Following a well-defined process reduces disputes down the road.
Keeping change orders to a minimum can help protect a project’s schedule and often, your budget. But some change ordersare inevitable, so it’s important to have a process for managing them — one that keeps the project moving forward and curtails disruptions and later disagreements.
These five tips can benefit everyone on the team.
- Agree up front on a change order process. Set up a change order process at the time the contract is being discussed. Everyone involved in the project — contractor, owner, architect, consultants and money partners — should agree to that process. In the contract, outline such factors as who should be allowed to introduce a change order and how the orders should be initiated, and state how the price of potential change orders will be calculated (for example, unit price, lump sum or time and materials).
- Develop a change order form. To protect yourself legally, avoid misunderstandings and maintain a good relationship with the owner, detail any changes to the original contract in writing. A project may need one form or several different forms for different types of change orders. Include these details about the change:
- Reason for the change, such as errors or omissions in drawings or specs, unexpected site conditions, owner additions or subtractions.
- Whether the change is required or elective.
- Scope of work. Spell out exactly what the change order covers.
- Estimate of costs, including materials, equipment and labor.
- Impact to the schedule. What repercussions will there be if the change order causes a delay?
- Get everyone’s approval in writing. In an ideal world, you could get every party to sign each change order in advance to avoid future legal disputes. But there will be times when you just can’t wait; you need to start the new work because your crews are waiting, the clock is ticking, and perhaps the owner is pressuring you. In these cases, the best bet is send some type of written communication — a letter or an email — to the other parties detailing all the changes that you and the other project team members have verbally agreed to. Then get them to sign off on the formal change order as soon as possible.
- Document (and save) everything. Keep all forms, quotes from suppliers or subs, photos, drawings, emails, invoices, etc. that relate to the change. If applicable, take photos to show why a change order is needed. It’s helpful to use project management software that lets you store electronic copies of all documents and communications related to each change order.
- Use project management software to track the status of change orders. You may be juggling several change orders at once. Use software that can help you see at a glance which ones are awaiting approvals, which are underway and which have been completed.
Change orders happen. With a clear and fair change management process in place, they are less likely to cause bad blood or turn into a claim.
Freelance writer Mary Lou Jay writes about business and technical developments in a variety of industries. She has been covering residential and commercial construction for more than 25 years.