The Challenges with Change Directives

This episode of 'What the RFI' delves into the concept of change directives in construction, explaining their significance, the process of issuing them, and the potential risks involved. Matt Brennan discusses the differences between change directives and proposed changes, emphasizing the immediate action that change directives allow. He shares real-world examples to illustrate the application of change directives and offers best practices for their use, highlighting the importance of careful evaluation and mentorship in the decision-making process.

Takeaways

• Change directives allow immediate work to start on projects.
• They differ from proposed changes in terms of documentation and approval.
• Issuing a change directive requires a signed and sealed document.
• Contractors compile all costs after work is completed under a change directive.
• It's crucial to review contractor invoices carefully after a change directive is issued.
• Change directives can be beneficial in situations with unknowns, like bad soil.
• Real-world examples illustrate the practical application of change directives.
• Best practices include evaluating the necessity of a change directive before issuing one.
• Mentorship and collaboration are essential in managing change directives effectively.
• Maintaining relationships with contractors is vital when issuing change directives.

Sound Bites
"Who doesn't love an open chequebook?"
"That's the danger of a CD."
"We can deal with the finances as we go."

Chapters
00:00 - Introduction to Change Directives
02:52 - Understanding Change Directives vs. Proposed Changes
05:47 - The Process of Issuing Change Directives
09:02 - Real-World Examples of Change Directives
11:54 - Best Practices and Cautions for Change Directives
16:11 - Conclusion and Final Thoughts on Change Directives

