I'm a novice, but it is also ethical to provide some transparency.  It doesn't sound like a good situation. You could speak to the client directly if he is the one contracting you.

I think it all will boil down to what the contracts says.  I don't have residential experience, but  the contracts I generally administer require me to review all Applications for Payment and Change Order Requests for legitimacy.  It also states in the contract that any changes must have prior approval before work is done (and that any work outside the contract scope done without prior approval is at the contractor's risk).  I require backup on all change requests prior to approval.

Ultimately, it will come down to the contract and the Owner.  You are trying to protect the Owner's interests.  Will they back you up?

Bruce,

Can you give an example of the change orders he is requesting? 

I do find it extremely fishy if he is saying "plumber needs $3k extra" without telling you what for and why this is an extra outside the defined scope of your drawings that he used to bid/negotiate his price. If you didn't request a change and he cannot back up why the change is necessary from the original scope of work he is shady.  

Mr Blue Sky,

It's all legit work: adding rebar to the foundation because of soft soil, rock hammering, adding a new underground propane line when the old one was displaced by the addition.

My issue though is that for the propane line, I'll just get a bill on his letterhead for $4k. I've said I want to see hours, hourly rate, material unit cost and material quantity and I want to see it on his sub's letterhead.

He reluctantly gave me hours, hourly rate, and overall material cost (without unit cost or quantity) but he resubmitted on his own letterhead.

My specs ask for the breakdown above but I didn't specify that I want backup from subs which I guess is my error. I had thought that was standard practice for change orders regardless of the contract type.

He then said that I've insulted him and he will quit the job before complying.

there is something very wrong about this.  I'm trying to think of way to suggest you to proceed, but other than hitting the guy with a shovel I can't think of anything that would be sound and reasonable.  i am not a lawyer, but this is the sort of situation where a person might want to clarify that they aren't a lawyer.  maybe search court records for his name to see if he's been caught before.

this is shenanigans.

“The only people who don’t want to disclose the truth are people with something to hide.” --Pres. Obama

Curtkram and Jitter,

I am trying to protect the owner's interests and I want to have a handle on things when he asks me if I think the change order prices are fair.

I do suspect the contractor is hiding something but I also feel sympathy for him even if he's padding the change orders. The client was pretty ruthless in negotiating down his fee and he felt he had to go along because he felt obligated to take the job because of a mutual friend.

so let the contractor be honest about padding fees...

everything always costs more after the bid.  that's normal.

That's the name of the game with change orders.  They have you, and most contractors I have worked with will pad it up with 20%+ profit to make up for getting that low bid. 

It helps to have alot of cover your ass notes & unit pricing.

also, don't get into any trouble because of anything I say.  I'm just some guy on the internets.  Good luck :)

The contractor is open about the 5% profit and 5% construction management fee (which the client always tries to get removed.)

What there is no transparency on is the actual fee from the sub. I'm not sure if he's not passing on invoices because he's increasing the sub's number or because he is worried the client is going to pick apart each line item.

Sounds like he's treating it as a cost-plus job rather than stipulated sum. And like Mr. Blue Sky says, it's likely the result of Chicago Bidding to get the contract. The contractor's threat to quit over being asked for supporting documentation is highly suspicious. If it was me, I'd refuse to initiate or approve any CO without proper documentation. (also...why is the GC originating COs? That shouldn't be happening. You as architect should be the only one doing that.)

As a general rule, I always try to establish a clear process for questions and changes during construction that goes something like this:

Change orders are not issued ad hoc as they arise. Cumulative changes are collected into Change Orders periodically. They are composed (by the architect only) from approved Change Proposals (usually on a monthly basis for larger projects). Change Proposals are themselves composed from cost- or schedule-impact RFIs, owner directions, ASIs, and all that other stuff, also on a regular basis. This protects everybody, and keeps the change process as transparent as possible. It also avoids surprises and encourages the contractor to be pro-active about addressing this stuff. If I haven't got a CP in the pipeline for that work, it's not going to be in a CO. Period. End of discussion.

You should know that it is standard contractor business practice to make their margins on change orders and bid the gaps in our documents. Note how that article recommends that construction project managers be rewarded and promoted for "generating successful change orders." GCs know perfectly well at the start of the project what they intend to submit change orders on during construction.

^ very informative, thank you you very much. In addition to you all helping the OP I really hope other new graduates and those still in school are reading and learning from this.

gwharton,

In the single-family residential work I've done, the GC always has initiated the change orders. Maybe "change order" is the wrong technical term but basically what happens is the contractor feels there is extra work outside of the base contract (bedrock blasting, decorator finish changes, etc) and emails a pdf invoice for my approval which I then tell the client is acceptable for payment.

In my experience it's pretty common that these change orders come in the form a single bottom line price and I have to reject it and ask for better supporting info.

Straight out of the spec section of my current project....

