Change Order in Construction; Comprehensive Guide 2024

Exclusive Neuroject Article: In the realm of construction, a “change order” represents a formally documented agreement that delineates alterations within a project, encompassing a spectrum of adjustments such as work additions or deletions, design modifications, timeline revisions, cost variations, or deviations from the original project blueprint.

This typically involves a mutual accord between the project owner and the general contractor (or, in some cases, the general contractor and subcontractors) concerning a specific change in the project’s scope, and these intricacies are meticulously recorded in the change order documentation. Essentially, a construction change order in construction functions as an amendment to the initial contract, which initially delineates the project’s scope of work and references the plans, drawings, and specifications.

Statistics underscore the prevalence of change order in construction landscape. In both commercial and public projects, these modifications manifest with notable frequency. However, it is important to underscore the importance of minimizing their occurrence, as change order in construction often engenders project delays and heightened costs, impacting one of the parties involved negatively.

For instance, an owner might experience delays in the anticipated opening date for a new building, or a contractor might find themselves compelled to employ more expensive materials without commensurate compensation. Therefore, the judicious management of change order in construction becomes pivotal in ensuring the success of construction endeavors.

Table of Contents

What Is a Change Order in Construction?

The term “change order” within the construction industry refers to an adjustment or amendment to a construction contract that alters the scope of work for the contractor. Change order in construction often results from modifications in the work outlined in the contract documents, which typically lead to changes in both the project’s cost and the timeline for completion. For a change order in construction to be considered valid, all terms must be mutually agreed upon by both the owner and the contractor.

Examples of change order in construction include instances where the owner wants to relocate a wall to accommodate design changes, add a window that was not part of the original plans, or change the type of flooring from tile to terrazzo. These change orders can be classified as additive change orders, which increase the contract price, or deductive change orders, which reduce the contract price.

The dynamic and complex nature of construction projects often leads to the need for change order in construction. Mistakes or ambiguities in the initial plans, an owner’s desire for aesthetic alterations, or the need to reduce costs can all be addressed through the change order process.

Fiction: Change order in Construction is Only for Mistakes

Change order in construction have garnered an unfortunate association with the misconception that they exclusively arise from mistakes. However, this misperception overlooks the primary triggers for change orders. A change order in construction serves as the formalization of alterations to contractual terms, and the majority of these adjustments result from a variety of factors unrelated to errors.

Owner-initiated changes to the project, unforeseen site conditions, weather-related delays, contractual complexities, and various other circumstances, not attributable to any party’s blunders, are the key driving forces behind most contract modifications. Owner-requested changes may encompass a range of adjustments, such as adapting the project’s scope to accommodate tenant needs or shifting schedule milestones to align with lease deadlines.

“Changes in the Work” Clauses

Most construction contracts include clauses that outline the procedures for modifying a contractor’s scope of work, often referred to as “changes in the work” clauses. These clauses are crucial components of construction contracts, as they establish a predefined process for implementing changes and determining the associated costs.

Standard form agreements typically address changes in the work within their general conditions. For example, the AIA-A201 2017 standard form addresses changes in Article 7, while the AGC ConsensusDocs 200 covers change provisions in Article 8. These standard agreements usually require change order in construction to be documented in writing. Custom contracts often explicitly state that only signed, written change orders will be binding and that oral modifications are not allowed.

The change order process begins when one of the contract parties requests a change. The contractor usually provides a “change order proposal” that includes a price quote for the additional work. Once the owner and contractor agree on the scope, price, and schedule, a formal, written change order in construction is prepared and signed by all involved parties. The contractor can then proceed with the modified work.

In practice, especially when dealing with unexpected changes during construction, the standard process might not always be followed, and change orders may not be reduced to writing. However, even if the parties deviate from their contractual procedures, they can still be bound by the change orders if their words or actions indicate compliance with the change order in construction clause.

Construction Change Directives

Change order in construction is not the sole means for owners to make changes to the work. Many contracts allow owners to unilaterally change the work without contractor agreement through a “construction change directive” (CCD). If the owner and contractor cannot agree on changes, the owner can issue a CCD, obligating the contractor to carry out the change, even if the contractor does not yet know the compensation for the additional work. Under AIA form contracts, the architect is typically responsible for determining the additional compensation or completion time due for the CCD, with contractors having the option to dispute and seek compensation.

