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How Do I Avoid Getting Screwed by My Landlord on a Buildout?

📖 2,103 words🗓️ Published Jun 23, 2026

Direct Answer

Make the landlord pay for the buildout, put every dollar in writing, and never sign a work letter that lets them mark up your costs. The single biggest money move is the tenant improvement (TI) allowance: on a 5-year deal in a decent market you should push for $40–$80 per square foot for a second-generation space and $60–$120 per square foot for a cold shell, and you should treat that number as negotiable, not a take-it-or-leave-it gift. Demand at least 1 month of free rent per year of lease term (so 5 months on a 5-year deal) plus a separate build-period rent abatement so you are not paying rent on a space you cannot occupy. Cap the landlord's construction management fee at 1–3% (they will quote 5%), force competitive GC bidding instead of their captive contractor, and write a delivery deadline with a per-day penalty so a late landlord eats free rent, not you. Get clarity on who owns the improvements, who handles change orders, and exactly what the holdover penalty is (often 150–200% of base rent) before you sign anything.

Trap 1: The TI Allowance Is Smaller Than It Looks

Landlords quote TI as a headline number, then shrink it. Watch for these moves:

"Allowance" vs. "turnkey." In a turnkey deal the landlord builds to an agreed plan and eats overages. In an allowance deal you eat everything above the number. If your buildout costs $95/sf and the allowance is $60/sf, you are writing a check for $35/sf out of pocket. Push for turnkey on a defined scope whenever you can.
Soft costs excluded. Many work letters say the allowance covers hard construction only — not architect fees, permits, engineering, data cabling, or your furniture, fixtures, and equipment (FF&E). Negotiate the right to apply unused TI to soft costs and even to free rent ("TI burn-down").
Use-it-or-lose-it clawback. If the allowance must be drawn within a tight window or it vanishes, you lose leverage. Demand 9–12 months to draw and the right to convert leftover dollars.

A good tenant rep at CBRE or JLL will tell you the real market TI for your submarket. Do not negotiate against yourself.

Trap 2: The Landlord Marks Up Everything

This is where landlords quietly skim. Defend against it:

Construction management (CM) fee. Landlords love to charge 4–5% of total construction cost to "oversee" the project. Cap it at 1–3%, and cap the dollar amount so a big buildout does not become a windfall for them.
Captive general contractor. If the landlord forces their in-house GC, you have no price discipline. Insist on the right to competitively bid the GC among at least 3 qualified contractors, or to bring your own with landlord approval not to be unreasonably withheld.
Overhead and profit (O&P). Make the GC's O&P a fixed percentage (commonly 10% and 5%) disclosed up front, not a moving target buried in line items.
Open-book pricing. Demand the right to audit invoices and see actual subcontractor costs. A landlord refusing an open book is telling you something.

Trap 3: Change Orders and Delays

Change orders are how a clean budget bleeds out, and delays are how you end up paying rent on an empty shell.

Rules to write into the lease:

No verbal change orders. Every change needs a signed, priced change order before work proceeds. "We'll true it up later" is how you get a surprise invoice.
Landlord-caused delays = your free rent. If permitting, base-building work, or the landlord's GC runs late, your rent commencement date pushes out day-for-day and you get bonus free rent. Add a hard outside date (e.g., 90 days late) that lets you terminate and recover deposits.
Force majeure cuts both ways. Do not accept a clause that excuses every landlord delay while still charging you rent.

Trap 4: Who Actually Owns the Improvements

You pay for the buildout — then the landlord keeps it. That is normal, but the details decide whether you also get stuck paying to rip it out.

Improvements become the landlord's at lease end in most leases. Fine — but negotiate no obligation to restore the space to base-building condition. Restoration can cost $10–$30/sf at move-out.
Specify removables. Your trade fixtures, FF&E, signage, and supplemental HVAC should remain yours to remove.
Surrender condition. Pin the exact return standard in writing: "broom-clean, normal wear and tear excepted, no restoration of approved alterations."

Trap 5: The Holdover and Other Exit Traps

The buildout fight does not end at move-in. The exit clauses can wreck you.

