Change orders are common in construction but can still cause major problems for contractors and their crews. A small change like moving a wall by just a few feet has a ripple effect that impacts the designers who need to change construction plans and may need to acquire new permits, subcontractors who need to wait for approval to implement changes and materials procurement teams. This change and the delays that could result from it could be costly and ultimately delay owner occupancy.
Depending on the reason for the change, the construction crew might be the last to know about a change of plan. The building team may go ahead with their originally scheduled actions, only to have to redo their work when they find out about the new plan.
If change orders aren’t handled effectively, they can cause delays, waste time and materials, and lead to payment disputes between owners and contract teams.
Here, we’ll talk about some of the problems change orders can cause and share tips on how contractors can make them easier for their crews to handle.
What Is a Construction Change Order?
Change orders are formal changes to the original contract documents between an owner and a contractor. Contractors may use a few types of change orders during a project, depending on the reason for the change. Some types include:
- Design: For example, if the owner decides to expand a room once construction has begun.
- Material: If a specific material price has changed drastically or a material becomes unavailable, the contractor may ask the owner to choose a new one.
- Scope: If a contractor begins digging and finds unexpected rock, the extra excavation work necessitates a change order request.
- Schedule: Severe weather, labor availability, or materials delays may cost the contractor time. The contractor may request more time to complete the work.
Whatever the reason, when a contract needs to change, it’s important to make sure everything is official and has the right paperwork before the builder moves forward with the new plan. The process for communicating changes, making requests, and getting approvals should already be laid out in the original contract so everyone knows what to expect.
Changes can potentially cause disagreements, delays, and added costs if they’re not handled effectively. Following proper processes can make change orders easier for everyone on the team, especially construction crews on the jobsite.
Essential Components of a Change Order
The first step in managing change orders is creating a set process for how they’re handled, including an accepted format or template for requesting a change from an owner. In any case, some specific information should be included in a complete change order.
Project Information
Make sure there’s no confusion about which project the changes are for. Without all relevant information, things can get lost, especially if the contractor or owner has a lot of different projects going on at the same time. Include the project name, address, contract number, and the owner’s and contractor’s details. And don’t forget to add a unique change order number so you can easily reference it later.
Important Dates
The change order should include any dates that might be important to remember later. At the very least, it should state the date the change was requested and the date the need for a change was identified.
These dates could be important down the line if there’s any disagreement about the changes. Construction contracts usually have rules about how much notice the contractor needs to give before altering the project scope. If the contractor doesn’t stick to those rules, the owner might reject the change order or even withhold payment.
Work Involved
A change order needs a detailed description of the proposed change and why it’s necessary. In some cases, the change order can include photos or documents to make the case for the change.
For example, the GC may find unexpected utilities during initial digging for a new building’s foundation. In requesting a change order, the GC would take photos of the utilities, like a gas line that moves through the excavation area, and a plan for how to move the project forward. In this case, the contractor may need to add time to the schedule because digging will have to wait until the utilities are moved.
There should be enough details about the change in scope that even people less familiar with the project can figure out the contractor’s intentions. Owners don’t always know what’s happening on-site, and if a change order document ever winds up in lawyers’ hands, they should be able to make sense of what the contractor was proposing.
Cost and Schedule Updates
If the change will mean extra costs for the owner or a longer timeline, make sure that’s clear. The owner should understand how the change order will affect the project as a whole.
Effective Change Order Management
When it’s clear the project needs a change in scope to keep things moving, the contractor should follow a set change order process so nothing slips through the cracks.
Review the Construction Contract
First, review the construction contract to confirm the original scope of work and the process for submitting change orders.
Communicate With the Owner
Next, you must have a (possibly tough or awkward) conversation with the owner about the changes. Contractors (unsurprisingly) avoid or put off this communication, but dealing with it head-on is easier than dealing with the delays and added costs that can occur later. After alerting the owner to the changes, the contractor can complete the change order paperwork and hand it off to the owner.
Rework the Schedule
Once the effects of the change are all figured out, rework the schedule accordingly. That means contacting subcontractors about moving their schedules around, too.
The change order should be seen as another section or addendum to the original contract. Just as with the original agreement, no work should be done until approval signatures are on the paperwork.
Legal and Financial Considerations
Since change orders modify an existing contract, they’re legally binding. That means the contractor is on the hook for the terms laid out in the change order. As part of the process, the terms — like who’s responsible for any extra costs from the change in scope — need to be worked out and agreed upon. A lot is on the line, including the risk that the owner will object to the extra charges or the lengthened timeline that result from the altered scope.
Get all agreements in writing. Collect and organize communications about the change order in case a dispute arises later. Capture as much information as possible about the work being done as part of the added scope, including the time spent, materials costs incurred, photos of progress, and a daily log of work on the project.
Best Practices for Efficient Change Order Handling
Change orders aren’t always easy to manage, but following some key tips can make it simpler.
Follow an Established Process
Write out the specific steps for the construction change management process and follow them step by step whenever a change is required. Refine the process to make it more effective as you learn more. Construction management tech can help teams track change order progress to make negotiation back-and-forth move a little faster.
Document Everything
Be thorough, so that any average Joe walking in off the street understands what the crew is doing and why they’re doing it. Keep written records of communications, a work log, and photos of anything that seems relevant. A construction management platform can make it easier to upload and catalog everything so it’s organized and accessible to everyone on the team.
Communicate directly and openly with everyone the change order will impact. Don’t shy away from difficult conversations — they’re only likely to get more difficult with time.
Dealing With Change Orders Head-On
We’ve covered some of the biggest sticking points contractors can face when dealing with change orders and how construction teams can get through the process unscathed.
Here’s a hot tip: Avoiding dealing with a necessary change order is a disaster waiting to happen. It’s best to deal with the issue head-on, get all the necessary approvals, and track work done and progress made. Tech can help communication between construction parties and keep all the documents in a central location so everyone is on the same page.
Change orders are common in construction, so learning to manage them effectively can be a huge advantage in maintaining happy clients and successful projects.
