Thorough planning and budgeting are put into place to ensure construction costs are well managed. However, somewhere down the line, some things will need to be modified. That’s where change orders come into play.
Change orders don’t necessarily arise from poor budgeting and planning or any errors made during the construction process. They are sometimes caused by events outside the control of the stakeholders. These can vary from market conditions and labor costs to weather conditions and other unforeseen circumstances.
Managed successfully, change orders aren’t something to be feared. Having a change order process in place will allow you to efficiently identify their need and manage them as they arise on a project. It’s important to share change orders with your clients and subcontractors so everyone is on the same page.
Here are some issues that arise and possible solutions for crafting an effective change order process:
Problems with change orders
Change is inevitable. On construction projects, a more apropos statement might be that change orders are inevitable. While not all change orders have a negative impact on the project, the most common issues faced are the impacts to project timelines and budget.
Disagreements over what warrants a change order are common since they affect the different parties involved in different ways. Clearing up any discrepancies in the scope of work and plans and specs can go a long way in eliminating the need for change orders down the road.
The construction contract should outline how the cost of work from change orders will be calculated. This includes equipment costs, overhead, and materials. How change orders will impact schedule changes and delays should also be covered in the contract.
Make sure a written change order form is included in the contract and avoid conflicting clauses regarding change orders. If the contract states the contractor can’t commence work on any changes without a written change order, there shouldn’t be language stating that the owner can order extra work to be performed without a compensation agreement.
At this point it should be made clear that no new or additional work will be done without a written change order that has been signed off on by all stakeholders involved. There are times when a change order won’t impact the cost or schedule of a project, but that’s not always the case. This is why it’s important that the contract cover how these items will be handled.
Anticipating change orders
Owners may try to be proactive by requiring a pre-site inspection giving them an idea of the scope of work to be done and the site conditions. This is where change orders can be touchy subjects.
As a contractor, change orders should protect you from feeling pressured into performing work that’s beyond the above-mentioned scope and outside of the anticipated budget.
Managing expectations is the most critical aspect of the change order process. The process should always be discussed with your clients in advance so they are aware that additional work will cost extra. This will prevent them from feeling they were caught off guard when they request a change and you ask them for more money.
Reducing change orders
A realistic assessment of the project’s total cost should be performed and should not only include the construction work, but also all accompanying costs. And while there is no “cure all” for reducing change orders, there are some ways to mitigate such issues.
They include establishing quality control processes; increasing coordination and collaboration; establishing an initial change order process; meeting directly regularly with the stakeholders involved; and including more detail in the design of the project.
When it comes to change orders in construction, get out in front of potential changes before they become an issue. Anticipating changes, having a process in place, and working to reduce those changes will keep your project moving forward.