Holdover penalty. If you stay one day past lease end, many leases charge 150–200% of base rent plus consequential damages. Negotiate 125–150% and strike consequential damages.
Personal guaranty burn-off. If you signed a personal guaranty, tie it to a good-guy clause that releases you once you vacate and pay through a notice period — do not let the buildout cost ride on your personal balance sheet forever.
Relocation rights. Strike or tightly cap any landlord right to relocate you, which can strand your custom buildout investment.

Your Negotiation Playbook

The order matters: lock the economics before you fall in love with the space, and always use a tenant rep broker whose fee the landlord pays — your representation costs you nothing and routinely returns multiples of its value in concessions from firms like Cushman & Wakefield and JLL.

flowchart TD A[Signed work letter + fixed scope] --> B{Change requested?} B -->|Landlord-caused or code| C["Landlord pays / no rent impact"] B -->|Tenant-requested| D[Written change order + price BEFORE work starts] D --> E[Apply unused TI first] A --> F{Delivered by deadline?} F -->|Yes| G[Rent commencement starts] F -->|No| H["Per-day penalty: extra free rent"] H --> I[Landlord eats the delay, not you]

flowchart LR A[Hire tenant rep broker - landlord pays fee] --> B[Get real market TI + free rent comps] B --> C[Push turnkey or large TI allowance] C --> D["Cap CM fee 1-3% + competitive GC bid"] D --> E[Free rent 1 mo per yr + build-period abatement] E --> F[Delivery deadline + per-day penalty] F --> G[No restoration + capped holdover] G --> H[Sign only after work letter is locked]

Related on PULSE

[How Do I Avoid Getting Screwed on a Ground-Up Build-to-Suit?](/knowledge/q13705)
[How Do I Read a Landlord Work Letter So I Don't Get Screwed?](/knowledge/q13774)
[How Do I Avoid Getting Overcharged on Utilities in a Lease?](/knowledge/q13712)
[How Do I Avoid Getting Stuck Restoring the Space at Move-Out?](/knowledge/q13688)
[What Is an Estoppel Certificate and How Do I Avoid Getting Trapped by One?](/knowledge/q13650)
[How Do I Avoid Paying for the Landlord's Capital Improvements?](/knowledge/q13676)

The "Work Letter" Trap: What Your Landlord Isn’t Telling You

The work letter is the single most overlooked document in a buildout negotiation. It’s not just a list of finishes—it’s the legal blueprint for who pays for what, and landlords often bury hidden costs here. Watch for "landlord’s standard" language that lets them substitute cheaper materials or charge you for "upgrades" you never asked for. Insist that every fixture, finish, and allowance (e.g., $5–$15 per square foot for flooring, $10–$25 per square foot for HVAC) is explicitly listed. Also, demand a "force majeure" clause that caps delays—without it, a "supply chain issue" could push your opening back 6 months while you pay rent on an empty space. A good rule: have your architect or contractor review the work letter before you sign, and budget $2,000–$5,000 for that review. It’s cheap insurance against a $50,000 surprise.

The "Soft Cost" Blind Spot: Permits, Fees & Hidden Overruns

Tenants often fixate on hard costs (drywall, wiring) but forget soft costs—permits, architectural drawings, engineering reports, and legal fees. These can eat 15–30% of your TI allowance before a single nail is hammered. In a typical 5,000-square-foot buildout, expect $10,000–$25,000 in permit fees alone, plus $15,000–$40,000 for design and engineering. To avoid getting screwed, negotiate a "soft cost cap" in the lease: the landlord covers the first $X (e.g., $10,000) of permits and design, or you split them 50/50. Also, ask for a "contingency fund" of 10–15% of the total buildout budget—if the landlord says no, that’s a red flag they’re hiding cost overruns. Finally, get a "change order" process in writing: any change over $500 requires your written approval, not a verbal "we’ll handle it."

The "Lease vs. Buildout" Clock: Timing Your Protections

Buildouts often take 3–6 months, but your lease clock starts ticking the day you sign. To avoid paying rent on a construction zone, negotiate a "rent abatement period" that starts only after the buildout is complete and you’ve passed a "certificate of occupancy" inspection. Push for "delay penalties" if the landlord misses the completion date—typically $1–$3 per square foot per month of delay, or a 50% rent reduction until the space is ready. Also, get a "punch list" clause that gives you 30–60 days after move-in to fix any defects (e.g., faulty wiring, uneven floors) at the landlord’s cost. Without this, you’ll be stuck with "as-is" problems. A smart move: hire a third-party inspector ($500–$1,500) to sign off on the buildout before you start paying full rent. It’s a small cost to avoid a year of headaches.

