How to Manage Construction Change Orders and Keep Pace With Schedule?
As a general contractor, you will hardly be happy to receive construction change orders from the owner when things are planned to perfection, and you strive to adhere to the construction schedule.
However, change orders are an unavoidable part of the construction project. Thus, builders should manage them proactively.
If you’ve received a change request and are unsure how to approach it, here are some tips to help you manage change orders effectively while keeping pace with the schedule.
With the right approach and proper planning, both parties can be satisfied in the end.
What Is a Change Order?
A change order is an addendum to the original construction contract that outlines any changes or modifications requested by either party. It can be as small as a material change or as big as a complete project redesign. Change orders are valid only after being signed by both parties.
Common construction order examples include changes in the scope of work, material additions or substitutions, additional services, and changes to the timeline.
- Changes in the scope of work refer to any changes requested by either party that falls outside the original work scope.
- Material additions or substitutions involve adding or replacing materials to complete a task.
- Additional services refer to any services that weren’t included in the contract originally.
- Changes to the timeline can also be requested if there is a need for an extended period for the completion.
It’s not always necessary that change orders request contractors to perform additional work. Change orders can also serve as a way for the client to pay less than the original budget by removing particular work from the scope.
Also, though change orders often result in the owner’s dissatisfaction and the contractor’s additional effort, the construction change order process can save costs and make good use of available resources. Owners can be satisfied with the job and still make change orders due to market conditions, changes in their needs, etc.
Change orders are common in the construction industry. According to estimations, around 35% of all construction contracts undergo at least one change order throughout the project’s lifetime.
That’s because such a complex field as construction contains a lot of uncertainty and depends on many external factors, and as a result, change orders are inevitable. What really plays a role is how the contractor and the owner manage change orders.
Don’t Treat a Change as a Problem
The best way to start managing change orders is by changing the attitude toward them. It’s best to think of it as an opportunity to work with the client and develop a solution that will benefit both parties.
One of the crucial causes of change orders is the length of the project. From the initial of the project until its completion, a lot of time passes, and changes occur in terms of availability of materials, working conditions, design trends, etc. Consequently, the client may need to change what they have agreed to.
Moreover, the construction company itself can also initiate a change order. Contractors may find better solutions to problems or unexpected issues during work. For example, jobsite workers might hit the rock during excavation or earthwork, which builders cannot predict during the initial estimation. In this case, having the opportunity to initiate change orders save builders from unnecessary costs and possible delays.
In a nutshell, change orders are a normal part of the construction process and if managed right, they can bring many benefits to both parties.
What Should a Construction Change Order Include?
A change order is a formal addition to an original construction contract, so it should include precise data documenting the change. Here are the critical components of change orders.
Project Information
The project name and all necessary data, such as contract number, job name and location, should be provided.
Main Stakeholders
The change order should also include the names of the key project stakeholders; client, prime contractor, or contractor that submits the change orders. There should also be the contacts of project stakeholders.
Requested Change
All the data about the requested change should be present, such as the nature and scope of the change and what it adds or removes to the project’s pre-agreed scope. In some cases, contractors also include the reasons for the requested change.
Cost and Schedule Changes
The key reasons for change orders are not to run out of budget. So, it’s especially crucial to document which cost changes the change order will impose so that contractors can charge clients correctly. Any other change in the project schedule should also be included to avoid any delays or interferences.
Signatures
At the end, the change order should include the signatures of all parties involved in the process. This is to formalize the document and validate it.
How Does the Change Order Process Work?
Creating and managing change orders is primarily the responsibility of the contractor. Quite often, clients may request changes verbally, and if contractors fail to document the change request, they might not be able to charge the client for it in the end.
So, here’s a rule: never change the project without having a written change order.
And here’s how the change order process usually works.
Step 1: The Project Stakeholder Proposes a Change After Signing the Contract
The first step is to clarify the detailed change request from all the stakeholders. There are many ongoing discussions during the project, so contractors should assess whether the requested change is significant enough to document it.
Step 2: Preparing and Submitting the Change Order
Contractors should document the change, including the necessary amendments compared to the original project scope, and how the suggested change will impact the cost, value and schedule of the project. Owners should be able to review and approve the change order before any work starts, so detailed documentation is important.
Step 3: Review and Approval of the Change Order
If the owner has no objections to the consequences that the requested change can bring to the project, they approve the change order. In some cases, even if there are no objections from the owners, contractors might not agree with proposed changes and reject them until a new agreement. So, there is usually a stage of discussions and negotiations to agree on the terms.
