By: Kendall Jones on July 19th, 2016
A Quick Guide to Managing Change Orders
Change orders are an inevitable part of working in the construction industry. You’ve probably had to deal with them at some point on a project and will continue to have to deal with them on future projects. When change orders aren’t properly managed, it can quickly derail the success of a project. Increased project costs, delays in hitting contract milestones, interruption of workflow, and not completing a project on time are some of the issues that can be caused by not addressing and resolving change order issues early.
Being able to effectively manage change orders doesn’t have to be difficult. All it takes is a little preparation, understanding, and lots of communication with all parties involved with the project.
Your first step before signing a contract and beginning any work is to review the plans and specifications with all parties involved with the project. Get clarification from your client, architect, and engineers regarding any questions you have regarding the scope of the project.
Any aspect of the project that is vague or unclear on what is expected should be resolved. This is also a good time to address any errors or omissions identified in the plans and specifications. Make sure any subcontractors you have doing work are also clear on the work they’ve been contracted to complete.
The next step is to review the contract. Make sure there is a clause written into the contract that addresses exactly how change orders will be processed. This includes procedures for issuing any modifications to the original scope of work that will result in new or different work to be completed.
Disagreements over what warrants a change order are common, since they affect the different parties involved in different ways, so clarifying any discrepancies or vague items 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 contract should outline how the cost of work from change orders will be calculated including 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.
Avoid conflicting clauses in the contract 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.
Make it clear that no new or additional work will be done without a written change order or a written notice to proceed that has been signed off on by all parties 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 which is why it is important that the contract cover how these items will be handled.
Change orders are issued for a number of reasons. The client can change their mind about what they want done, unexpected or changes to the site conditions can require additional work and omissions and errors to the plans are all common reasons for change orders. It’s important to communicate and have an open dialogue with the client, designers, and any affected subcontractors when a change order is coming.
Advise your client of any work that needs to be stopped as a result of the changes and discuss any delays or schedule changes that need to be made. Make sure that all labor, material, and equipment needs are accounted for in the change order whether the new work being required will negatively impact any work already completed.
Remember to consider how each change order will impact your subcontractors on the project. Work with your subs to evaluate any changes to their costs and schedule and determine how their contracted work will be affected by the change order.
If you are faced with multiple change orders on a project be sure and review what the combined impact will be to the overall project. Determine how it will affect your productivity and the strain it will have on your resources (workers and equipment). A large number of high-impact change orders can lead to a backlog of work so careful planning and scheduling of your resources and subcontractors is vital to avoiding disruptions in the flow of the project.
Change orders are a part of doing business in, but they can be easily managed by requesting written documentation and being open and honest with your client about the time and money it will cost to make those changes.
About Kendall Jones
Kendall Jones is the Editor in Chief at ConstructConnect. He has been writing about the construction industry for years, covering a wide range of topics from safety and technology to industry news and operating insights.