The Definitive Guide To Change Orders In Construction

So change orders and variations— what are they? How do they impact your construction project? This video, this training is going to give you everything you need to know about what you need to negotiate in your contracts with regards to variations, change orders. What are variations, change orders? What's the difference in terminology? All the good stuff. Watch this video and you'll be an absolute pro. Hi, my name is Cian Dillon Brennan. I'm CEO of a company called Quantum Contract Solutions. The reason we make these videos is there's so many construction companies out there that are losing money hand over fist and and they don't need to, and we're gonna show you how to stop that. So if you get some value, please like and subscribe so you get notified when there's new videos up and you can learn more, and you can learn from other construction companies who have made tons of mistakes so you don't make the same ones. Enjoy. Hey, construction legends, or soon-to-be construction legends. Today's presentation and training is all about time bars. It's called Contractors King and Time Bars That Bite. This is a really, really interesting topic. In construction. It's a global thing. It's all around the world. I'll talk about one particular court case that happens to be in Australia, but it is a global thing, predominantly in all the major company countries. They all have the same thing. I've worked for companies in the US, in the Middle East, in Australia, in Ireland, and they all have this particular thing. It's called time bars, right? So let's get into what time bars are. And how they can affect the project. Okay, so let's talk about the time bar again. So originally, in construction, you've got your tiers of contractors. And so originally what used to happen is if some— if, you know, we got the head contractor and imagine he had 10 or 12 subcontractors below him performing the work. Now, What was happening in the old days was everything would look absolutely fine on the program, on the main contractor's budget, everything looks okay, we're all on track. And then at the end, all of a sudden it had become very clear that it was very, very late and people needed more money to finish. And so when they're trying to forecast their budget, it was like flat, flat, flat, and then bang, right at the end, all this flurry of costs used to come in and big delays used to come in. It used to all happen at the very end of the project, which obviously for planning purposes is not a good thing. And so what they brought in was what's called a time bar. The time bar basically said that whenever you are delayed on site or whenever you've been asked to do additional work or if you think you've been asked to do additional work, you have, you have a certain period of time to notify us in the first instance and then submit variation or change order or submit an extension of time. They're your periods of time to do this. That is what the time bar is. Now, the reason for that was so that they captured delays and they captured costs as the project was going on so they could forecast their costs and completion dates more accurately. However, in those time bar clauses, more often than not— not always, but more often than not— it'll say that if you've been delayed, or you think you've been delayed, and you don't notify us, you are taking on that delay as your own. You're saying that it's not a delay, essentially. If you've been asked to do additional work, you don't notify us within a particular time, you are taking on that additional work as your own cost, and then any delay associated with that. So what happens now in construction is they try and make those time bars super, super small, you know, 48 hours, 72 hours to try and make sure that you don't get your notice in on time. So you're not able to get your notice in from the delay on site into them. So lots of things have to happen in that 48 hours. You know, you have to look at it, see if it's a real delay, see if you can try and somehow mitigate the delay, then realize you can't, or you can, but it's still going to be a delay. And then go back to the office, get someone to write up this notice and submit it. So, you know, it seems pretty easy, but there's actually a lot of steps involved. Site and the office may be very, very far away. So communication is obviously, you know, a thing. So long story short, so many construction companies don't get their notices in on time. They don't get their variations, change orders, or extension of times in on time. And so they end up not getting paid. They get this letter back saying your variation has been rejected, your change order, your extension of time has been rejected, and therefore you're not getting paid for it. Happens all the time. Now let's go to a court case to back up this thing. And this is a BHP Billiton project, so a huge mining company in Western Australia, and they engaged very, very large tier 1 contractor called John Holland to demolish a wharf, or so now, to upgrade a wharf. And then John Holland subcontracted the demolition scope, if I'm correct, to CMA Assets. Now, CMA Assets, their whole job was to come and demolish dolphins and whatever, whatever is there, right? Dolphins are these concrete structures. So the first thing is they got up there with vessels. Now, when you've got a vessel, these vessels cost 100 grand a day, you know, a lot of money. You're talking for the vessel itself, you're talking whole crew that's on the vessel, all the equipment on the vessel. These vessels cost a lot of money per day, a lot of money on standby per day. And so when they got there, John Hollands were all in the way and they couldn't access where they need to. So this delay was a long time. They couldn't, couldn't start work. Clearly not their fault, right? Next thing was there was these dolphins, uh, with concrete structures on the side. My understanding said that the rebar in the Dolphins was different than what it was. Long story short, it took a lot longer to demolish than was originally anticipated, which once again was not CMAAS's fault. Their EOT, it was rejected for the reasons that I've said previously. They didn't submit their notice on time, they didn't submit their EOT on time. Went to court, went to Supreme Court of Western Australia, and the judge held that— says here on my screen— there is no doubt that a strict application of Clause 10.12 and 10.13 is harsh. But long story short, he held it. And so because CMASSIS didn't submit a notice or the EOT on time, even though, you know, it was— they were entitled to it, really, they didn't get paid. Not only did they not get paid, but because they delayed the project, because the delay was now theirs, they got hit with liquidated damages and they lost obviously a lot of money. So this is a global thing. There will be court cases in each of your countries with similar things, there or thereabouts. Now, there's obviously lots of little things that happen in these things. So contractually, if you're a good contracts person, you've got to get your notices in, you've got to get your EODs, you've got to get your variations in on time. So contractually, what we're trying to do here is we're trying to close the gap between delivering on site and delivering contractually. We're trying to make it easier. So when we're looking in a contract to negotiate a contract, what we want to do is we want to find all the time bars and we're going to bump them up. We want to bump them up to about 5 days. Contractually, that's all you're doing with time bars is you're bumping up the days. The days for your variations and change orders, and depending what your terminology is, and then your EOTs. Bump them up for those and the notices. Now, a couple of little tricky little things that we can talk about now while we're here is you need to have a system to easily track all the changes and delays. Submit your notices more as like a memo style, not like a personal email letter type thing. Make it look more procedural. Ideally, a little trick is do it via like doccontrol@yourcompany.com rather than person to person. Depending on your contract, might have a specific way of submitting notices more often. That's fine. Record all of your delays in your section in your weekly minutes and submit your variations regularly. Don't wait for lots of variations to come, submit it in one. Don't do that because you won't comply with the contract. Bottom line is the practical steps you need to implement is you need to find all the time bars in the contract and you need to ask them to be increased to about 5 days for all the time bars. Okay, that's it, and I'll see you in the next one.