Enforcing a CCD against a contractor may seem to contradict the traditional rule that contract modifications must be mutual and supported by consideration. Nevertheless, courts routinely uphold CCD provisions. The CCD is advantageous to the owner as it minimizes delays and enables work to proceed, even when the parties cannot agree on additional time or costs. Contractors, however, must perform the CCD work, and refusing to do so constitutes a breach of contract.

Cardinal Change Doctrine

Although owners have broad authority to require changes to the work, this authority is not unlimited. The cardinal change doctrine safeguards contractors against excessive demands. This doctrine asserts that certain changes can fundamentally alter the original contractor’s obligations to the extent that it would be a breach of contract for the owner to insist on the changes. For example, if an owner initially contracted for a hotel’s construction but later decided to build a movie theater instead, the cardinal change doctrine would release the contractor from the obligation to build the theater, even if a valid CCD directed the contractor to do so.

The cardinal change doctrine can also be invoked if the cumulative effect of change order in construction substantially alters the project’s original scope. It is important to consider the entirety of the project and all change orders issued when evaluating the client’s position.

Tips for Change Order Disputes

Change order in construction often leads to disputes between owners and contractors. Parties frequently disagree on whether a change should be considered as such, resulting in additional costs. When dealing with change order in construction disputes, consider the following tips:

Determine if a Change Order is Justified: The evaluation of whether a “change” is indeed a change is highly fact-specific. Examine pre-bid documents, responses to Requests for Information (RFIs), field work orders, and the parties’ past practices to determine the nature of the change. Also, consider order-of-precedence clauses that specify whether written specifications or drawings take precedence.
Keep Track of the Change Order Process: Contractors often initiate extra work without obtaining a written change order in construction. In such cases, assess whether the parties may have waived the requirement for written change orders through their words or actions.
Assess Subcontractor Agreements: Changes in one contract may not necessarily apply to another. If the owner and the contractor execute a change order, but the contractor fails to obtain a change order from its subcontractor, it can create a gap in the project’s scope. Ensure that subcontractors receive the change orders they deserve.

Change order in construction is an integral part of construction projects, and their proper management is essential to avoid disputes and ensure the smooth progression of the work. By adhering to best practices and considering the legal principles surrounding change order in construction, both owners and contractors can minimize conflicts and maintain project success.

When is it Necessary to Change Orders?

There are various situations that can necessitate change order in construction. For example, a contractor may discover that the soil conditions at the construction site are less stable than initially thought by the designers. Such a discrepancy will inevitably necessitate a change in approach and likely entail more work, time, and materials.

Another example could be an owner deciding to upgrade the lighting fixtures after the contractor has already installed them. To formalize this change, the contractor would draft a change order in construction specifying the removal of the original fixtures and the purchase and installation of the new ones.

Such changes can lead to conflicts and disputes that have the potential to strain working relationships.

Why You Might Require a Construction Change Order

The inherent nature of the commercial construction process often leads to the necessity of a change order in construction. Discrepancies between the initial plans, designs, budgets, and the actual on-site conditions once construction begins are practically unavoidable.

As the interim period between the submission of initial plans and the commencement of construction unfolds, more stakeholders become involved, including architects, engineers, and other design specialists. They work on various aspects of the project, striving to coordinate their efforts. Despite these coordination efforts, increasing the number of participants and roles typically amplifies project complexity. This elevated complexity usually results in the emergence of design conflicts, gaps in specifications, and various disagreements and errors.

As these disagreements and errors accumulate, change order in construction naturally accumulates as well. General contractors and subcontractors employ these documents not only to assist in estimating their bids during the bidding process but also to rectify omissions, errors, and other issues that come to light during construction.

Moreover, the need for change order in construction often arises due to the constantly changing environment in which large construction projects exist. Owner requirements or financial resources may change; unexpected events like snowstorms can disrupt work; economic crises may impact project funding; or subcontractors may struggle to find qualified workers.

