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Change orders significantly influence the expenses and profit of a construction project. Therefore, it’s essential for all relevant participants to adhere to a uniform process for change orders, ensuring no steps are missed.
Whenever there’s a need to carry out tasks not covered in the initial scope of the construction contract, a change order becomes necessary. However, there’s a substantial amount of preparation required before creating a formal change order. The following are the steps involved in a successful change order process:
1. Understand the contract
The cornerstone of effectively managing construction change orders lies in thoroughly understanding the original contract between the general contractor and the client. A construction change order is essentially an amendment or addition to this existing contract, and its implications can significantly affect the project’s scope of work. To navigate this process adeptly, it is crucial to carefully review the contract before signing, focusing on any clauses specifically related to change orders. These clauses often encompass critical details such as the timeframe for initiating a change order, the specific information and documentation required, and the identification of the authorized party to approve the changes, whether they are initiated by the contractor or the owner.
Additionally, it’s important to be aware of any conflicting language within the contract, particularly regarding the commencement of change work and the owner’s authority to request additional work. Some contracts might contain stipulations prohibiting starting change work without a written and approved change order yet simultaneously allowing the owner to demand extra work without a formal agreement. Tools like Bauwise’s contract management feature can aid in reviewing and keeping track of such contract revisions, including change orders. Utilizing pre-built templates for change orders can also help ensure that all necessary information is captured accurately and consistently. Overall, a detailed understanding of your contract, especially the clauses about change orders, is fundamental for general contractors and subcontractors to successfully manage changes and avoid potential disputes or misunderstandings during the construction project.
2. Review the project plan
When you start a construction project, it’s really important to carefully check the project plans and the contract at the beginning. This means looking for any mistakes or things that might not be clear in the project’s design or what should be done. If you find anything that doesn’t seem right, talk to the person who owns the project and the architect to fix these issues. This will help avoid the need to make changes later, which can save time and money.
It’s a bad idea to skip this step. If you don’t check everything carefully, including what the site is like now and what problems might arise (like not having enough materials or workers), you might end up with extra work and costs later on. Using tools like Bauwise can help a lot. These tools let you track how the project is going and keep all the important documents in one place. Everyone can see the latest plans and know what’s happening. By getting to know the work planned before you start and fixing any mistakes or missing parts, you can avoid problems and extra costs later in the project.
3. Use a Standard Process to Ensure Consistency
Establishing a uniform method for handling change orders ensures consistency across your construction projects. This process should be clear and agreed upon by all involved parties, including contractors, subcontractors, and clients. Many construction companies opt for specialized software designed for change order management. These platforms, like Bauwise, streamline the creation, review, approval, and archiving of change orders, offering a more efficient alternative to traditional manual methods.
If you choose to use such software, it integrates all aspects of change order management into one unified system. This automates the process and provides a centralized platform where all stakeholders can easily create, review, approve, and access change orders. This approach significantly reduces management overhead, ensures transparency, and minimizes the risk of lost or untracked information.
However, if a digital solution is not feasible, it’s still crucial to develop a standardized process for manual handling. This includes creating a consistent change order template, setting a precise sequence for review and approval by all parties, and establishing a reliable system for document storage and retrieval. Whether you choose a digital platform or a manual process, the key is to maintain a consistent, transparent, and efficient approach to managing change orders throughout the lifecycle of your construction projects. This systematic approach saves time and enhances communication and coordination among all stakeholders, ultimately contributing to the smoother execution of your projects.
3. Define the change and evaluate the impact on the budget and schedule
In this critical part of the construction change ordering process, clearly define the change and its financial and time implications. Begin by briefly describing the change—whether it’s a design change, a material change, or a response to unexpected problems.
Then, assess its financial impact. Clarify how the change will change the budget by comparing the original and new costs. Transparency is crucial here to manage expectations.
Also, evaluate how the change will affect the project schedule. Specify possible delays, or vice versa, if the change does not significantly impact the schedule. This direct approach to describing both cost and time impacts is essential for effective project management and maintaining client trust.