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Transcript

0:00

Who doesn't love an open checkbook? Today is all about change directives, and let's get into it. Welcome to What the RFI. This is the podcast all about CA from the lens of an architect, project coordinator's perspective. So today, like I said, we're getting into change directives and what is a change directive. So first off, change directives are also known as CDs in the short form, okay? But it's kind of like a proposed change or again, from the Canadian side, contemplating change notice, but it's a little different, okay? And what makes it a big difference is allows the work to start immediately. Okay, so let me explain, right? So let's look at the standard proposed change, complaint change notice process, okay? So we would basically compile a document. We would, you again, get our consultants, whatever the case is for this particular change. So if we were gonna say again, propose to change a wall. and move a wall into a job, we would get the drawings together, we would get the specs needed if it was applicable, our proposed change put together, issued out to the contractor, we would wait, and then we would get pricing, and then we approved the pricing, and then we issued a change order, and then the work would start. So from the start of this process, from the moment saying the client wants to make this change, This might take a whole month, again, to basically put the documentation together, issue it, pricing, et cetera. So where a change directive becomes different is the moment we put that piece of paperwork together. So again, this is a, we're issuing a change directive, we're putting it together and we issue it to the contractor, immediately it's a green light to go. Get started, get that work done because we're on a schedule, we need to get this, or there might be some unknowns. And that's what we're gonna kind of dive into. So again, a proposed change, put it together, price it, approve, work, change directive, issue the documents, contractor, go ahead. And that's kind of the big changes and the differences between a change directive. So how do you prepare a CD? Well, kind of as we were just kind of talking, it's very similar to the PC, but... you'll put all the documents together and before you issue this out, the one thing that is going to make this a little different, at least this is from where I am from in Vancouver, BC, but my understanding is very much across the states, is basically before you issue this, what makes this different than a proposed change is you actually do get a physical sign sealed document of the change directive. So meaning the cover page would have the architecture on record stamping, sealing this document, and then also getting the owner sign off. Because this is a document that we're issuing out to immediately green light, we have to give some kind of authority that the contractor, please proceed. You are gonna get paid again. It's an open checkbook. And I'll get into that a little bit more in depth here. So like I said, the contractor immediately commences the work. So... Again, if he was moving that wall, he's just going to go. He's going to basically get everyone in, he's going to get his trades in there. They're going to do the work immediately. And eventually they're going to come back with the paperwork and we'll get into that here in a moment. So like I said, a CD, the reason you would even entertain this is because you need to start the work immediately because there's a schedule impact or there's some other knowns. So the way the payment works, is so say this work is done, we've moved the wall, it's all done. At this point, the contractor is going to compile all the time, all the invoices, everything into one final basically proposed pricing for review. But at the same time, you don't have too much of an argument because the reality is you gave him the work and we didn't know what the costs were going to be. That's the danger of a CD as you're kind of starting to understand as we keep walking through it. Hey, so it's kind of like if you went out and built a shed for your friend and you collected all your Home Depot receipts, your gas, your rentals, your time, you basically put it all together and said, hey buddy, that shed cost me $25,233. And you know, here's a kind of a breakdown of all my time and the invoices and my receipts. And you go, hold on, I didn't expect that. At end of the day, you issued it to say, ahead. And that's what you would be owing to your buddy in that case. So basically the con, like I said, the contractor pulls all this pricing together, puts it together in one complete package. He issues it out for your review. You review the pricing and then you issue a CO and then you process it. Okay. And it can be tricky sometimes. ifs or buts about it. And where it becomes tricky is sometimes again, it's not just you as the architect, it's also involving geotechnical or maybe it's involving mechanical electrical and they all have to do their peer review and go, does the pricing make sense? Right? Because again, it doesn't mean you have to accept it, but it definitely makes it, it kind of puts you in a different spot for, you know, your review process. So like I said, if you reviewed the pricing, you go, yeah, that looks all fair and reasonable. That is the quantities that we were looking at for this particular change. you would issue a CO and be done. But say if something doesn't look right, like say if it was something about soils, and I'll go into detail and examples in a minute, but just say if it, you know, they were calling up saying it was gonna cost so much extra steel and you're looking at the drawings and going, no, no, this doesn't make sense. You know, we only needed to move the wall out by a foot and yet I'm being charged, you know, 100 feet, linear feet or something. That's where you can come back and say, and challenge the contractor in terms of his invoicing of the breakdowns and go from there. Another good example is maybe the breakdowns already been there. That's where you can say, I'm not seeing the proof of this change. Like I said, going to the example of the shed. you're charging me for corrugated cladding or something like that, but you put only vinyl on the side. that's where you can start to challenge. So you still wanna check, because again, although ideally we should be trusting, the reality is, is you need to do diligent and check the work as well, and basically what they're invoicing for. So that's where you could push back on it, and then you come to the table and be like, my bad, that invoice actually was in a different job, and we slipped it in by accident. By accident, maybe not. Point is at that point, then you can challenge it, they'll revise it, comes back, looks fair and reasonable now. issue your change order and your way you're going. Okay. So that's kind of like the standard process. Okay. And even with those disputes, sometimes it will end in a moment where you've got to basically pull in the contractor, you as the architect, the owner, consultants, and even the subs and hash it out and challenge it and go, this is based on your findings. This is where it is. They're going to come in and You do not want to get to, if you don't agree at that point, then of course it's going to be a mediation and that kind of stuff. We want to avoid that, but hopefully there's some kind of common ground where we can come together and just finalize the pricing and be good with it. So they can be a little bit tricky with it and just be prepared when you issue it. There is the reality of a change directive. So let's look at some examples. of how change trajectories apply. Why would you even issue something like this? Why would you issue this open checkbook? It sounds crazy, man. So let's look at it. So the first common one is bad soils. The beginning of the project, you got the owner hired out the geotechnical engineer. He digs some boreholes based on the preliminary plans where you're thinking of placing the school. Wonderful. But the problem is, is we got a couple holes in the north, we got a couple holes in the south of property. We didn't do any holes in the middle, right? Or even still maybe you did a couple bore holes and then they have construction is they're out there excavating the site and 10 feet from those drill holes or in that area where you didn't test, the soil is complete garbage. What are you going to do? It is too many unknowns at this point where, you know, do you issue a proposed change in this point at CCN, right? Where they just keep digging, but they can't estimate it. Again, I would never even put a budget number to that because you don't know what's behind the wall. You don't know what's behind the surface or anything like that. So that's where a change directive does make sense. Where you're saying, all right, as per the geotech, we need to excavate this area. We've got to strip it down. basically at that point, the geotech would kind of live on site for the next few days. The contractor would be doing the