Issues that Lead to Change Order in Construction

Here are the typical construction issues that lead to the generation of change order in construction:

Errors and omissions in plans and drawings
Unrealistic budgets and schedules
Design alterations, including the addition of items and features
Worker or material unavailability
Unforeseen site conditions, such as unstable soil
Material substitutions due to shortages or upgrades
Conflicting or inaccurate specifications
Technological changes
Conflicts between the contract and project documents
Poorly defined project scope
Financial issues on the part of the owner or contractor
Inadequate coordination
Damage caused by adverse weather conditions
Quality problems and construction defects
Regulatory changes

What Should Be Included in a Construction Change Order Form? A construction change order in construction form should encompass a highly detailed description of the modification and its new terms. It should also incorporate additional information, such as the revised cost, the project’s name and address, the owner’s name, and more.

Essential Components of a Change Order Form

At a minimum, all change order in construction forms should contain the following:

Project name and address
Owner’s name
Requestor’s name and contact details
Comprehensive description of the planned modifications
Cost of the change, including a cost breakdown and the total amount
Signatures of all necessary representatives
Signatures of homeowners (for residential projects) or other relevant third parties
The date on which all essential representatives (and other relevant third parties) sign the change order in construction
Revised project completion date

The Process of Construction Change Order

Because change order in construction can significantly impact a construction project’s costs and profitability, it is imperative that all involved parties adhere to a standardized change order in construction process and ensure that no steps are overlooked.

The following steps should be followed when creating a change order:

Implement a Standardized Process (Including a Template) for Consistency: You can access downloadable construction change order in construction templates for various purposes to ensure consistency by referring to “Complete Collection of Free Change Order Forms and Templates.” Below, you’ll find a useful example of a change order in construction summary, complete with sections for essential information such as a description of the necessary alteration, supporting documents, and specifications of the change.

Convene a Meeting with Other Stakeholders: Assemble the owner, contractor, and subcontractor to engage in a discussion regarding the change before formalizing it on your document. Strive to reach a mutual understanding of how the change will impact both the cost and the schedule. (It’s important to note that verbal agreements are not legally binding, so it’s essential not to rely solely on conversations with the foreman.)
Clearly Define the Change: Utilize your change order in construction form to provide a concise summary of the alteration. Include specifics about the nature of the change, any modifications in materials or methods, the rationale behind the change, and any new specifications. Ensure the form is properly submitted.
Specify the Impact on the Budget and Schedule: Ensure that the document clearly outlines any changes in costs and time necessitated by the change. Also, illustrate how the change will influence the project’s overall cost and timeline. If there are no alterations in either the cost or schedule, make this explicitly clear.
Present the Change Order to the Other Party: If both parties have reached an agreement on the terms of the change, present the change order in construction to formally incorporate it into the contract.
Negotiate Further, if Required: In cases where the parties have not yet settled on the financial and scheduling implications of the change, additional negotiations become necessary. These discussions may involve senior project managers, financial executives, and legal counsel specializing in construction. If a consensus remains elusive, the contractor may have to proceed with the work while reserving the right to seek compensation upon project completion.
Obtain Signatures: Once a consensus is reached, ensure that the change order document accurately reflects the final agreement, and authorize the change by having all involved parties sign the document. Note: If an agreement cannot be reached, you may still be obligated to perform the work (without additional compensation until the project concludes) if the contract language contains such a provision.
Assess the Impact on the Project: Adjust the overall project schedule as needed, and make sure to update all interdependencies (other work that is dependent on the completion of the change order-related task) and identify any conflicts.
Communicate with All Stakeholders: Share information about the change with all participants in the project, including field managers, the crew foreman, and subcontractors.
Maintain Thorough Records: Preserve all relevant documentation and keep a log of construction change order in construction for purposes such as invoices, payments, dispute resolution, or audits. Depending on local regulations and whether the project involves government contracts, you may be required to retain these documents for several years or even over a decade. You can find a downloadable template for tracking construction documentation, contractor progress reports, and more in “Excel Construction Management Templates.”

In each of these scenarios, the contractor ultimately submits a proposal to the architect, documenting the cost and time implications of the proposed changes. It becomes the responsibility of the architect to diligently review this proposal and inform the owner of its reasonableness. An essential aspect is ensuring that the contractor isn’t asserting a claim for work already mandated by the contract documents, or including costs, such as general conditions and overhead, which are encompassed within the OH&P percentage or for other work already contracted.

