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Field Change Memos Work


On the construction jobsite, your crew hits an underground water line not shown on the plans. With water now spraying over excavated and open footings, should you wait for a signed change order to fix the broken line or take immediate steps to mitigate the damages?

List Of Excuses:

Why You Didn’t Get Changes Approved in Writing……

#1: “I’m too busy right now to get the signature.”

(But never too busy to go to court!)

#2: “I trust my customer, he seems fair!”

(How much work will you have to do to pay for $10,000 in unpaid change orders?)

#3: “Don’t worry, I’m friends with my customer.”

(Friends sign and pay for change orders, enemies don’t.)

#4: “We’ve got to keep the job moving, I’ll get it later.”

(When we have no leverage!)

#5: “I don’t want to rock the boat this early in the job.”

(Training your customer starts at the beginning of the job!)

#6: “My customer told me we’ll work out all the extras at the end of the job.”

(When they’re out of money!)

Most construction contracts have language allowing contractors to continue working, fix the problem, and keep the job moving. The key is to inform the general contractor or owner as soon as possible. Always call immediately and follow up with a faxed ‘Field Change Memo’ by the end of the same day. Your contract allows you a specific amount of time to request more money and time for the extra work.

Sample Field Change Memo

Date: 3/15

Project: The Perfect Project Re: Broken Water Line

Field Item:

Today, we hit an unidentified underground waterline while excavating footings along column line C. In order to mitigate the damages the gushing water was causing, we immediately shut off the water main, dug out the wet soil, re-compacted the sub-grade, and re-formed the footings.

See attached photo # 1 – 4 dated 3/15

Additional Cost: Cost Plus Work per approved contract hourly labor and equipment rates to be submitted and approved within 5 days.

Additional Time: 2 extra days

Sincerely, Joe Superintendent Approved: Mr. Customer

The field memo system is a simple way to get a customer’s signature authorizing you to proceed with extra work, and acknowledging you’ll agree on a price later based on pre-approved rates that have been agreed on and attached to your contract. The actual change order can involve many parties, including the subcontractor, general contractor, construction manager, architect or engineer, project owner, and lender. In a typical situation, the subcontractor submits a change order request. The builder’s project manager reviews it and submits a change order request to the owner. The owner has the architect or engineer approve it. And then, if it’s valid, the bank must approve it so the progress payment cost breakdown can be processed. Those steps can sometimes take three, six, or 12 weeks. The final price of any owner-requested changes is usually approved prior to starting the extra work. On unwanted extras, most change orders are rarely approved prior to the start of the work.

Charge the Right Price

Most contracts delineate how to proceed with change orders. There are three standard ways extra work can be performed by your contracts:

Lump Sum - A fixed price for all extra work required
Detailed Cost Breakdown - A detailed estimate with backup
Cost Plus - Actual costs of the work plus markup

In the lump sum method, the owner or contractor can require the subcontractor to perform the work “lump sum” or “fixed price” for extra work agreed on prior to starting the work. With a detailed cost breakdown approach, the subcontractor can be required to present their detailed estimate with backup. If the general contractor or owner isn’t satisfied with either the lump sum quote or the detailed cost breakdown price, they can usually force the subcontractor to perform the work on a cost-plus basis.

Many contractors only like to work on a lump-sum basis. If you have been in business awhile, you know what things should cost. If a subcontractor forwards an extra charge to you in the amount of $750 for a $200 item, and you submit the bill to your customer for approval, the customer will think you are either trying to gouge them, or you don’t know what things cost. You will then need to go back to your subcontractor and tell them to give you a fair price. When a lump-sum estimate is rejected, negotiating over price ensues using the detailed cost breakdown method. Arguments begin and enemies are made at this level. Avoid this by charging the right price the first time.

Extra Work Takes Extra Time

In every change order request, always include additional time required to perform the work even if it doesn’t affect the critical path of the project. No exceptions.

Get paid for what you do by putting it in writing every time. Start using this Field Change Memo system and you’ll improve your collection ratio.

Business - Commercial Real Estate Industry

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This article contains general information only. Sunflower Bank is not, by means of this article, rendering accounting, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, before making any decisions related to these matters, you should consult a qualified professional advisor.