Construction Change Directive

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21 Aug, 2024

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A Construction Change Directive (CCD) refers to a legally binding document used in the construction industry to change their work on the project. It serves as a temporary measure to expedite necessary changes while formal contract adjustment is underway or infeasible due to time constraints.

It instructs the changes in the payment process scope, cost, or schedule of the project. It is typically employed when there is a need to implement changes quickly and a formal change order cannot be processed in a timely manner. Although they are used for practicality, they still require documentation.

What Is Construction Change Directive (CCD)?

A Construction Change Directive (CCD) is a binding document issued by the project owner allowing alterations in projects before or during agreement finalization.
It acts as a temporary solution to accelerate essential changes when formal contract adjustments are in progress or hindered by time limitations.
CCDs expedite urgent changes pre-agreement. Steps: understand purpose, issue CCD, promptly acknowledge, proceed unless disputed, document costs, negotiate, agree, document changes, monitor progress, resolve disputes, and legal consultation if needed.
Moreover, CCD precedes agreement, directing project changes, while a Change Order formalizes pre-agreed alterations within the project scope, cost, or schedule.

Construction Change Directive Explained

A Construction Change Directive (CCD) refers to a formal written instruction used in the construction industry that authorizes changes to the original scope of work in a construction contract. It becomes active when the formal change order process could be more practical in certain situations due to time constraints or other issues.

It acts as a temporary step to fasten the necessary changes in projects when emergency action is needed. Moreover, it facilitates the work to continue while final details, scope, schedule, and price are being negotiated. Therefore, it gives the advantage of retaining the original contract without any change, adding to its flexibility. However, contractors have to act on it immediately, although contract time or sum may be lacking in the agreement.

Furthermore, it does mean an obligatory order rather than a request that directs extra work in the absence of any formal agreement between contractor and owner. Consequently, the changes become expedited but may lead to a hostile working environment. As a result, disputes between the concerned parties may arise in the future. Besides, it can also result in incurring unexpected costs due to force account pricing. It may also prolong the timelines of negotiation due to negotiations under CCD.

However, its usability supersedes its implications. Since it addresses urgent issues like design flaws or hazardous material use, it also contributes to project momentum sustenance through authorized swift changes. All the while, the original contract remains available for further renegotiation between parties.

Talking of financial effect, it impacts project cost structures and cash flow, necessitating consolidations and reconciliation using formal change orders. Also, lenders and investors raise concerns regarding risks and mismanagement if CCDs happen frequently in a project. Additionally, CCD affects project valuation and terms of finance.

Examples

Let us use a few examples to understand the topic.

Example #1

Suppose in the bustling city of Arcadia, a conflict emerged between the architect, Clara, and the contractor, Alex, amidst the restoration of a historic theater. Clara, acting on behalf of the theater's owner, quickly emailed Alex a Construction Change Directive (CCD) requiring emergency roof reinforcing in response to unanticipated structural problems. Time restrictions hampered the official change order procedure. Reluctantly and protesting the increased charges, Alex issued the command despite his insistence on not paying for it.

Notwithstanding conflicts, the CCD made sure that the job was done. Hence, Sam, the project manager, intervened and emphasized the importance of the instruction. In the end, the CCD's installation accelerated the urgently required modifications, ensuring the theater's structural stability. But this also led to a later negotiation for formal contract Sum revisions, emphasizing the critical role that the CCD plays in project momentum and future financial negotiations.

Example #2

A recent article shed light on Ontario's construction landscape transformation through the 2020 update of CCDC 2, intending to extend these reforms nationwide. Critical distinctions between CCDC 2 versions revolve around prompt payment and the introduction of adjudication. Notable changes encompass expedited payment procedures, aligned holdback timelines, establishment of "Ready-for-Takeover" benchmarks, provisions for swift dispute resolutions, valuation alterations, cash allowance reallocation, and expanded safety obligations for contractors. Contractors in Ontario utilizing CCDC 2 are urged to incorporate supplemental conditions tailored to suit their operational needs to ensure compliance with timely payment and adjudication.

Seeking expert advice tailored to specific circumstances is recommended for comprehensive guidance. This article underscores the transformative impact of CCDC 2 amendments on Ontario's construction sector, aiming for widespread implementation across Canada. Notable alterations encompass payment procedures, dispute resolution provisions, and safety obligations, emphasizing the need for Supplementary Conditions for Contractor compliance and specialized advice for tailored guidance.

How To Deal With It?

CCDs can lead to a hostile environment, so one must know how to deal with them using the following steps:

Review the CCD: Carefully review the Construction Change Directive document. Understand the proposed changes, reasons for the changes, and any immediate impacts on the project, such as cost and schedule adjustments.
CCD Issuance: In the CCD for contractors, owners identify adjustments to the job, timeline, and budget.
Prompt Review and Acknowledge: Acknowledge the CCD as soon as possible to show cooperation.
Proceed with Work (Unless Disputed): Keep working as ordered to prevent delays or contract violations even in the face of objections.
Document Cost Impacts: Keep careful track of personnel, supplies, expenditures, and schedule modifications.
Initiate Negotiations: Have negotiations to modify the terms and prices of the contract.
Agree on Compensation: Essential that both parties agree on payment for the modified job.
Document Changes: The instruction must be carried out with a clear record created by a change order.
Monitor Progress: Assure prompt completion within the predetermined spending limit.
Resolve Disputes: Work together to find solutions that both parties can agree on when disputes arise.
Legal Consultation: Consult a construction attorney if talks break down or disagreements continue.

Understanding AIA (Americal Institute of Architects) construction change directive procedures aids in handling CCDs effectively. One should utilize a construction change directive form or template for clear documentation and streamlined CCD management processes.

Construction Change Directive vs Change Order

Although both are related to construction projects, they have certain differences, as listed below:

Construction Change Directive	Change Order (CO)
This happens before the formal agreement, where the direction for change in scope, cost, or schedule of the project.	The pre-agreement changes made to the project become official.
Here, the representative or the owner of the project issues it.	Any of the parties can initiate it.
Agreement is only sometimes required on an upfront basis.	Both parties have to agree.
Considered a temporary measure, often leading to CO	Permanent process containing contract modification, evaluation, and negotiations.
Only the architect or the owner signs the temporary order.	Both the parties- owner and contractor sign the CO.
Moreover, the original contract remains intact despite implementing emergency changes without interrupting project momentum and adding flexibility.	Registers documented changes and agreed-upon modifications to the contract.
Furthermore, it acts as a directive, making it mandatory for contractors to act.	It needs the consent of both parties before implementation.

Frequently Asked Questions (FAQs)

1. When to use a construction change directive?

They are usually employed when:
• Unexpected site conditions develop that call for quick response, like during excavation or running upon unforeseen subterranean utilities.
• The owner asks for modifications to the project's scope. This might entail making changes to the finishes, materials, or design.
• It is necessary to make minor clarifications or revisions to the contract documents. This might entail fixing typographical mistakes or clarifying ambiguous requirements.

2. Who issues a construction change directive?

It is usually issued by the owner or their authorized agent, such as the project architect or engineer.

3. Who signs a construction change directive?

Signing the construction change directive signifies acceptance and agreement to the terms set out by both the contractor and the owner's representative. In addition to preventing future problems, this signing procedure helps guarantee clear communication.

4. What is a construction change directive AIA?

It may be used to guide adjustments to the job that, if carried out after some time, could cause the project to take longer to finish. A claim or disagreement might arise if the modified work is not immediately completed. Generally, the architect and the owner sign a Construction Change Directive.