All commercial construction projects can involve changes along the way. Even with the best planning and team, change orders are inevitable. In fact, change orders occur in more than a third (35 percent) of commercial projects. Minimizing them should be every owner’s and developer’s goal.
Changes result in costs, delays, and frustration (and often conflict) as a project progresses. The average number of change orders in any commercial construction project is typically one to five.
Most Common Reasons for Change Orders
Municipalities can be a major source of change needed during commercial construction. For example, a fire alarm system may be requested after construction has already started.
Like municipalities adjustments, tenant requests are also a main cause for changes. They don’t happen as often as changes related to municipality requirements, but can occur. When your tenants change their minds after construction has already begun, you often have to weigh the importance of that tenant to your overall project against the cost of making major changes to scope. A corporate tenant’s request may be more costly, but the risk of refusing it may be greater.
Like all aspects of commercial construction, you need to balance your short- and long-term goals with your wallet.
Only by knowing the potential reasons for change orders can you work to avoid them. Here are some of the main ones:
Plans that contained errors and were not accurately drawn
Communication fails between the property owner and the contractor
The scope of work was improperly defined by the contractor
Due to supply challenges (which are common now), the contractor must substitute building materials, often requiring changes in construction methods and timing
Inclement weather, which can result in labor shortages/delays and safety concerns
The owner or tenant encountered financial or other complications, which resulted in scope changes
Government regulations changed, which create unanticipated updates to plans
Some of these (like weather or zoning/regulatory requirements) are beyond your control. But others may be mitigated through careful planning and process management.
Here are three ways to minimize change orders.
#1 - Conduct an In-Depth Plan Review
As tempting as moving forward with construction is, spending adequate time on the plan can save you time and money in the long run. Do not begin construction until you’ve received a full set of permits and approvals. Although this may be frustrating at times, you’ll avoid surprises and possible conflict as you move through the construction process.
Ensure that the plans have been thoroughly reviewed with the general contractor, especially if they are being used as tenant prototypes. Multi-tenant properties can be especially tricky. You must thoroughly review every work letter in detail and make sure that both your architect and general contractor interpret all of them properly.
Automation has enabled plans and drawings to be more detailed and accurate. Ensure that everyone involved in the project is using technology to its best advantage to create the most accurate renderings, timelines, and cost estimates.
An in-depth plan review with all team members before construction begins is critical to making sure that every team member has reviewed and properly translated the plans.
#2 - Create a Buffer in Your Time & Cost Estimates
Your contingency budget should be developed with another leeway to accommodate change orders. Depending on the project, that might be 5-6% of the overall budget and should fall into your contingency budget. But do clarify that with your general contractor.
When changes must occur, communicate them clearly and accurately as well as adjust your estimates accordingly.
#3 - Allow for Weather (& Other Uncontrollable Instances)
Unpredictable weather has become an increasingly important factor in construction planning. Weather delays cost the construction industry about $4 billion annually.
Even when work is being performed indoors, cold snaps, snowstorms, and heavy rain can result in delays. Workers may have difficulty getting to job sites and materials shipments may be delayed by days, weeks, or even months.
Plan for weather conditions based on your geography and expert forecasts. For example, you know that snow is likely on the east coast between November and February, so plan for your outdoor work to be completed before the first flake falls.
Some weather incidents can result in huge expenses. For example, heavy rains in Washington State can lead to flooding and the need to pump out a job site.
Research the geography of your project and be prepared for any surprises that Mother Nature can throw your way. You can’t control the weather, but you can minimize its impact.
The COVID-19 pandemic has also had an impact on the construction industry. Supply chain issues and labor shortages due to illness can lead to unanticipated disruptions. In fact, 70 percent of construction business owners have reported that the pandemic had a negative impact on their delivery times and performance.
Create a Change Order Process That Works
Now that you know that change orders in commercial construction are inevitable and have pinpointed three key ways to mitigate them, have a process in place that minimizes expense, confusion, and animosity as you go through construction.
First, identify the “problem” and why the change occurred. Avoid blame-placing and finger-pointing.
Next, discuss how this change will have an impact on the project as a whole. Make sure all parties involved are aware of the adjustment, especially if it has an impact on other parts of the commercial construction project.
Last, sign-off on the paperwork. Again, use technology to keep track of change orders, so you can accurately communicate the cost and timing impact and learn from every project.
Change orders will never be eliminated in commercial development, but how you prepare for and deal with them can make all the difference in project success in the long run.
bRENT ATKISSON >
Brent Atkisson is highly experienced with a strong background in development, remodeling, property management, IT infrastructures, facility management, and maintenance. He has managed projects for 75 ground up and restaurant conversions, and more than 130 restaurant remodels. Since joining SimonCRE, Brent has overseen 120+ build to suit projects including The Steelyard in Chandler, AZ, Simon Medical Center in Laveen, AZ, the Village at Prasada in Surprise, AZ, and Jackrabbit Ranch Marketplace in Buckeye, AZ.