction variation claims are approved

It’s essential variation claims are correctly formulated and submitted in accordance with the contract. They need to be resolved as soon as possible, preferably amicably and without resorting to protracted legal disputes. However, this shouldn’t mean that contractors don’t fight for their entitlements in terms of the contract. 

A properly drafted and presented variation claim which is fair will be more readily accepted by your customer. Make sure your variation claims and change orders are successful.
15 Rules for construction variation claims and change orders
How do you ensure your variation claims are successful?

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"Most of the books on claims would focus on the ingredients of a claim, but very few indeed give practical advice on actual writing. This book fills this gap so nicely. It is well-structured and clearly written."

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