Furthermore, the architect needs to consider the proposed impact on cost and time. Are the presented costs reasonable? While a detailed estimate might not be mandatory, the architect must assure the owner that the costs are justifiable, the quantities are accurate, and the costs comply with the contract. The architect, even if not experienced in schedule logic, must assess whether the proposed schedule impact is reasonable. When evaluating the time impact, several factors, including critical path analysis and the potential for the contractor to mitigate delays, come into play.

If the architect does not entirely agree with the contractor’s proposal, they must respond in writing, outlining their reasons and making efforts to reach mutually agreeable terms. Upon agreement with the contractor, the architect must notify the owner of the reasons for the change, review the cost and time implications, and seek the owner’s approval for the proposed adjustments to the scope, contract sum, and contract time.

Once all parties are in concurrence, the architect proceeds to prepare the change order in construction. The description within the change order in construction should be unambiguous, concise, and comprehensive, ensuring it’s understandable to a third party. This description should cover three crucial aspects: the scope of the change, its impact on cost, and its effect on the project timeline. The scope should reference the specific Contract Documents that will be altered, as well as the architect’s documents describing the change. As for cost and time, the change order in construction should specify the contractor’s proposed adjustments to the contract sum and schedule, referencing their proposal.

In the final stages, the change order in construction should list any accompanying attachments, including supporting documents, each accompanied by its date. Once the change order form is completed, the architect compiles all attachments and issues the change order in construction. It is customary to produce three copies: one for each signatory. Typically, the architect signs first, followed by the contractor, and then the owner. Alternatively, if agreed upon, the entire process can be handled electronically in PDF format.

Construction Change Order in Construction Pricing

Form When determining the price for a construction change order in construction form, three types of costs should be taken into account: direct, indirect, and consequential costs. These costs can be calculated using either a forward or backward approach (explained in detail below).

Studies have revealed that, on large projects, change order costs generally amount to 10 to 15 percent of the contract’s total value. Moreover, a higher number of changes tends to lead to a reduction in productivity, ranging from 10 to 30 percent.

The timing of a change order in construction request can significantly impact its cost. For instance, requesting a change order early in the construction process (before the work on the affected item has started) will generally be less costly than requesting one after work has commenced. Furthermore, if the work on items dependent on the change has already been completed, the cost of the change order in construction increases significantly. In this case, the change will necessitate reworking the affected item (and all dependent items), triggering a chain reaction of additional costs.

In any change order in construction proposal, it’s advisable for a contractor to provide a detailed breakdown of their prices. Presenting a lump-sum proposal to an owner can obscure the reasoning behind the costs, potentially hide hidden expenses, and create uncertainty about whether the profit margin of the order exceeds that of the contract.

Understanding Change Order Costs

As previously mentioned, construction change orders must encompass three distinct categories of costs: direct costs (the most straightforward to comprehend), indirect costs, and consequential costs (the latter two can be notably challenging to quantify).

Direct Costs: These are the expenses directly associated with implementing a change order in construction. Some direct costs are readily apparent, such as materials, labor, and equipment. Others may be less conspicuous and involve professional fees for redesign, fuel for equipment operation, staff hours dedicated to coordinating and communicating the change to engineers and on-site crews, as well as expenses like security, project insurance, sales tax, permit fees, licenses, safety measures, cleanup, and utilities.

The calculation of certain direct costs necessitates consideration of a multitude of factors. Here are the approaches for calculating various direct costs:

Determining Construction Labor Costs: Labor costs encompass labor hours and rates, labor supervision, project supervision, and benefits like sick pay, insurance, retirement, and employer taxes.
Pricing Construction Materials: Calculate the base cost of materials by using vendor price quotes or actual costs. To this base cost, add expenses for transporting, storing, handling, and inspecting materials.
Assessing Costs for Rented and Owned Construction Equipment: When assessing equipment costs related to change orders, various factors come into play. The key consideration is whether the equipment is rented or owned.

For Rented Equipment: Calculate the cost of rented equipment by first determining an hourly rate, which involves multiplying the rental fee by the number of hours required for the change order in construction work. Then, include operating costs like fuel and lubricants.

For Owned Equipment: If you own the equipment, specify your pricing method in the contract, unless you have already established your equipment cost recovery rates for allocating equipment to a project. This recovery rate should encompass factors like purchase price, sales tax, depreciation, ownership costs (e.g., insurance, licensing, maintenance, overhauls, and repairs over the equipment’s expected lifespan), and financing or opportunity costs.

