This contract tip is about drafting change order mechanisms.
Change orders are a contract mechanism to streamline the process for simpler changes in the statement of work (SOW). For significant changes to the SOW or contract, we use amendments.
Change orders are more common with construction, development, and other projects that tie the vendor to a fixed price for an unpredictable project.
The less certainty we have upfront, the more likely we’ll need to rely on change orders.
If you are working on a complex project, think through your change order mechanisms, including these two questions:
1. Do you need a robust change order process? - Some contracts just include a sentence, while others have pages devoted to them. What you need depends on the type of deal, its scope, and the pricing strategies.
2. Is the vendor obligated to perform all changes required by the customer? - This point can be a sticky one. Vendors may not agree that they have to take on tasks outside the original scope. But customers may not have any options under the circumstances other than the vendor.
One common compromise for this challenge is to require the vendor to perform all change orders relating to the scope on a cost-plus or time and materials basis. Customers can establish a rate sheet in advance.
Do you have any other techniques that you use to draft these provisions?
