Bidding construction jobs can be a bit like guessing how many gumballs are in a jar! You cannot know what you cannot see. Therefore, the validity of your bid is subject to a solid scope or statement of work (SOW) and in some cases detailed bid specifications.
Regardless of how detailed the SOW might be, there will undoubtably be scope items that could not be foreseen and/or natural forces like weather or other “acts of God” that impact your work and schedule.
Before You Even Enter the Contract
So, when entering into any contract, make sure there is a change order (CO) provision that stipulates your ability to request a change order when unforeseen items occur.
Always ensure that COs are to be in writing, provide the detail on why the CO should be approved, provide details on the additional work and cost above the contract price, and are signed off by you and your customer.
With regards to the customer, make sure the person signing off has the authority. All contracts should call out the person in charge and/or with signature authority. If not, the person that signed your contract is the person with authority.
Don’t Work Outside the Original Contract
In no circumstances should you ever perform out of scope work without a signed CO. When you do, you lose all leverage on collecting for the work and can impact your ability to perfect and enforce a mechanics lien should one be filled.
Another rule of thumb when providing a bid; be sure to clearly call out your assumptions, especially if the SOW is loose. For example, when providing excavating and grading services, call out the assumptions for total cubic yards to be removed; rock will not be present above X feet; fill dirt or debris is not present, and so on.
You know your business and the items that will impact your price. Specifically call these out. Understand that these assumptions will often become the basis of a successful CO.
There May be Exceptions
At times you will see a “duty to proceed clause” on time critical projects, especially in the government world. These clauses effectively require you to continue work even if the work is outside of the SOW you signed up for.
When these clauses are present, you will be required to continue to provide your services while you negotiate the cost modification. To “put tools down” or stop work in the presence of the clauses will mean you are in breach of contract which is not the route you want to take.
When these clauses are present, your protection is predicated on several things:
- Your understanding of the scope during the proposal phase
- Documentation of the change in work or extended labor hours at the time it occurs (the more detail the better)
- The clarity of your proposal, based on anticipated site conditions and a clear set of assumptions. Having a clear proposal and basis of your bid will be the difference in getting paid or not!
The Bottom Line
CapitalPlus can help guide you through the complexities of change orders, in addition to our invoice factoring services, always available to help with any funding needs your business may have. Contact us today to see how many ways CapitalPlus can help your business grow!