If you lack an established recovery rate, you can calculate one by referencing industry sources like the AED Green Book, Rental Rate Blue Book, and Army Corps of Engineers Equipment Rates. To derive a maximum hourly rate for the change order in construction work, divide the monthly rate by the available working hours in a month (typically 176). Usually, you must cap the rate at 50 percent of the machine’s market value when first used for a change order in construction. In cases of less complexity, a general rule of thumb is to price owned equipment at 50 to 60 percent of the retail rental rate.

Whether you rent or own equipment, it’s essential to add operating costs, which comprise fuel, oil, parts, fluids, shop space, and storage. Moreover, when calculating equipment costs in the context of change orders, you must apply different rates based on the equipment’s status (standby, idle, or active). Your rate for a specific machine should account for its level of wear and tear, encompassing factors like depreciation, capital costs, overhead, indirect costs, labor and parts for scheduled overhauls, and fuel.

Indirect Costs: Indirect costs encompass overhead, profit, and markup. While these costs are indirectly linked to change orders, they must be factored into the pricing of change order in construction.

Overhead: This pertains to administrative expenses incurred in the overall operation of your business, but that cannot be allocated to any single project. It includes costs like office rent, office equipment, utilities, salaries and benefits of management and administrative staff, advertising, taxes, training, business licenses, vehicle insurance for staff, legal and accounting fees, association dues, and service or warranty work on current equipment and structures.

Typically, larger companies have higher overhead costs than smaller firms. To calculate your overhead percentage, divide your total company revenue by total overhead costs.

Net Profit and Gross Profit: Net profit is the amount left after subtracting all expenses and costs, including overhead. The average net profit typically ranges from five to ten percent of total revenue. Gross profit, on the other hand, is the amount before deducting costs and expenses, including overhead.

Markup: Markup involves adding a specified percentage to costs (both direct and overhead) to establish a profitable selling price. This markup must also be considered when setting change order prices. A common industry standard for markup is 15 percent. To achieve a desired profit margin, the markup percentage must exceed the profit margin percentage. For instance, to attain a 20 percent profit margin, you would need to mark up costs by 25 percent and price the change order in construction accordingly.

The difference in these percentages arises because the profit margin increases linearly, while the markup percentage increases at a higher rate. The competitive market and economic conditions influence pricing, and the markup and profit margins applied to bids should be carried over to the pricing in change order in construction.

In highly competitive markets or during economic downturns, contractors may price their bids with lower profit margins. Similarly, when competition and transparency push owners to resist higher markups on standard items, contractors may apply nominal markups to materials.

Consequential Costs: These are the indirect costs, comprising both hard and soft expenses, arising as a result of a change order in construction. These costs are referred to as “consequential” because they are the direct consequences or cumulative effects of the change order itself. Consequential costs encompass factors such as project delays, overtime, training, morale, crew reallocations, and inefficiency.

They also include labor productivity losses due to the stacking of trades, where multiple subcontractors work in a confined space, introducing safety risks and challenges in accessing materials. Industry literature, surveys, court cases, and case studies provide guidance on calculating the impact of these change order-related factors.

Methods like the Cumulative Impact Approach, Measured Mile Approach, and quantifying the impact of trade stacking have been developed by experts to determine the probability and costs of change order in construction impacts. To estimate the cost of these factors, you should consider their impact levels, such as minor, average, or severe.

For example, severe stacking of trades may result in a 30 percent productivity loss, while minor fatigue could lead to an eight percent reduction in productivity, as reported by research from ELECTRI International. When calculating consequential costs for a change order in construction, it’s essential to substantiate your figures with authoritative references. This ensures that, in case of disputes, your calculations are demonstrated as fair and reasonable.

Pricing Models: Forward vs. Backward Pricing for Construction Change Orders The pricing strategy for construction change orders is highly dependent on timing. Forward pricing occurs before the commencement of change order in construction work, while backward pricing occurs after at least some of the work has been carried out.

