Many contractors are familiar with situations where building owners delay and reject change work orders to avoid paying for them. It is a common practice in both residential and commercial projects, Michael Stone writes for Markup and Profit. Stone outlines such situations, where contractors write a change work order (CWO) specifying changes to projects and file it to the building owner.
These CWOs are usually unanswered for weeks before the owner rejects them, despite written approval being given by the owner's project manager.
Make no mistake about this, the delay is done deliberately by the owner. They are trying to get the work done for free or at a greatly reduced rate. They know that the contractor wants to get the project finished and get out of there and that, in all likelihood, since the change has already been made on the project the contractor will reduce the price of the CWO or write it off rather than bother to fight.
Stone tackles the question of how contractors protect themselves from such practices. The first step is learning how the project will be financed to ensure you have the correct information to communicate with the lender. The second step is putting a proposal together with a clear payment schedule.
In your documentation or proposal, make it clear that if your payment schedule isn't met, you'll file a lien immediately. Also explain that if you have to file a lien and they still haven't paid after thirty days (or however many days you want to set), you'll start foreclosure.
There are a few more things to consider. When you write a CWO for a job, include a time limit on the approval. Three days is plenty of time for an owner to decide to make a change or not. Maybe four or five days in some instances, but weeks or months? Not necessary. Also tell them in writing that if they don't approve or deny it in that time frame, you'll assume it's been approved and you'll implement the change in order to keep the time schedule. That might or might not hold up in a court fight, but it's worth documenting and it should encourage them to decide much faster.
Stone advises contractors against agreeing to a job where full responsibility of field measurements and building applications fall on the contractor. Getting all the information up front in a strong proposal can protect against delays and nonpayments in CWO situations.
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