Step 4: All Parties Sign the Change Order
When everything looks good, all parties sign the change order and it becomes legally binding. An approved change order is an amendment to the original contract and is its integral part. It sets new financial and non-financial obligations for all the parties involved.
So, the only thing you are currently missing out on is how to create construction change orders. Scroll down for an answer.
How to Create Change Orders?
Messy paperwork and many back-and-forth emails are not friends with change orders. Contractors worldwide refer to specialized construction software solutions to manage and create change orders as a proven way to shorten the cycle time and increase accuracy.
If you haven’t got construction software yet, here’s a detailed instruction on managing change orders with Buildern – a professional solution for contractors.
Step 1: Fill in Your Original Project Details
As Buildern provides construction managers with a complete toolset for the work, the first step toward creating a change order via Buildern will be adding a project and filling in all the details.
This may include information like:
- Project name / Owner’s contact information
- Start and due dates
- Cost codes for different line items
- Local taxes
- Insurance rates
- Preliminary budget estimation, etc.
The more details you fill in, the easier it will be to track the changes.
Step 2: Generate a Change Order
Buildern has a premade template for change orders. You can generate a change order in a few clicks without requiring tons of manual data entry.
Add a name for the change order and link to a scheduled item. This option will help you track all the changes regarding the schedule of work and materials.
The in-built calendar will help set an expected approval due date. You’ll quickly get through all the paperwork with such a user-friendly and intuitive system.
Choose the units, their prices, and the required quantity for each change order item.
Step 3: Review the Change Order and Send It to The Client
Once all the details have been filled in, it’s time to sign and approve the change order. Buildern stores all the paperwork and records, so you won’t lose any data even if something goes wrong.
Here’s an example of a change order from Buildern’s dashboard. See how easy it is to track all the changes and communicate with your client:
Tips to Improve Change Order Management in Construction?
As a construction company, managing change orders can be an overwhelming task. To make the process smoother and more efficient, here are some tips for improving change order management:
Negotiate Contract Terms In Advance
Having a set of rules and regulations in place for the change order process is essential. Make sure to discuss, negotiate and agree upon these changes before beginning the construction. Otherwise, you risk delays and disputes down the line.
Fairly discussed responsibilities between the contractor and client can help you avoid further difficulties. Also, consider agreeing upon pricing standards, invoice payment terms, and compensation for change orders to mitigate any misunderstandings later.
Do Not Start Working on Change Requirements Without Change Order
We already know that change orders are the official document to make changes and modifications in a construction project. Therefore, it is important not to begin work on the change requirements until a change order has been issued. Not only will this ensure that changes are properly documented, but you will also be able to bill correctly for the services provided.
Companies that work without preliminary change orders risk delays, unnecessary costs, and potential discrepancies. If playing with your professional reputation is the last thing you want to do, then make sure to issue change orders before starting any additional work.
Address Change Orders In a Timely Manner
Saving everything for the last minute is never a good idea. It is crucial to attend to change orders promptly and professionally. Doing so will avoid any disruptions or delays down the line. Moreover, timely delivery guarantees that both parties will make the most of the resources available and save time and money in the long run.
Carefully Communicate the Impact of The Change Request On the Project
Organize a meeting with all the involved parties to discuss and agree upon the changes. Make sure to explain the impact of those changes on the budget, timeline, resources, and other such aspects.
Doing this will help everyone understand the consequences of the change order and keep all parties on the same page regarding expectations. Regular sessions regarding the change orders are necessary to ensure that all parties are aware of the changes and their implications.
Document Everything
If possible, document the meeting proceedings for future reference. A written record of the final agreement will help both parties avoid future disputes.
Moreover, document all the changes made with the new change order. Doing this will help builders monitor and track the changes efficiently.
Keeping corporate documents and project-related stuff on a single platform will guarantee that team members, stakeholders, subs, and everyone involved in the project always have access to the right documents and their recent versions.
Be Open to Making Changes
Changes are inevitable in the construction industry, so accepting and embracing them is important. Open-mindedness and flexibility are key traits of successful construction teams.
Adopting a “can do” attitude and being open to making changes can go a long way in driving project success.
Be ready and willing to make changes while upholding the rules and regulations of the change order process. At the end of the day, the goal is to provide a successful outcome for the client.
Conclusion
Change orders can be tricky to manage, but they are an unavoidable part of the construction process. The key is to approach them with a professional attitude and prioritize communication with all the stakeholders involved.
Following the steps outlined in this article can foster a productive and stress-free environment for change order management. Doing this will help keep projects on track, avoid potential disputes, and get the job done on time and to the highest quality standards.
As a reliable construction management tool, Buildern helps you to streamline the change order process with its automated features. Try Buildern now and get a taste of efficient change order management.
