As the old saying goes, change is inevitable. On construction projects, a more proper statement may be that “change orders are inevitable.” If the sheer thought of change orders makes you flinch, it might be time to take a closer look at your change orders and determine how you can improve them.
Change orders are not something you need to fear, mainly if they are appropriately managed. However, you need to master the change order process to quickly realize the need for change orders and handle them as they arise on your projects.
In this article, we’ll be sharing with you the best practices to improve your change order process while minimizing the costs for each change order. We will also dig into how construction scheduling software can help improve your change order workflows.
The Actual Costs of Change Orders
Change orders can culminate in various costs in your business. Assessing the costs helps your company improve the change order process and minimize unnecessary and worrying inefficiencies. In particular, direct, indirect, and consequential costs may result from a change order.
1. Direct cost
These are costs that a particular change order directly impacts. They include:
- Materials
- Equipment
- Labor
- The costs of communication between builders and other personnel
- Other expenses resulting from add-on work
2. Indirect costs
Indirect costs refer to overhead, which might either be fixed or variable. In several construction projects, indirect costs might increase tremendously as the project becomes more and more complex. The company’s accounting, project management, and construction inventory management practices will help identify how change orders can impact indirect costs typically associated with overhead.
3. Consequential Costs
These costs are relative to change order timing. Specific factors, like labor shortages and inclement weather, can have long-term consequences on the project costs. A change order also reduces productivity by 30%, resulting to even more consequential costs.
Understanding each of the three potential costs cited above can help you and your team determine how to mitigate them. Deploying a standardized change order process will not just help account for the project costs; it can also help speed up or enhance the organization of the process. Overall, suppose you can identify which of the costs are slowing down your construction business the most. In that case, you can immediately enhance your change order process by mainly targeting inadequacies driving those costs.
Common Change Order Issues in Construction Leading to Disputes
The seeds of the disputes usually lie in the content of the contract and bidding documents. When you do not specify certain aspects of the projects from the outset, you may discover sooner that your initial plans, specifications, designs, etc., require immediate changes.
In case if you still do not know, below are some of the common causes of change order-related disputes.
- Incomplete design – when specifications and plans contain inadequacies and mistakes, you might not be able to price the work correctly or fully execute it.
- Poor design coordination – Builders, architects, and other parties involved might assume that one of the other parties is managing certain aspects of the job. As a result, gaps in the plans are soon to arise.
- Specification issues – Issues in specifications often stem from using boilerplate language, failing to account for differences.
- Schedule speed-up and delay – It happens when the client decides he needs an earlier completion date but insists not to incur additional costs.
- Insufficient disclosure and unknown conditions – whether due to inability to know beforehand and a deliberate lack of disclosure, a discovery of the problem right after work is underway and may lead to a fraud claim.
- Unfair restrictions – This phenomenon occurs when the government places unfair restrictions on your company.
- Unwritten orders – While you need to call for actual documentation of change orders, it may be hard to follow the step.
Apply These Five Best Practices to Improve Your Change Order Process
While every construction project is unique, following the five best practices below can help improve the change order process and reduce a range of issues. Such problems include disagreements over project scope and, of course, overall costs.
1. Take an In-Depth Look at the Contract
It is crucial to remember that a change order is fundamentally an addition to your project’s original contract. There are several reasons why a change order may occur and require extra work. Probably errors happened during the actual project. So, when you start the change order process, looking back at the original contractor will be your first step. This is to determine what details exist around change orders.
If there is confusion regarding the nature of the change orders and its relation to the original contract, resolve them right away as soon as possible before implementing them.
2. Go over your specific plans in place
While reviewing the current contract, look closely at the project plans and specifications. If you notice something unclear in the documentation, always consult with your client even before processing the change order. Not doing so will lead to additional complications throughout the project. Consequently, you may find yourself dealing with many change orders that could have been prevented beforehand.
So by monitoring the project specifications, you can solve possible material shortages that may occur due to the lack of preparedness before the job even starts. Speaking of material shortages, tracking your resources, materials, stocks, etc., is crucial to prevent shortages from happening.
Make this easier using inventory management software like Pro Crew Schedule. With this reliable software solution, you can eliminate complexities and have more control of your inventory. You can track and monitor your materials, equipment and other company resources most effectively and seamlessly.
3. Communicate with all Parties Involved
A big part of your change order process includes constant communication with all parties involved in the project. Discussions usually start with determining the reasons for a requested change order and how it will be handled. Most disputes regarding change orders are affecting the change order process.
This is why you need to work not with your team but with your clients as well. Carefully define the new scope of work. Ensure to discuss how it can impact the present construction performance and schedule. It is essential to be on the same page as your client regarding the expectations and specifications for how the work will proceed when change orders are necessary.
- Keep everyone updated on the change order process.
- You, your team, your client should be aware of the work that is being altered.
- Integrate the change order into your construction project schedule to reduce its impact on the project completion.
4. Keep All Important Documentation
Like each other aspect of your construction project, it is vital to document everything relating to change orders. You can make documentation much easier if you further develop process documents and templates. On the other hand, your team can use them every time they initiate a specific change order process.
Make sure to keep records of all documentation and negotiations to make sure all parties are held accountable. As previously stated, communicate with all parties involved.
5. Keep Negotiations More Efficient
Negotiating can be challenging, especially if there are disagreements about the change orders, especially the costs. To a certain extent, some alterations to the project timeline are required if necessary. So, if you want to keep all negotiations smooth and ensure to get paid, include and build that to your process. Begin by discussing with your client the entire scope of the additional work as well as the final costs.
The project’s agreed-upon costs may now appear in the original contract. Yet, you need to decide on a mutually agreeable cost while maintaining the change order in some cases. Next, the project schedule will now be discussed. Work closely with your team and your clients to determine if the project requires timeline extensions to complete the work.
Use Construction Scheduling Software to Help Automate the Process
When you want to enhance your change order process, do not just stop at the communication procedures. You can simplify things by using reliable project management software. A dedicated software solution enables you to make the change order process far beyond painless. Just as importantly, it will give you the ability to handle and manage all documentation and subcontractor submissions. This particular construction tech helps you with overall management, including your people, materials, construction inventory list, etc.
If you are deeply worried about many aspects of your change order process becoming disorganized, the right solution like Pro Crew Schedule will help. It eliminates many complications around change orders and other several phases of your construction project. In addition, you will most benefit from the total transparency relating to the process workflow.
Key features of Pro Crew Schedule include:
- Project calendars, construction scheduling, filtering features (pending, in progress, complete, and on hold)
- Document sharing and management, RFIs, change orders, and submittals
- Construction crew management, job log, monitoring work hours
- Tracking feature, digital time cards, clock in and clock out capabilities
- Unlimited document storage for estimates, quotes, past contract paperwork, maps, blueprints, invoices
- Contract tracking and contractor-subcontractor messaging, inventory management
- Mobile access and cloud-based platform
If you like to learn more about Pro Crew Schedule, request a live demo and get a 30-day FREE trial!
Key Takeaways
Change orders can derail the construction schedule and may push project costs over the actual budget. You may set schedules and budgets to support predictability, yet change orders disrupt both. While change orders are a harsh reality in construction, you can still keep them to a minimum when you focus on coordinating and designing your projects more carefully and comprehensively from planning to execution.