FAQ

What is the most important thing to include in my lease for a buildout? The lease must specify a fixed tenant improvement (TI) allowance, the exact scope of work, and that the landlord cannot add management fees or overhead markups. Without these details in writing, you risk paying inflated costs or losing the allowance entirely.

How can I avoid paying for the landlord’s own construction delays? Include a clause that ties rent commencement to substantial completion of the buildout, not just the lease start date. Also add a daily penalty (e.g., rent abatement) for every day the landlord misses the agreed completion deadline.

Should I accept a work letter that lets the landlord manage the buildout? Only if the work letter caps all overhead and profit at a reasonable percentage—typically 5–10% of hard costs. Otherwise, the landlord can mark up every subcontractor bill, turning your TI allowance into a profit center for them.

What’s the best way to handle change orders during construction? Insist that all change orders require your written approval before work begins, and that any cost savings from value engineering go to you, not the landlord. This prevents surprise charges and ensures you benefit from cheaper alternatives.

How do I protect myself from being charged for “normal wear and tear” at move-out? Define “normal wear and tear” in the lease as cosmetic aging that doesn’t affect structural or MEP systems. Also require a joint walkthrough before you start the buildout, with photos, so you’re not billed for pre-existing damage.

Can I negotiate the landlord’s right to approve my contractor? Yes, but you must give the landlord a right to object only on reasonable grounds (e.g., lack of license or insurance), not arbitrary preference. This keeps you from being forced into using the landlord’s own expensive contractor.

Sources

CBRE — Office and Retail Occupier Lease Negotiation and TI Allowance Guidance
JLL — Tenant Representation: Concession and Free-Rent Benchmarking Reports
Cushman & Wakefield — Office Fit-Out Cost Guide (per-square-foot construction benchmarks)
NAIOP (Commercial Real Estate Development Association) — Work Letter and Tenant Improvement Best Practices
BOMA International — Lease Administration and Operating Expense Standards
The Tenant Advisor / tenant-rep brokerage commentary on construction management fees and change-order control

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![How Do I Avoid Getting Screwed by My Landlord on a Buildout?](https://ifreightx.com/wp-content/uploads/2019/04/WP-7-ways-to-avoid-getting-screwed-over-on-a-lease-purchase-agreement-contract-trucking-1024x640.jpg)

<svg xmlns="https://www.w3.org/2000/svg" viewBox="0 0 1200 340" role="img" aria-label="How Do I Avoid Getting Screwed by My Landlord on a Buildout? — PULSE Buildouts"><rect width="1200" height="340" fill="#EBE9DE"/><rect width="14" height="340" fill="#C0531F"/><text x="58" y="116" font-family="Arial,Helvetica,sans-serif" font-size="32" font-weight="800" letter-spacing="3" fill="#C0531F">PULSE BUILDOUTS · COMMERCIAL REAL ESTATE</text><text x="56" y="198" font-family="Arial,Helvetica,sans-serif" font-size="60" font-weight="800" fill="#2b2b2b">Save money. Don’t get screwed.</text><text x="58" y="258" font-family="Arial,Helvetica,sans-serif" font-size="30" font-weight="600" fill="#6b5b4d">Leases, TI, NNN &amp; buildouts — negotiated in your favor</text><g transform="translate(1010,86)" fill="none" stroke="#C0531F" stroke-width="9" stroke-linejoin="round"><rect x="20" y="40" width="150" height="130"/><line x1="20" y1="40" x2="95" y2="6"/><line x1="170" y1="40" x2="95" y2="6"/><rect x="50" y="80" width="36" height="36"/><rect x="104" y="80" width="36" height="36"/><rect x="74" y="128" width="42" height="42"/></g></svg>

