Scope of Work in Construction Litigation
Scope of Work in Construction Litigation
What is Scope of Work in Construction Litigation?
The scope of work in a construction contract lays out what work is going to be completed by the contractor. This is a fundamental and important aspect of the agreement, that needs to be carefully set out to avoid disputes and ensure that the contractor is fairly paid, but not overpaid, for the work that they perform. Large scale construction contracts have detailed processes to clearly define the scope of work and deal with any changes that come up once work has started. Homeowners and contractors who deal with smaller projects often do not have the same level of detail regarding the scope of work, and unfortunately, this is a common area of dispute where the relationship breaks down between a contractor and homeowner. If the scope of work is not defined, the homeowner may dispute the bill thinking that they have been overcharged or the contractor has under delivered on what was required. While it is not always possible to implement the extensive procedures that are used on large projects, homeowners can benefit from knowing how large projects are conducted, and where possible applying these principles to the relationship with their contractor. Likewise, contractors can benefit from having clear quotes that precisely detail their scope of work so that the customer is less likely to dispute the contractor's bill, and if a bill dispute develops the contractor has a better case in the event that matters go to court.
Defining the Initial Scope of Work
The initial scope of work will be the basis on which the contractor makes their initial estimate or if they are offering an all-inclusive price, their quote for the job. The initial scope of work must be ascertained in order for the contractor to accurately estimate or quote the job. For large projects, the scope of work will likely be determined by a full set of plans and may include detailed specifications for the materials and construction techniques that the contractor must utilize. For homeowners, this is often not feasible; however, the more detail that can be communicated to the contractor in determining their estimate or quote, the better the chance that everyone is on the same page and the project will run smoothly, resulting in a satisfied client and a contractor who received the payment that they expected.
Ideally, a homeowner will have a set of plans on which the contractor is asked to offer an estimate or quote before the parties enter into a written agreement that includes details like payment terms and completion dates. If this is not possible, the homeowner may be wise to sit down with the contractor and go over the design of what they want to be built, and the materials that they want the contractor to use. For a homeowner who is not experienced with construction, the contractor may be able to offer advice and assistance in selecting materials and designing the improvement. At a minimum, both parties benefit by making sure that there is a written description of what will be constructed, the materials that will be used, and the cost.
Putting time and energy into defining the scope of work at the outset of the project may be difficult for the impatient, who want to get the project underway, but a clearly defined scope of work helps give both sides a better idea of the costs involved in the project and helps to avoid costly disputes. For both the homeowner and the contractor, having a clear understanding of the project is vital. The homeowner must understand exactly what they are getting, and how much they will need to pay. The contractor must understand exactly what is expected of them, and a clearly defined scope of work allows the contractor to show that they have completed the project and deserve payment.
What Happens When Project Scope Changes?
In any project, whether it is a large residential development or a small residential renovation, there are often changes to the scope of work that take place over the course of the project. In a large project a municipality might require changes in order to issue approval, or a problem, such as inconveniently located bedrock, might become apparent that needs to be overcome in order to continue with construction. On a smaller project, gutting some walls might reveal shoddy work from a previous renovation, or water ingress or mould that should be remedied while the wall is open. In all of these hypotheticals, if the contractor did not include this work in their original quote and scope of work, then a change to the scope of work becomes necessary.
When there is a change to the scope of work, it can be problematic, because the work is already underway and suddenly there is the need to deal with the uncertainty created by the change in scope. The contractor will want to ensure that they are fairly paid for the additional work required by the change in scope. The owner or client will want to ensure that the contractor does not take advantage of the situation and bill an overly large amount for the additional work. It may be a delicate situation for both parties. The homeowner might feel like they are held hostage because their house is hallway ripped apart and they don’t want to get into a dispute with their contractor and delay the completion of their home. The contractor may have invested time and money into the project and might fear that getting into a dispute over a change to the scope of work will prevent or delay payment for the work already completed.
In large construction contracts, there is generally an independent consultant who acts as an intermediary when changes to the scope of work are needed. When the need for a change becomes apparent, a formal written change order will be issued to the contractor, the contractor will formally quote the change, and provide the quote to the consultant, who determines whether the quote is reasonable and in theory protects the interests of both parties. There may even be provisions for arbitration if one party does not agree with the consultant’s decision on a large change order.
For homeowners, it is cost prohibitive to have an independent consultant, and the pace of change on a residential project can be rapid, especially if the project is a residential renovation where things might be uncovered during the initial demolition phase. While there is no independent consultant on a smaller project, the parties themselves can still help avoid problems by clearly communicating. If the homeowner wants a change, that should be clearly specified and described. If the contractor thinks they are being asked to do something that was not included in the original scope of work, then they should deal with that issue immediately instead of putting it off until the final bill. Where both parties agree that something is an addition to the scope of work, the contractor should prepare a written quote for that addition – this is fair to both parties, the contractor is entitled to be paid for the extra work, and the homeowner is entitled to know what their requested change is going to cost.
While ultimately homeowners and residential contractors cannot implement the extensive procedures that are used on larger jobs, the same principles apply. The scope of work has to be clearly defined at the outset, for the benefit of both parties. Changes to the scope of work need to be clearly defined, and ideally agreed upon in writing through a written change order that defines the addition to the scope of work, and the compensation payable for completing that addition. Following these strategies should help both homeowners and contractors avoid disputes regarding the scope of work on a project. If the worst happens, and such a dispute does arise, it may be time to consult with construction litigation counsel. Velletta, Pedersen, Christie is pleased to assist clients facing a construction litigation dispute, whether they are homeowners or contractors.
A Cautionary Note
This article provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.