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Changes to the scope of a construction project—official and unofficial, documented and undocumented—are a constant. The reasons are almost infinite, but the damage to construction firms fall into three main areas: increased liability, decreased profitability and damaged reputations.
The changing scope of projects, known as “scope creep,” is commonly defined as the continuous growth or change in the scope of a particular project beyond its original stated intent. Managers at all kinds of construction-related firms encounter this problem every time a client incrementally expands on or changes the original scheme. And as firms begin to accept changes to the original scope of work without taking the proper measures to control scope creep, workload can double or triple.

Scope creep is created from several factors:

• a lack of communication among the construction firm, client and any other contractor involved in the project;
• construction firms’ failure to utilize proper contract procedures;
• the construction firm manager’s ego or desire to increase revenue;
• improper analysis of the original scope of work;
• failure to establish and comply with internal procedures for dealing with change orders; and
• clients who intentionally seek to get more work out of the construction firm for free.

Several real-world examples include a contractor that sued a school district over unpaid bills related to changes in the project; a contractor and five of its subcontractors that sued a California hospital over a $24 million project that included $16 million in overages because of change orders; and a construction firm that filed suit for additional money over a boat ramp project, claiming change orders included the client’s decisions to move the location of the ramp twice.

The list could go on and on, and, unfortunately, the list of firms that wrote off billings to avoid messy disputes is most likely even longer. Generally, the risks are proportionate to the level of creep that exists on a particular project or job. For example, if client asks a construction firm to oversee a small portion of another contractor’s work, the potential risk is relatively minor. On a larger project where the potential for creep is greater, however, the risks can be devastating. The good news is that the damaging effects of scope creep can be managed or limited by following a few simple guidelines.

Minimize Scope Creep
While many would like to believe that scope creep is something that can be prevented, in reality, it cannot. Changes to the scope of work are inherent to almost every project. To suggest that it can be avoided or eliminated is wishful thinking.

That being said, every job is going to require at least some tweaks to the original scope of work. These adjustments to the original scope are not necessarily damaging if the increase in scope of work is handled and documented properly. The two best ways to manage changes to the scope of the project are through proper communication and contract procedures.

Proper Communication
It is imperative that construction firms clearly explain their services and expertise as well as what types of work is included—and excluded—in the project agreement. This should be outlined at the initial meeting and also should be referred to in any contracts. If any subcontractors are required to sign the client’s contract, their work should clearly be established as well.

Changes to the project’s scope should be treated as an entirely new agreement with the client. This means that construction firms should fully understand the scope of the new assignment, confirm it with the client and put it in writing. If the construction firms mentioned earlier took the time to better discuss the nature and extent of their responsibilities with their clients, they may not now be entangled in lawsuits and may have been able to avoid losses in the hundreds of thousands of dollars.

There’s an overlooked and often underutilized word used to combat the expanding scope of a project: “No.” Construction firms should not be afraid to tell their clients that they cannot or do not want to expand the scope of their duties.

Proper Contract Procedures
Whether the client signs the construction firm’s contract or insists that the firm sign the client’s contract, it is the construction firm’s obligation to ensure that the scope of work is adequately defined. Far too often, general terminology is used when defining the scope of work. Specific language explaining the job and its limitations should be included in the scope of work section.

Scope creep is often the result of undocumented verbal communications. In order to be protected, any conversations concerning the scope of duties or responsibilities should be put in writing. That way, if a dispute arises, construction firms have proof of the agreement. It is not uncommon to see construction firms tied up for years in litigation arguing over non-payment of work done in connection with scope-of-work changes.

It is very difficult for firms to claim they are entitled to payment for additional work performed if the request for the additional work is not committed to paper. As the examples mentioned here indicate, much of the litigation involves disputes where construction firms believe they should be paid for the additional work, while the client argues that no request for additional work was made or that the additional work falls under the original scope.

Protocols need to be established to deal with expanding work scopes. Before the project outline begins to change, have a standard protocol set up for which to accept, confirm and memorialize changes to the scope of work. One of the easiest ways to deal with an expansion of work is to make a habit of creating addenda to existing contracts. The addendum should clearly spell out the expanded scope of work as well as payment terms and conditions. It should be signed by both parties and should clearly establish rights and remedies. While the damaging effects of scope-creep cannot be eliminated, they can be managed and controlled through effective communication and proper contract procedures.