# How Do I Avoid Getting Screwed by My Landlord on a Buildout?

## Direct Answer

Make the landlord pay for the buildout, put every dollar in writing, and never sign a work letter that lets them mark up your costs. The single biggest money move is the **tenant improvement (TI) allowance**: on a 5-year deal in a decent market you should push for **$40–$80 per square foot** for a second-generation space and **$60–$120 per square foot** for a cold shell, and you should treat that number as negotiable, not a take-it-or-leave-it gift. Demand **at least 1 month of free rent per year of lease term** (so **5 months on a 5-year deal**) plus a separate **build-period rent abatement** so you are not paying rent on a space you cannot occupy. Cap the landlord's **construction management fee at 1–3%** (they will quote 5%), force **competitive GC bidding** instead of their captive contractor, and write a **delivery deadline with a per-day penalty** so a late landlord eats free rent, not you. Get **clarity on who owns the improvements**, who handles **change orders**, and exactly what the **holdover penalty** is (often **150–200% of base rent**) before you sign anything.

## Trap 1: The TI Allowance Is Smaller Than It Looks

![How Do I Avoid Getting Screwed by My Landlord on a Buildout? — Trap 1: The TI Allowance Is Smaller Than It Looks](https://image.pollinations.ai/prompt/high%20quality%20editorial%20business%20professional%20office%20photograph%20illustrating%20Trap%201%3A%20The%20TI%20Allowance%20Is%20Smaller%20Than%20It%20Looks%20How%20Do%20I%20Avoid%20Getting%20Screwed%2C%20realistic%20magazine%20style%2C%20warm%20light%2C%20no%20text%2C%20no%20watermark?width=1200&height=675&nologo=true&model=flux&seed=75578)


Landlords quote TI as a headline number, then shrink it. Watch for these moves:

- **"Allowance" vs. "turnkey."** In a turnkey deal the landlord builds to an agreed plan and eats overages. In an **allowance** deal you eat everything above the number. If your buildout costs **$95/sf** and the allowance is **$60/sf**, you are writing a check for **$35/sf** out of pocket. Push for **turnkey on a defined scope** whenever you can.
- **Soft costs excluded.** Many work letters say the allowance covers **hard construction only** — not architect fees, permits, engineering, data cabling, or your **furniture, fixtures, and equipment (FF&E)**. Negotiate the right to apply **unused TI to soft costs and even to free rent** ("TI burn-down").
- **Use-it-or-lose-it clawback.** If the allowance must be drawn within a tight window or it vanishes, you lose leverage. Demand **9–12 months** to draw and the right to convert leftover dollars.

A good tenant rep at **CBRE** or **JLL** will tell you the real market TI for your submarket. Do not negotiate against yourself.

## Trap 2: The Landlord Marks Up Everything

![How Do I Avoid Getting Screwed by My Landlord on a Buildout? — Trap 2: The Landlord Marks Up Everything](https://image.pollinations.ai/prompt/high%20quality%20editorial%20business%20professional%20office%20photograph%20illustrating%20Trap%202%3A%20The%20Landlord%20Marks%20Up%20Everything%20How%20Do%20I%20Avoid%20Getting%20Screwed%20by%20My%20La%2C%20realistic%20magazine%20style%2C%20warm%20light%2C%20no%20text%2C%20no%20watermark?width=1200&height=675&nologo=true&model=flux&seed=93332)


This is where landlords quietly skim. Defend against it:

- **Construction management (CM) fee.** Landlords love to charge **4–5%** of total construction cost to "oversee" the project. Cap it at **1–3%**, and cap the **dollar amount** so a big buildout does not become a windfall for them.
- **Captive general contractor.** If the landlord forces their in-house GC, you have no price discipline. Insist on the right to **competitively bid the GC** among **at least 3 qualified contractors**, or to bring your own with landlord approval not to be unreasonably withheld.
- **Overhead and profit (O&P).** Make the GC's **O&P a fixed percentage** (commonly **10% and 5%**) disclosed up front, not a moving target buried in line items.
- **Open-book pricing.** Demand the right to **audit invoices** and see actual subcontractor costs. A landlord refusing an open book is telling you something.