4. Meet With All Involved Parties
Effective communication is pivotal in managing construction change orders, involving all parties – from the contractor and owner to subcontractors and other stakeholders. The process should start with a detailed discussion between the contractor and the owner or their authorized agent, focusing on the reasons for the change, its management, and the new scope of work. This conversation is crucial to align expectations and understand how the change affects the construction schedule and performance.
Subcontractors also play a vital role in this process. They need to be informed about how the change might impact their work, whether directly or indirectly, and adjustments in their schedules and workflows may be necessary. It’s important to note that while these preliminary discussions are valuable, they should not be considered final or legally binding. Oral agreements, such as a casual conversation with a subcontractor, lack legal enforceability. Therefore, following up these discussions with formal documentation is essential to ensure that all agreements are clearly recorded and legally acknowledged.
Clear communication ensures that everyone understands their responsibilities in the revised plan and integrates these changes into their work schedules effectively.
6. Negotiating the Change Order
Negotiating a change order in construction is the last step before writing and signing the change order, and it can sometimes be a bit tricky. This is where you have to agree with the owner on things like how much the extra work will cost and if you need more time to finish the project because of these changes. You can figure out the cost using different methods like charging for each unit, based on the time and materials used, or as a total fixed price. Sometimes, this way of deciding the cost is already mentioned in your original contract, but if it’s not, you’ll have to agree on a price that works for you and the owner.
Also, if the new work means you’ll need more time to complete the project, don’t be afraid to say so, especially if the owner asks for the extra work. The negotiation is about discussing things with the owner and finding a solution that both of you are okay with.
Using tools like Bauwise change order management software can help a lot in this process. It lets you keep track of all the changes and discussions about them. You can also make professional-looking proposals for the change orders with all the necessary details. This helps ensure everyone understands and agrees on the changes and how they will affect the project.
5. Write and sign the change order
When it comes to finalizing a construction change order, the key steps involve drafting the document and obtaining the necessary signatures. Once the client and the contractor have agreed upon the terms of the proposed changes, the contractor is responsible for preparing the actual change order document. This document should meticulously capture all the details of the agreed-upon terms, ensuring that it accurately reflects the final agreement between both parties. The critical step in this process is the sign-off; both the client and the contractor must formally authorize the change order by signing the document. This step is not just a formality but a crucial legal requirement that signifies mutual agreement and understanding of the changes to be implemented. Only after all involved parties have signed this document can work on the changes officially begin. This process ensures that all modifications are clearly defined, agreed upon, and legally binding, thus safeguarding the interests of both the client and the contractor and facilitating a smooth project continuation.
7. Document everything
Documenting every aspect of the construction change order process is crucial for preventing disputes and avoiding delays. Start by creating templates for initiating and requesting change orders, ensuring every change is handled consistently and uniformly. Keep detailed written records of all communications between you, the owner, and any subcontractors involved. It’s important not to start any change order work without the owner’s signed and authorized document, which clearly outlines the costs and any other negotiated terms.
As work on a change order commences, carefully document the progress, including time spent and material costs, and share these updates with the owner to address any issues as they arise. Utilizing construction change order software, such as Bauwise, can significantly enhance this process. It helps track all contract documents, including change orders and ensures that everyone involved can access the latest document versions, making the process more efficient and streamlined.
In essence, thorough documentation and digitization of every project-related document safeguard against future liabilities and maintain the project’s momentum. Even during the execution of the change order, continuous documentation and communication are essential. Having all parties sign off on each step establishes a clear understanding and agreement on costs and impacts on the schedule, thus keeping everyone aligned and informed throughout the project.
Written by
Taavi Kaiv
Taavi Kaiv is a construction specialist with over ten years of experience in the construction industry. Taavi is an accomplished construction project manager with many successful projects that have been completed under his guidance. Taavi holds a master’s degree in construction management from the Tallinn University of Technology. View profile
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