5 Must Haves on a Construction Change Order
What is a construction change order?
A construction change order is any change to the original contract regarding the scope of work, price or schedule agreed upon between any of two parties in a construction project. Change orders are common in construction projects since unpredicted things happen all the time, causing a need to change the original agreement. A study found that the typical commercial construction project involves 56 change orders. Change orders are mutual agreements and the non-controversial way to make adjustments when necessary.
When are change orders necessary?
- — When unrealistic budgets are in place
- — When unrealistic timelines are in place
- — When there are gaps in the original contract
- — When the scope of work is ill-defined
- — When conditions affect safety
- — When unpredicted conditions and issues arise
- — When the owner wants to expedite the process
Change orders, although necessary, can cause a lot of problems for the subcontractor if he does not ensure that he is following best business practices when creating, sending, and recording all change orders.
Here are 5 must-haves on any construction change order:
Get the change order in writing before the work is done
The most important element to have on your construction change order is to have it in writing. Although some change orders are not required to be in writing, and often are done verbally to save time, it is good business practice to always get written verification before proceeding. Verbal change orders cause problems for both parties when trying to get paid or in the face of any legal disputes. Having a written change order will prove that any work you did or did not complete was requested and approved in the change order, and therefore you are entitled to compensation and are free of any legal obligation.
If both parties agree that a change order is necessary, make sure that the additional work or change in the scope of the work is written out clearly and in detail. The change order should include revised costs, schedule, the scope of work, or any other change that is being implemented. This document should also be read and signed by both parties.
Use standardized change order templates
Having a standard change order will save you and your team time and money when change orders are needed. Subcontractors should invest in software that includes change order templates that can be customized to fit their business needs. Having this personalized change order template in place will ensure long-term consistency no matter who is issuing the change order.
When a general contractor or subcontractor comes across an issue that needs immediate action, he can include a photo of the situation along with the change order request to get the owner to understand the urgency of the situation. Photographs are a powerful tool that allows one party to better explain the situation to another party who has not experienced the issue first-hand.
Do it digitally
Digital documents are much easier to create, manage, and store than are paper documents. With the capabilities of construction technology, change orders can easily be created, sent back and forth, electronically signed, automatically date/time stamped, and permanently stored in a centralized database. This automation of the change order process will save both parties time and money.
Change orders are not going anywhere anytime soon, so the subcontractor needs to make sure that he is ready and able to manage them in an efficient manner. By following these 5 simple change order best practices, your construction firm and any parties that you contract with will be able to handle the change order process better.