## Trap 3: Change Orders and Delays

![How Do I Avoid Getting Screwed by My Landlord on a Buildout? — Trap 3: Change Orders and Delays](https://image.pollinations.ai/prompt/high%20quality%20editorial%20business%20professional%20office%20photograph%20illustrating%20Trap%203%3A%20Change%20Orders%20and%20Delays%20How%20Do%20I%20Avoid%20Getting%20Screwed%20by%20My%20Landlord%20o%2C%20realistic%20magazine%20style%2C%20warm%20light%2C%20no%20text%2C%20no%20watermark?width=1200&height=675&nologo=true&model=flux&seed=89772)


Change orders are how a clean budget bleeds out, and delays are how you end up paying rent on an empty shell.

```mermaid
flowchart TD
  A[Signed work letter + fixed scope] --> B{Change requested?}
  B -->|Landlord-caused or code| C[Landlord pays / no rent impact]
  B -->|Tenant-requested| D[Written change order + price BEFORE work starts]
  D --> E[Apply unused TI first]
  A --> F{Delivered by deadline?}
  F -->|Yes| G[Rent commencement starts]
  F -->|No| H[Per-day penalty: extra free rent]
  H --> I[Landlord eats the delay, not you]
```

Rules to write into the lease:

- **No verbal change orders.** Every change needs a **signed, priced change order before work proceeds**. "We'll true it up later" is how you get a surprise invoice.
- **Landlord-caused delays = your free rent.** If permitting, base-building work, or the landlord's GC runs late, your **rent commencement date pushes out day-for-day** and you get **bonus free rent**. Add a hard **outside date** (e.g., 90 days late) that lets you **terminate and recover deposits**.
- **Force majeure cuts both ways.** Do not accept a clause that excuses every landlord delay while still charging you rent.

## Trap 4: Who Actually Owns the Improvements

You pay for the buildout — then the landlord keeps it. That is normal, but the details decide whether you also get stuck **paying to rip it out**.

- **Improvements become the landlord's** at lease end in most leases. Fine — but negotiate **no obligation to restore** the space to base-building condition. Restoration can cost **$10–$30/sf** at move-out.
- **Specify removables.** Your **trade fixtures, FF&E, signage, and supplemental HVAC** should remain yours to remove.
- **Surrender condition.** Pin the exact return standard in writing: "**broom-clean, normal wear and tear excepted, no restoration of approved alterations**."

## Trap 5: The Holdover and Other Exit Traps

The buildout fight does not end at move-in. The exit clauses can wreck you.

- **Holdover penalty.** If you stay one day past lease end, many leases charge **150–200% of base rent** plus **consequential damages**. Negotiate **125–150%** and **strike consequential damages**.
- **Personal guaranty burn-off.** If you signed a personal guaranty, tie it to a **good-guy clause** that releases you once you vacate and pay through a notice period — do not let the buildout cost ride on your personal balance sheet forever.
- **Relocation rights.** Strike or tightly cap any landlord right to **relocate you**, which can strand your custom buildout investment.

## Your Negotiation Playbook

```mermaid
flowchart LR
  A[Hire tenant rep broker - landlord pays fee] --> B[Get real market TI + free rent comps]
  B --> C[Push turnkey or large TI allowance]
  C --> D[Cap CM fee 1-3% + competitive GC bid]
  D --> E[Free rent 1 mo per yr + build-period abatement]
  E --> F[Delivery deadline + per-day penalty]
  F --> G[No restoration + capped holdover]
  G --> H[Sign only after work letter is locked]
```

The order matters: **lock the economics before you fall in love with the space**, and always use a **tenant rep broker whose fee the landlord pays** — your representation costs you nothing and routinely returns multiples of its value in concessions from firms like **Cushman & Wakefield** and **JLL**.

<!--pillar-weave-->
## Related on PULSE

- [How Do I Avoid Getting Screwed on a Ground-Up Build-to-Suit?](/knowledge/q13705)
- [How Do I Read a Landlord Work Letter So I Don't Get Screwed?](/knowledge/q13774)
- [How Do I Avoid Getting Overcharged on Utilities in a Lease?](/knowledge/q13712)
- [How Do I Avoid Getting Stuck Restoring the Space at Move-Out?](/knowledge/q13688)
- [What Is an Estoppel Certificate and How Do I Avoid Getting Trapped by One?](/knowledge/q13650)
- [How Do I Avoid Paying for the Landlord's Capital Improvements?](/knowledge/q13676)

## The "Work Letter" Trap: What Your Landlord Isn’t Telling You

The work letter is the single most overlooked document in a buildout negotiation. It’s not just a list of finishes—it’s the legal blueprint for who pays for what, and landlords often bury hidden costs here. Watch for **"landlord’s standard" language** that lets them substitute cheaper materials or charge you for "upgrades" you never asked for. Insist that every fixture, finish, and allowance (e.g., $5–$15 per square foot for flooring, $10–$25 per square foot for HVAC) is explicitly listed. Also, demand a **"force majeure" clause** that caps delays—without it, a "supply chain issue" could push your opening back 6 months while you pay rent on an empty space. A good rule: have your architect or contractor review the work letter before you sign, and budget $2,000–$5,000 for that review. It’s cheap insurance against a $50,000 surprise.

