Helping contractors prepare change order requests and claims is one of the things that I do every day. In doing so, I often see them struggle with exactly what they need to include to make their change orders and claims persuasive and, more importantly, successful.

One of the keys to a persuasive and successful change order request or claim is providing adequate documentation. To fully appreciate what the term “adequate documentation” means, it’s important to consider what I believe are the three main elements of a change order or claim: Entitlement, Impact, and Cost. If we can address each of these, your chances of receiving payment for the change order or claim improves significantly.

Looking at each element in turn, here is the kind of documentation that should be included in a change order request or claim. Entitlement

What Does the Contract Say?

Referencing your contract and the contractual provisions relevant to the issues are things that I cannot stress enough. By definition, a “change” is something that caused your work to differ from what your contract originally contemplated you would be responsible for. You need to show how the project work, working conditions, or requirements differed from the contract work, conditions, or requirements. Then reference the appropriate contract provision. This becomes the foundation for your change order request or claim.

What are the Facts?

In addition to showing your contract obligations, you also have to establish that the work, conditions, or requirements are, in fact, different from your obligations as set forth in your contract. This is a factual issue. Documentation is used to establish the necessary facts.

Daily reports, logs, and diaries are often essential to establishing what actually happened or what conditions were actually encountered. Daily reports and other daily records, prepared at the time the problem was discovered, are often given substantial credibility and are among the most persuasive documents available for establishing the fact that a change has occurred.

Other credible sources of facts include correspondence, directions from the owner, meeting minutes, and other communications between you and the owner. Project photos are also very persuasive when comparing actual conditions against design documents.

Impact

Description of the Impact

One of the biggest challenges for contractors is that they struggle with describing and documenting the impact they’ve experienced. It’s not enough to simply show that a change occurred. Contractors also have to connect the change with the added costs incurred to deal with the change. This causal link between the change and the costs is referred to as “impacts.” Impacts can take many forms, but common examples include delays, inefficiencies, and added effort to perform additional or more difficult work.

In order for your request to be successful, you must connect the dots between the change and its impact on your work. If it’s a delay claim, providing the applicable schedules and time impact analyses are crucial. If it’s an inefficiency claim, then documentation related to performance (productivity) will be needed, including labor hours, equipment hours, and quantities of work performed.

Cost

Accounting and Cost Information

This is where we assign a dollar value to the impact we just described. Items such as labor wage rates, equipment rental rates or ownership costs, and direct and indirect costs should all be documented, compiled, and calculated in accordance with accepted accounting standards and the contract. Any dollar amount you claim should have accounting documentation to support that cost. There’s one last thing I want to stress. When preparing change order requests and claims, it truly is “garbage in, garbage out.” Spending the necessary time and resources to prepare a comprehensive and persuasive request will provide better results, and save you both time and money in the long run. If you focus on these same three elements during your change order request or claim preparation, and provide adequate documentation with each step, you will have a better chance for a successful outcome.

For more on this or any other topic, please call me at 215-814-6400 or email me at bill.haydt@traunerconsulting.com.

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