Change Order Management in Construction

We all will have a chuckle at the above image of the Yacht named Change Order and the tender named Original Contract.

However, the truth is Change Orders are not the strike it rich, make a fast buck that most Clients believe and are always trying to avoid paying for.

All builders are without doubt better off with NO Change Orders and get in and out of the contract on time.
Change orders are not just a straight monetary calculation issue they are time related.

The burden of proving disruption and/or prolongation is on the Contractor and many small to Medium contractors just do not have the resources to keep contemporary records required by the contract or As Built updated schedule records to properly support a detailed Extension of time claim with demonstrable time impact analysis.

Many Change orders either individually or collectively do extend the required time to complete the works but to document and if necessary, fight a dispute over an extension of time is more effort and cost than the contractor can expend. In addition, the Client/Contractor relationship can be so damaged during this process that repeat business can be impacted.

We at ADDMORE ensure our clients have a Change Order Management Policy with clearly detailed workflows so that pre contract this topic can be discussed and both parties agree upon how the Change Orders will be administrated during the contract starting with the authorized personnel to issue Change Orders.

Change Orders are always to be in writing no such thing as verbal instruction pertains to being instructed to Vary the contract conditions as the contract will no doubt clearly state.

However, contractors must accept that the instruction to proceed with a change order and the approval of the cost are on two different timelines again usually set out in the contract itself.

Therefore, once work is officially an instruction to proceed noting it is a variation to the contract a price should be submitted as soon as possible even if some PC rates OR Provisional sums need to be used to ensure everyone is aware of the magnitude financially of the Variation to the works.

Whilst in parallel preparing any engineering works or material orders to mitigate the delays to the works and disruption to other trades and the project completion.

The fully finalized price with supporting documents should be submitted as early as reasonable and in as much detail as practical.

Communication and transparency with the Client on true costs and the actual markup added will go a long way to a fair settlement.

We at ADDMORE support our clients with cost estimates of change orders, contractual notices and claim preparation if required and always seek to only claim what is a true and fair cost for the variations instructed and get paid for what we claim.

Change Orders must be professionally submitted with:

1 An Cover sheet that has the standard project information, overall cost, an extension of time in days (if applicable) and a description of the reason for the change.

2 Supporting documents are to include:
a. RFI
b. Material Submittal (if new product being introduced into the project)
c. Subcontractors proposal with full break out of costs not just lump sums
d. Back up document / spreadsheet
e. Architectural/Engineering Drawings and Sketches

We ensure the WHY this is a change to the contract and WHY they are required to pay for it are clearly defined for ease of the Clients review.

We ensure we fully know the Change Order before submitting it and that its validity is contractually supported.

We do the homework to check our subcontractors pricing and understand how they have built up their prices and why it will take the time requested.

The Devil is in the Detail so pay attention to the breakout of material, labor, tax (if applicable), mark up etc.

Know your Client when and how to present a Change order can be very important, get your timing right in the right place.

Its just business keep emotion out of change orders and always be professional in your presentation to gain the clients confidence you are not trying to buy a Yacht from his projects change orders