## The "Soft Cost" Blind Spot: Permits, Fees & Hidden Overruns

Tenants often fixate on hard costs (drywall, wiring) but forget soft costs—permits, architectural drawings, engineering reports, and legal fees. These can eat **15–30% of your TI allowance** before a single nail is hammered. In a typical 5,000-square-foot buildout, expect $10,000–$25,000 in permit fees alone, plus $15,000–$40,000 for design and engineering. To avoid getting screwed, negotiate a **"soft cost cap"** in the lease: the landlord covers the first $X (e.g., $10,000) of permits and design, or you split them 50/50. Also, ask for a **"contingency fund"** of 10–15% of the total buildout budget—if the landlord says no, that’s a red flag they’re hiding cost overruns. Finally, get a **"change order" process** in writing: any change over $500 requires your written approval, not a verbal "we’ll handle it."

## The "Lease vs. Buildout" Clock: Timing Your Protections

Buildouts often take 3–6 months, but your lease clock starts ticking the day you sign. To avoid paying rent on a construction zone, negotiate a **"rent abatement period"** that starts only after the buildout is complete and you’ve passed a **"certificate of occupancy"** inspection. Push for **"delay penalties"** if the landlord misses the completion date—typically $1–$3 per square foot per month of delay, or a 50% rent reduction until the space is ready. Also, get a **"punch list" clause** that gives you 30–60 days after move-in to fix any defects (e.g., faulty wiring, uneven floors) at the landlord’s cost. Without this, you’ll be stuck with "as-is" problems. A smart move: hire a third-party inspector ($500–$1,500) to sign off on the buildout before you start paying full rent. It’s a small cost to avoid a year of headaches.

## FAQ

**What is the most important thing to include in my lease for a buildout?**  
The lease must specify a fixed tenant improvement (TI) allowance, the exact scope of work, and that the landlord cannot add management fees or overhead markups. Without these details in writing, you risk paying inflated costs or losing the allowance entirely.

**How can I avoid paying for the landlord’s own construction delays?**  
Include a clause that ties rent commencement to substantial completion of the buildout, not just the lease start date. Also add a daily penalty (e.g., rent abatement) for every day the landlord misses the agreed completion deadline.

**Should I accept a work letter that lets the landlord manage the buildout?**  
Only if the work letter caps all overhead and profit at a reasonable percentage—typically 5–10% of hard costs. Otherwise, the landlord can mark up every subcontractor bill, turning your TI allowance into a profit center for them.

**What’s the best way to handle change orders during construction?**  
Insist that all change orders require your written approval before work begins, and that any cost savings from value engineering go to you, not the landlord. This prevents surprise charges and ensures you benefit from cheaper alternatives.

**How do I protect myself from being charged for “normal wear and tear” at move-out?**  
Define “normal wear and tear” in the lease as cosmetic aging that doesn’t affect structural or MEP systems. Also require a joint walkthrough before you start the buildout, with photos, so you’re not billed for pre-existing damage.

**Can I negotiate the landlord’s right to approve my contractor?**  
Yes, but you must give the landlord a right to object only on reasonable grounds (e.g., lack of license or insurance), not arbitrary preference. This keeps you from being forced into using the landlord’s own expensive contractor.

## Sources

- CBRE — Office and Retail Occupier Lease Negotiation and TI Allowance Guidance
- JLL — Tenant Representation: Concession and Free-Rent Benchmarking Reports
- Cushman & Wakefield — Office Fit-Out Cost Guide (per-square-foot construction benchmarks)
- NAIOP (Commercial Real Estate Development Association) — Work Letter and Tenant Improvement Best Practices
- BOMA International — Lease Administration and Operating Expense Standards
- The Tenant Advisor / tenant-rep brokerage commentary on construction management fees and change-order control

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