B. Contractor-Initiated Proposals:  If latent or unforeseen conditions require modifications to the Contract, Contractor may propose changes by submitting a request for a change to Architect.
1. Include a statement outlining reasons for the change and the effect of the change on the Work.  Provide a complete description of the proposed change.  Indicate the effect of the proposed change on the Contract Sum and the Contract Time.
2. Include a list of quantities of products required or eliminated and unit costs, with total amount of purchases and credits to be made.  If requested, furnish survey data to substantiate quantities.
3. Indicate applicable taxes, delivery charges, equipment rental, and amounts of trade discounts.
4. Include costs of labor and supervision directly attributable to the change.
5. Include an updated Contractor's Construction Schedule that indicates the effect of the change, including, but not limited to, changes in activity duration, start and finish times, and activity relationship.  Use available total float before requesting an extension of the Contract Time.
6. Comply with requirements in Division 01 Section "Product Requirements" if the proposed change requires substitution of one product or system for product or system specified.

Thanks Mr. Blue Sky. I have something very similar in my specs but it's almost impossible to get contractors to follow it. I had a recent job where the GC passed on bills from the hvac guy and electrician 6 months after their work was completed each asking for ~$5k with just a one sentence description of the extra work and no hours, rates, or materials prices, etc. Neither change order was on the sub's letterhead either.

I think what really set the GC off on my current job is that I asked to see backup from his sub. He took it as me not trusting him while I told him I'm just doing what I'm paid to do. And I felt that if he's asking for extra money, it's irrelevant whether it's a stipulate sum or CM job. It's not part of the original contract so I'm neglecting my duties if I just blindly accept any request for money.

Trust or not, it's business and you have the owner's best interest's in mind. His behavior is still suspicious.

"Trust but verify."  You should appeal to his love of Reagan.

bruceprice, if it's in the project manual, it's part of the contract. That's your trump card. If the GC doesn't follow what's in the project manual, you can and should refuse to certify payment. That's the only  real power you really have during the construction phase. Don't be so quick to surrender it in order to avoid making waves.

And, FYI, I use that change process I outlined on single family projects AND multi-million square foot mixed use. It works just fine for both, but you do have to establish compliance expectations with the GC up front.

I think there is a significant history of contractors not being trustworthy.  In fact, it's kind of a stereotype.  Some random survey somewhere said only 23% of people find home contractors to be trustworthy.  I bet your contractor knows that too.  There is no reason for him to be offended, and more than likely he's not offended.  I just don't see that kind of overly-sensitive mamby-pamby person overseeing a construction crew. 

I really only have experience in commercial construction.  As I understand it residential construction is designed to move much faster, and having an architect disrupt a schedule because of paperwork would likely be a significant frustration for a contractor.  It might be understandable that he would have some resentment towards having to do his job, or resentment towards being expected to not lie constantly if that's case.  On the other hand, the economy doesn't seem to be in a position for this guy to quit over something trivial.  Maybe if he had tons of work lined up behind him, he could afford to make that threat.  I suspect he would either walk away because he's hiding something significant, or he's just trying to manipulate you.

as a side note, 5% profit is way too low

10%.  pretty sure that management fee goes into profit as well.

There are field orders (which don't effect the overal price) and change orders (which do).

if contractor's giving you shit,  you can file Construction Change Directive on AIA Document G714 or AIA Document G714, which outline methods to follow to determine the amount of the Contract adjustment.This forces the contractor to furnish adequate supporting data to substantiate claims for additional compensation.

But all conflicts are messy. In most cases you will lose at lest a little bit.

right right.

general question:

i suppose the real answer is "it depends" but in general, are residential contractors less professional than commercial?

yes.  that is absolute.

i suppose there is a possibility that there could be exceptions if you subscribe to that sort of philosophy.

bruce - i've never approved change orders from a contractor (residential, commercial, whatever) without some kind of backup. honestly, i'm surprised the owner or at least the owner's bank is requiring them for the draw request. 

from what you've described, there doesn't seem to be anything wrong. in fact, if anything, i think you're setting up the appropriate standard. otherwise, what's to stop him from just giving you a c.o. every other day for things that are 'unforseen' but which really should be in the base price? even for residential contractors, there is a certain level of professionalism...

Regarding the profit, we generally have two line items on the bid form for the GC to fill out.  One is the profit percentage they will add to changes (in general, it has been 15%), and the other is the profit percentage they will give back for changes that end up being credits (usually about 5%).  It puts it out in the open, and also lets the Owner know that changes during construction do have additional costs.  It then becomes a line item on the cost proposals, and we just evaluate the items before the profit is tacked on.

Based on your description of the changes, it sounds like you are early on in the construction process, working on excavation or foundations.  This also means that the Owner (and you can advise him as the Architect) need to lay down the law on a change order process.  If you don't do this, you'll have a GC out there looking for change orders, rather than focusing on the construction of the project.

During underground work, you'll run into a lot of unknowns, which can result in a change order.  If this is a legitimate change order, then the Architect produces a Change Proposal Request (CPR) that describes the change written and with drawings (if necessary), the GC prices the CPR (including subcontractor back-up) and then the Architect and Owner Approves, Does not Approve, or readjusts the scope of the CPR.  Once a CPR is Approved, then and only then, does it turn into a Change Order that adjusts the Contract Price.

It also helps to get input from the GC as to when a decision needs to be made by the Owner on a CPR as to not to have an adverse affect on the construction schedule.

Work with this process going forward and it will save you a lot of headaches later on.

At the very least, I receive a break down of costs from the GC, on the GC's letterhead.  It usually contains line items from their sub contractors.  I don't necessarily request backup from a sub.  I compare the GC's change amount with estimating references and past experience to verify if it is in the right neighborhood.