In backward pricing, you have the advantage of firsthand experience to calculate the price, whereas forward pricing relies on estimates and industry norms. Both pricing approaches factor in direct, indirect, and consequential costs. Whether you choose forward or backward pricing for your construction change order in construction, it’s crucial to identify the time and productivity impacts on costs.

In cases where actual data is unavailable, the cost flow technique can assist in forward pricing. Often presented graphically, cost flow examines the distribution of construction expenditures over time, illustrating the budgetary requirements at key milestones to ensure the project’s successful completion. These calculations should encompass both direct and consequential costs.

It’s important to distinguish cost flow from cash flow, which deals with the inflow and outflow of funds over time. By comparing cash flow to cost flow in a construction project, you can determine whether sufficient funds will be available as costs are incurred. If a deficit is identified, project adjustments may be necessary.

In the context of a change order in construction, owners and contractors can compare the revised cost flow to the original cost flow to gauge the impact of the change, aiding in the pricing process. However, to make this comparison meaningful, detailed data on productivity changes resulting from the change order in construction is essential.

Avoiding Disputes

Change order in construction often become the subject of legal disputes, primarily due to disagreements between contractors and owners regarding the need for compensation or schedule adjustments, or whether the change falls under the original contract provisions.

According to the Arcadis 2020 Global Construction Disputes Report, the average value of construction disputes globally was $30.7 million, with an average dispute duration of 15 months. Consequently, both owners and builders have a strong incentive to understand the typical causes of disputes to prevent them.

Many of these disputes can be traced back to deficiencies in the contract and bid documents, as their implications may not be fully evident to the parties at the time of signing. In cases where certain project aspects aren’t clearly defined from the outset, issues often arise when plans, designs, specifications, and more require modifications at a later stage.

Here are some common factors that contribute to construction change order-related disputes:

Incomplete Design: Plans and specifications may contain errors, inconsistencies, or insufficient details, making it challenging for contractors to accurately price or execute the work. This could involve inconsistencies among specifications, such as those between initial and final finish schedules.
Poor Design Coordination: Architects, engineers, and consultants may assume that others are responsible for certain aspects of the work, leading to gaps in plans or conflicting designs that contractors struggle to interpret or resolve.
Specification Issues: Problems with specifications often arise from using generic language, not accounting for variations among manufacturers, relying on outdated specifications, or specifying requirements that do not align with available products.
Schedule Changes or Delays: After the project begins, owners might seek an earlier completion date without wanting to pay extra for acceleration. Conversely, contractors might fail to meet deadlines but argue for full compensation, citing extenuating circumstances.
Inadequate Disclosure and Unknown Conditions: Discovery of an issue during construction, whether due to a lack of disclosure or a genuine lack of prior knowledge, can lead to disputes. For example, poor subsurface conditions may not have been apparent during bidding.
Owner-Initiated Changes: While contracts typically allow owners to request changes while compensating the contractor for added costs, disputes can arise when owners claim such changes don’t warrant additional compensation.
Unfair Restrictions: Unjust regulations in government or public projects can impose constraints on contractors, such as mandating the use of specific proprietary options or limiting supply sources, leading to disputes.
Unwritten Orders: Contractors should ideally include contract provisions requiring written change orders for any revisions or additional work. However, field conditions, urgency, or oversight may lead to verbal orders, potentially waiving certain contractual rights.
Incorporate Realistic Change Order Clauses: Ensure that the authorization clause for change orders is practical. This clause often requires approval from someone who may be off-site or in a different time zone. Therefore, it’s wise to include an alternative procedure that designates a secondary authorization contact for urgent changes. This provision allows for timely contractor payments during unforeseen circumstances while protecting the owner from excessive costs.
Promote Peacekeeping Measures: Delays and work stoppages are major contributors to change order in construction disputes. These interruptions often occur because most contracts force contractors to implement changes, regardless of compensation terms. This puts considerable financial strain on contractors, which can lead to disputes. To mitigate such issues, consider incorporating language in the contract that specifies the owner’s commitment to pay a certain percentage of change order in construction disputes occurring during construction. Additionally, both parties should retain the right to dispute each matter.
Establish Pricing Standards: Once an owner enters into an agreement with a contractor, they relinquish the ability to seek competitive bids from other contractors. Consequently, contractors determine their own change order prices, which may lead to accusations of price gouging. To prevent disputes, include a comprehensive schedule in the contract detailing labor, profit, overhead, and markup rates for the project.
Pre-Project Issue Identification: Before commencing the project, thoroughly review the plans and specifications to address any ambiguities, errors, omissions, or conflicts. Submit any change orders promptly, as delaying them after construction begins increases the risk of cost overruns, schedule delays, and friction between the owner and contractor.
Understand Legal Remedies: If you’re a contractor facing difficulties in resolving a change order in construction dispute, you have several legal options at your disposal, such as using a mechanic’s lien, a stop notice, a bond, or a warranty claim within a specified time limit. Different jurisdictions have varying regulations regarding liens, including the requirement for preliminary notices to preserve lien rights. Comprehend the specific laws in your region.
Enhance Change Order Efficiency with Technology: Implement construction project management software, takeoff and estimating software, or building information modeling (BIM) tools to automate and streamline the change order creation and management process.
Maintain Regular Communication: Organize stakeholder meetings at the project’s outset, conclusion, and throughout its duration to ensure that everyone remains informed about the scheduled work. Stakeholders include the owner/client, general contractor, and subcontractors.
Seek External Input: Arrange for peer or third-party reviews of drawings, specifications, and other critical documents to ensure completeness and accuracy.
Stay Organized: Develop and utilize checklists to ensure all necessary information is included in drawings, specifications, and contracts.
Continuous Learning and Training: Attend workshops and training sessions on document quality and development to educate team members on the appropriate processes and information requirements.
Enforce Accountability: Avoid proposing or accepting open-ended change order in construction without predefined deadlines or budget limits.
Demand Clear Documentation from Contractors and Subcontractors: Ensure subcontractors provide transparent documentation of hourly rates, material costs, and quantities for extra work. If feasible, request visual documentation, such as photos and videos, of their work throughout the project.