work, be pulling out the material. Hey, I think I got all the material. looks like it. Geotech says, yeah, that looks good. We're happy that that's meeting the compaction for what we need for the bearing. Now we need to bring structural fill in. Great, contractor's ordering that. He's bringing it in, he's moving ahead. They get it all done and they go, great. We've got our base foundation for this school or high rise or whatever the case is. Great. Like I said, at this point, we'll pull all the invoices together. And again, it's pretty straightforward. Cause the moment we just... Issued as a CD. We're just going to start tracking it as CD one, CD one, CD one, all these little invoices, time, the trucks, know, the geotechnicals time, et cetera. Done. Put together. And then there's our final invoice and then we got to review it. And like I said, going back to kind of where it gets gray is like, well, I don't believe you brought that many trucks. That's where your geotechnical, he was actually on site and he was watching how many trucks was coming in. Plus the civil engineer, when this example would come in and challenge and go, well, you. gave me these survey before you did this cut and fill exercise. And now you gave me the afterwards, well, I only calculate X amount of trucks and you're saying we're double that. That's where you can, you would kind of put that challenge. But the reality is at least the project didn't suffer because we issued the change directive and then we got the work done to allow the project to keep carrying forward. We can deal with the finances, you know, as we go, but at least the work is done and the project's still on track. So again, that's a good example where you would see it. And that kind of leads into a good point about stripping plans and that will be another day topic, something that we would do as a firm, how we would issue these plans in regards to basically being preventive of bad soils. And again, another day, another topic. Another scenario where I ran into was we needed some additional fairing because of the fire spray on the steel structure. was one of our first projects that we were doing as a steel structure. We knew that to get our ratings for the floors and the walls and and supporting structure that we needed to do a one hour fire spray on it. So great, not a problem. The only problem is, is, you know, we calculated the size of the stud to accommodate the steel structure and the fact that we needed at least a minimum one inch of fire spray all the way around. again, you got your wide flatten beam, wide flange beam. and you've got that fire spray on both sides. So basically, you know, if it's an eight inch, you know, beam in that case, you've got eight inches plus one inch plus one inch. So now you 10 inches. Well, it's fitting within a 12 inch stud or something like that. Problem is, you know, the steel, when it goes up, it will start to rack in a sense. And there is tolerances that they have to follow as per the structural engineer. But if you've got one steel vertical member going you know, say north and another one going south, that stud channel may not be wide enough. So always kind of go up two sizes from whatever that steel member if you're doing fire spray and then you're usually okay and you're safe with that. And unfortunately, our example is we kind of went a stud size down because again, it was our first experience with doing that. And then we had that fact that none of the steel was perfectly straight, but it met within the tolerances and then the fire spray. So where I'm getting with this is we needed an extra layer of Hat-Track furring to accommodate that fire spray. Cause we can't scrape it off. You can't, again, you know, starts to eliminate the fire rating and that's not, not acceptable, right? You got for code. So we had to a whole extra layer of Hat-Track furring to basically give us that thickness and that depth of the wall. So we priced it out. We did a CCN. right? Because we had to do it. There was no change, right? And we were ahead of schedule. It was all good, no issues. And we got a CD, basically pricing for that proposed change. And it was going to be something like $65,000. It was a lot of area, right? For just and it would just seem ridiculous. We quickly priced it out. And we thought this isn't right. We weren't getting anywhere with the contractor because they didn't because of the size of the where they had to go and they weren't they weren't sure if they were going to cover areas. So they allowed for some extra room for it. So we said, and the owner kind of, you know, challenged and encouraged us to look at an issue and a change directive of a CD. And that's what we exactly did. We did, we looked at it we said, why not? We'll be able to track, see there are mad hours, the time, the labor, the amount of sheets and drywall, et cetera. And that's exactly how we approached this scenario. So we said, all right, contractor, here's your CD, go ahead. And the CD, in this case, the timing, wasn't again, it wasn't kind of a quick thing. It took, you know, took many, many months because again, it was them framing the building and basically after they're done, kind of, we probably issued it, like I said, after the steel was up and it was, fire sprayed and the one moment they started going into your boarding, then that's when it really kind of started. And then until the building was finished, wrapped up. that's change directive did take several, several months to basically complete. When we got it from that original proposed change pricing, we saved about probably about half and because now we had proof of that is and plus the contractor the sub trade that was doing the work there was no risk to him because he got billed for his time and versus him taking a risk going on I got to put a high number of this I don't want to you know underestimate this job because he didn't know he didn't go at every single stud area and look at it he just did it based on budget if they were up there and about to board went nope we need an area hat truck they quickly boarded it and called it a day and ready to go So in that case, it did make sense. It worked out in our favor. And ultimately, like I said, it just, it made sense in that application. And plus it did not stall the work. And that's where change directives can be in a positive way. But again, you do take the risk because it is an open checkbook. Okay. So what not to do with change directives? Like I said, this is something you do not just want to issue as you go. I've had contractors just you know, encourage me to issue a change directive. So they love change directive because of fact that it is the open check method, okay? So just be cautious when you are issuing them. Look at the scenario. So like I said, just kind of be cautious before you issue them. Really kind of look at the options, evaluate it. It doesn't hurt to issue a proposed change for pricing. But again, if it's something like soils, that's something unknown, or you guys dig up and you find a pipe and there's a whole network of stuff. you're not going to get away from issuing a change directive. So you have to go that method. But, you know, maybe there's alternatives, right? Maybe there's different solutions, right? Maybe you can issue a proposed change and get it. So again, I think there's a couple of things that you need to look at with that. A change directive may be cheaper than issuing the proposed change, like the fire spray example I just gave you. So wrapping up the episode, how do you feel about change directives? A little scary, a little nervous? I think at the end of it, you've just got to look at the scenario that you're in with your project. Again, soils are pretty straightforward. It's most likely going to be a change directive. But if you get these kind of odd cases, something's come up, you know, see if there's a proposed change taking issue, get pricing. If it comes in high, no one's budging, then you can always entertain the change directive. But you do take the risk that you could be paying more or you could be paying less. You got to just evaluate it. And again, where there's lots of unknowns, that's where the change directive approach. it makes sense with it. And, you know, as you're kind of going through these and seeing the values of it, if you're unsure, again, balance those ideas off of your senior staff, right? Your colleagues in your industry. Mentorship is key when it comes to this, as you know. You know, you don't want to basically issue too many change directives and you get buried at the end of the project because you went in over your contingency. and that's something that's not acceptable. You wanna maintain those relationships and you wanna do these really well. So be very cautious how you are issuing them, but they're there for a specific reason as we've talked today. And that wraps up this episode of What the RFI, all about change directives. So until next time, architects, keep designing and contractors, keep making those blueprints into reality. We'll see you on the next one.