Every construction project has its share of change orders. Among the most serious are drawing and design changes discovered after work begins. Inaccurate specifications can also generate a corrective change order. Some change orders may require materials substitutions, a major complication. With any change order, the expectation is for the contractor to respond in a way that keeps the job moving. But it may well add labor hours and increase both material and labor costs.
As any contractor can attest, those costs can add up. Change orders contribute to cost overruns and often are a major factor in pushing work past scheduled completion dates.
Contractors can ensure projects will run smoother without expensive delays and added costs by putting clear, systematic procedures in place for managing change orders. An institutionalized system that becomes integral to an operational approach is the best way to moderate the risks of change order disputes long term. Management will go even smoother if it is undertaken with a collaborative spirit. That means making sure that everyone with a stake in the project—contractor, owner, trades and consultants—buys in to its terms before the project starts, and keeps lines of communication open.
Five steps will help shape change order management process and improve outcomes.
Review contracts keeping change orders front and center
Specifications for managing change orders should be clearly delineated in the contract. This means establishing ground rules for initiating, authorizing, performing and paying for work required by change orders. Not only will this slow the pace of unauthorized change orders, but it will also head off unnecessary requests. The individual who receives change orders must be identified. The submission time frame should be specified, one way to emphasize timeliness. It’s also key to stipulate documentation that should be included with change orders.
Review All plans
This is a must before work starts to guard against ambiguities, errors or omissions that might pose problems. Delays due to document revisions are easier—and less costly—to manage early in the project than issues around change orders down the road when construction’s well underway.
Write it Down
It’s dangerous to accept an oral change, so don’t. If change orders aren’t executed in writing, there may be problems collecting the full amount for the changes, although the legalities vary by state and type of work (residential versus commercial). The construction contract may be silent on written change orders as a condition of payment; however the process should not be to delay difficult discussions until the invoice is outstanding. Each change order should be specified in writing, written clearly and in detail. A strict protocol for signoffs by all parties is also imperative.
Set communication procedures
A change order can have a big effect on the project overall, starting with timelines and how they are followed, but including bigger scheduling issues like work phases and worker requirements. Establishing and following a communications protocol ensures that all contractors on the job, with a direct or indirect involvement, know about the changes and can provide input on their potential impact.
Think tech
Given the explosion of construction tech solutions, project management software with change order functionality may be a smart investment. Today’s systems offer templates for change orders and can track their approvals, streamlining the process and producing far more efficiencies than paper logs and email.
Change orders and disputes over them will always be a part of construction projects. By thoroughly documenting the facts and managing the process right, contractors are better protected, offset risk and encounter fewer surety and professional liability issues. Everyone is bound to come out ahead.
