Concepts
A change or variation order refers to a work that is added to or deleted from the original scope of work of a contract, which alters the original contract amount and/or completion date. It is a typical part of the construction environment and is generally formalized in writing. It is used to implement and record changes that adjust the contract’s scope, schedule, or cost.
Change orders generally focus on three key variables: scope, time, and cost. If there’s an alteration to any of these three factors, a change order would be initiated. For example, a client might wish to add an additional floor to a construction project halfway through. This would undeniably impact the project’s scope, schedule, and budget, necessitating a formal change order.
Characteristics
- Initiated by any authorized personnel involved with the project
- Change the scope, cost, or timing of the project
- Normally approved by the client before commencement
- Generally agreed upon cordially
Claims
Claims, on the other hand, are a request or demand by the contractor seeking additional time, cost, or both, which they believe the contract entitles them to, but the employer does not agree upon. In construction contracts, these disputes would arise when one party believes there have been changes to the job that the existing contract does not cover, thereby necessitating additional payment and/or time extensions.
For instance, if very abrupt weather changes lead to substantial unplanned delays, the contracting team may file a claim for a time extension, stating that these unforeseen weather events were beyond their control.
Characteristics
- Initiated by the contractor to request extra payment or time
- Involves disputes or disagreements
- Can lead to legal action or arbitration if disputes persist
- Claims are usually confrontational
| Change/Variation Orders | Claims | |
|---|---|---|
| What are they? | Adjustments to existing contract | Requests for extra time or cost |
| Who initiates? | Any authorized party | Contractor |
| Impact on project | Changes scope, schedule, cost | Seeks additional payment or time |
| Approval required | Yes | Disputed |
| Potential for confrontation | Low | High |
To prepare for the PMI-CP exam, it’s crucial to understand how both change orders and claims function, what triggers each, how they’re processed, and their potential impacts on the project. Furthermore, knowing how to efficiently manage these aspects can be a determining factor in successfully delivering a project on time and within budget.
Answer the Questions in Comment Section
True or False: A change order is a formal document that changes the terms of the original contract, including the price and schedule.
- True
- False
Answer: True
Explanation: A change order is indeed a formal document that modifies the elements of the original contract, typically including adjustments to the price, schedule, or scope of the project.
True or False: A claim is a demand for additional time and/or money due to changes not covered by the contract.
- True
- False
Answer: True
Explanation: Claims in a contracted project typically arise due to changes, disputes or unwanted situations not stated in the original contract specifications requiring additional time, resources or funds.
Multiple Choice: Which of the following best describes a variation order?
- a) Statement of dissatisfaction
- b) Change in the original contract
- c) Claim for additional money
Answer: b) Change in the original contract
Explanation: A variation order represents an alteration to the original contract including changes in the project’s scope, specifications, designs or instructions. It is formally issued by the project owner/client to execute the changes.
Multiple Choice: In claims, the contractor is:
- a) Requesting modifications to the contract
- b) Seeking compensations or extensions due to disruptions or delays
- c) Reducing the project budget
Answer: b) Seeking compensations or extensions due to disruptions or delays
Explanation: Claims are usually made by contractors seeking compensations for unexpected disruptions, changes, or delays that arose during the execution of the project.
True or False: Change orders do not have any effect on the project timeline.
- True
- False
Answer: False
Explanation: Change orders often affect the project timeline and budget as it modifies the original contract by adding or removing aspects of the project.
True or False: Claims can lead to legal disputes if not handled properly.
- True
- False
Answer: True
Explanation: Claims represent disagreements between parties which, if not resolved skillfully and timely, may evolve into complex legal issues or disputes.
Multiple Choice: Which of the following is a similarity between change orders and claims?
- a) Both require additional time and/or money
- b) Both represent a dissatisfaction with the project
- c) Both are chosen by the contractor
Answer: a) Both require additional time and/or money
Explanation: Regardless of whether it’s a change/variation order or a claim, both can result in a demand for extra time or funds since they represent alterations or disagreements in the operational aspects of the project.
Multiple select: Which of the following could be a reason for a change order?
- a) Equipment failure
- b) Design errors
- c) Unexpected site conditions
- d) Disagreement between parties
Answer: b) Design errors, c) Unexpected site conditions
Explanation: Design errors and unexpected site conditions can lead to the issuance of a change order to address and rectify those issues.
True or False: Claims are only initiated by the contractor.
- True
- False
Answer: True
Explanation: Claims are solely initiated by the contractor seeking remedy for disruptions or delays that were unanticipated and are not covered under the original contract.
Multiple Choice: What is the result of a successful variation order?
- a) Legal dispute
- b) Contract termination
- c) Altered project contract
Answer: c) Altered project contract
Explanation: Successfully issuing a variation order results in an official modification of the existing contract terms including altering project specifications, schedule or price as discussed and agreed between client and contractor.
True or False: Change orders can lead to claims.
- True
- False
Answer: True
Explanation: If not handled properly, change orders may possibly lead to claims particularly if there are misunderstandings or disagreements on the significantly altered aspects of the project.
Multiple choice: Which party usually submits a variation order?
- a) Client
- b) Contractor
- c) Subcontractor
Answer: a) Client
Explanation: The client or project owner is typically the party who submits a variation order when they decide to change the original scope or specifications of the project.
Great explanation on the differences between change orders and claims. Really helped clear things up for my PMI-CP exam prep!
Can someone explain how a variation order is processed in comparison to a claim?
I found that the section on the reasons for issuing change orders vs. claims particularly insightful.
Appreciate the detailed breakdown of both concepts!
Interesting post! What’s the main difference in documentation requirements between change orders and claims?
Could someone elaborate on how each affects the project timeline?
Thanks! Very useful for my exam prep!
I’ve always been confused about these terms. This post really clarifies things.