What is a Change Order?
A change order is a document used to record an amendment to your original construction contract. The purpose of a change order request is to create a record of added services. If a contractor fails to use change orders, then the firm is likely to lose out on getting paid for those additional services. Below are the steps to create a change order request; staying up to date and organized with documentation prevents falling behind schedule and eliminate payment disputes. Below is a construction change order template to help you get started.
— Common causes for a change order request
— Simple steps to create a change order request
— Change order request software
— Contracting with your GC to document change orders
—Change order template
Common causes for change order requests:
The common causes of a change order request are included but not limited to:
— the project’s work was incorrectly estimated
— the customer or team reached an obstacle that deviates from the original plan
— the customer or team is incapable of completing their deliverables within budget
— extreme weather and job site conditions cause a delay in work
1. Start with the original contract
First and foremost, a change order cannot exist without an original contract – you wouldn’t have anything to make adjustments for reference. Change orders hold both you, the contractor and the owner accountable in a legal context. Change orders may be needed if you have changes in Jobsite conditions, regulatory and safety issues, and material substitutions.
It’s important to read through the original agreement thoroughly and focus specifically on the terms and conditions related to change orders. The clauses include the period that both parties can initiate a change order, the specific format, and information and the authorized agent that will approve the change order for contractor initiated changes.
2. Review plans and specifications
The failure to address, review, and clarify issues with the scope of work means the more unnecessary change order requests you’ll have to do later. When you consider the contract and its clauses, you will review plans and project details. In this step, you should review and anticipate the current site status and conditions to make sure there are potential issues that can arise. If there are ambiguous drawings and errors in the scope, it can result in material and labor shortages for the project. The failure in identifying problems with the scope of work and plans will lead to unnecessary changes later in the project.
3. Don’t delay or ignore change orders
The owner or the contractor can initiate the change order request. Either way, it is crucial to deal with it right away. To do this, negotiate the cost, receive authorization to begin the work in writing (change the scope), and make schedule adjustments for the amended work. Delaying change orders can be disastrous to a project because it can result in substantial cost overruns and an inaccurate schedule. When in the process of receiving a request for a change order, it is a good idea to get started with reworking the schedule to avoid any delay.
Additionally, eSUB’s change order module offers an organized system to manage all CORs. To prevent delays in change orders, using this system, you can set calendar alerts and reminders.
4. Communicate with all individuals involved
Part of the COR process is to communicate with all parties involved in the project. As a GC, it is important to keep in touch with subcontractors, owners, and the owner’s authorized agent. You should discuss with the owner’s authorized agent to define a new scope and come up with an agreement on expectations with the change orders. Subcontractors need effective communication during the COR process because they have to adjust their schedules and discuss the potential impact imposed on their work.
eSUB’s change order system has integrated emails that you can send to the owner, the owner’s authorized agent, and subcontractors. Additionally, you can add document attachments of the COR to send those involved with the date submitted and the actions listed in the details.
5. Document everything in a centralized location
Having your written records of changes is beneficial if there is a dispute between you and the owner or GC. Field-first project management software designed for commercial subcontractors allows you to track change orders status and get quotas based on category (labor, material, equipment). Documentation in a centralized location is key for organizational purposes because you can find all change orders throughout the entire project. Additionally, it protects you from beginning work until you have the authorized agent’s signed documents.
6. Negotiate the change order
Finally, the last step before you start working on the Change Order is to “Negotiate the cost.” This step is complicated because conflict can arise when there is an adjustment to the contract scope. It creates controversy on costs and whether the original timeline needs adjustments.
— Work with the owner or GC to establish an agreement on additional work costs
— Dispute whether or not a timeline extension is necessary as a result of a change order. If the owner or GC initiates the COR, don’t be afraid to push it back.
Download the Construction Change Order Template
Starting with a construction change order template will help tremendously in staying organized and professional when submitting a change order. The top of the excel sheet is where the subject of the change order goes. This is also where the date and the change order request number go. You should enter in the original cost of the work to keep a record and to keep everything organized. Following that, you can enter in all of the costs, and split them up to keep track of exactly how much the change in the contract will cost. PCO, P, V, and A are the statuses of each change order request. These stand for potential change order, pending, void, and approved. All these costs add up at the end, and you can see what changes in the budget are needed.
Change orders are an unavoidable part of a commercial project. Mismanaging change orders can cause schedule slips, rework, and lost revenue. However, if change orders are managed effectively, they can increase profit margins. This can quite possibly save a project, a company’s reputation, and eliminate the threat of litigation.
Unfortunately, this falls on the trade contractor to manage COs effectively which is an excellent reason to rely on your own project management system even when the general contractor requires you to plug into their system. Nevertheless, get clarity from the owner or general contractor on the change order process. The process can be quite simple if you prepare yourself and take the right approach.
Bonus Tips: #powertothetrades
— Ensure the contract includes a clause requiring written documentation for all change orders.
— Use your own change order software to track all requests instead of going the manual route or relaying 100% on the GC’s system.