The Vendor's Fourth Change Order
You are managing a fixed-price contract worth $1.2M with a vendor for custom self-service kiosk software, six-month delivery, and acceptance testing against a statement of work. The contract includes a 10% liquidated-damages clause for late delivery and a change-control clause requiring written change orders signed by both parties. The vendor has submitted four change orders totaling $180,000, mostly for "client-caused delays" tied to your API team's late responses. Your technical lead, without authority, verbally told the vendor to "go ahead and add the extra reporting screens-we'll sort out the paperwork later." The vendor is now three weeks behind and has threatened to stop work unless the change orders are approved. The relationship is deteriorating, but the vendor is the only one with the required kiosk certification.
1. Evaluate the vendor's change-order claims and your own position. What is the status of the verbal direction, and what should you do first?
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The change orders must be assessed individually, not as a lump sum. For each one, determine whether it arises from a genuine change in scope or from the vendor's performance failure. The API delays may be excusable if they affected the vendor's critical path, but that does not automatically make them compensable; the contract's notice, causation, and change-control provisions govern. The $180,000 total is not evidence of entitlement. The liquidated-damages clause is also not automatic; it applies only if the delay is not excused by client-caused events.
The verbal direction from your technical lead is the most dangerous fact. Under a written-change-order clause, an unauthorized verbal instruction does not create a valid change, but it can create apparent authority or waiver arguments, and the work may already be done. First, instruct the technical lead to stop issuing direction and put all communication through you. Then review the contract and the email trail to establish what was said, when, and by whom. Send the vendor a written response that separates the four claims, requests supporting evidence for each, and reserves your rights without denying everything. Do not simply refuse all four; that invites a constructive stop-work claim and damages the relationship.
2. The vendor threatens to stop work. How should you handle the commercial and relationship risk while protecting the project?
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Treat the stop-work threat seriously but do not negotiate under it. Review the contract for suspension, termination, and dispute-resolution rights, and ask your procurement or legal lead to confirm your position before responding. In writing, acknowledge the dispute, state that you are evaluating the change orders in good faith, and request that the vendor continue work on the undisputed scope while the commercial issues are resolved. If the vendor refuses, escalate to its account executive and consider a formal reserve of rights; do not waive liquidated damages by conduct.
At the same time, protect the project. The vendor's unique certification means a replacement is not a quick option, so a purely adversarial stance is risky. Separate the commercial negotiation from the delivery recovery: convene a joint recovery session to agree on a revised delivery plan, the API support your team owes, and the acceptance criteria for the disputed reporting screens. Consider a global settlement that trades a documented, bounded payment for schedule certainty and a waiver of the disputed delay claims. Any settlement must be in writing, approved under your change-control authority, and must state that it is full and final for the identified claims. Document the verbal direction as an internal lessons-learned issue and reinforce change-control training.