Common Causes of Change Orders

In the realm of construction projects, engineers assume a pivotal role, overseeing various technical aspects of building a structure. Their responsibilities encompass designing essential building systems, selecting appropriate construction methods, and ensuring that the work complies with quality standards. Engineering-related modifications frequently necessitate change order in construction industry.

The primary factors behind engineering-related change orders include:

Adjustments for Fuel and Material Costs: Adapting to fluctuations in fuel and material costs is a common trigger for change order in construction industry. However, controlling these adjustments can be challenging due to the market-driven variability in prices.
Errors and Omissions in Contracts: Omitting crucial details from project contracts can significantly impact the project. Collaborating with highly experienced professionals to create and review contracts is essential to prevent these issues.
Utility-Related Challenges: Conflicts related to utility designs, plans, or facilities can lead to project delays or necessitate plan adjustments.
Geotechnical Problems: Geotechnical engineering focuses on assessing ground conditions to identify risks and design appropriate foundations. Encountering issues in this aspect of a project can result in delays, work stoppages, or the need for redesigns, especially if unforeseen soil and rock conditions are discovered.
Owner/Client Additions: When project owners or clients introduce additional elements after construction has commenced, engineers may need to revise plans and specifications. It is advisable to thoroughly address all details in advance to prevent unexpected changes.
Environmental Concerns: When proposed changes have the potential to impact the environment, it is crucial to evaluate their implications. Proposing alterations that contravene environmental regulations or protective measures can lead to delays or necessitate design revisions.

For additional resources, you can access a variety of free construction work order templates and forms.

Enhance Change Order Management Through Enhanced Data Utilization

Effective change management primarily involves the process of making informed decisions. When project managers have access to more information and data, they can adeptly mitigate the financial and scheduling implications of change order in construction industry. It’s worth noting that Building Information Modeling (BIM) and communication software play a pivotal role in enhancing data collection efforts.

The cornerstone of efficient data collection and management hinges on the adoption of suitable technology and software. Companies that employ a myriad of disconnected applications for data management risk overlooking critical pieces of information. By consolidating all data resources within a single, organized platform, project managers gain a comprehensive view of the available data, enabling them to make well-informed decisions based on this wealth of information. To ensure accessibility to project managers, uniform software usage is essential for sharing information across the board.

Conclusion

Construction change orders are a common yet critical aspect of the construction industry. They allow for necessary adjustments to be made to a project’s scope, timeline, and budget, ensuring that the end result meets the desired quality and functionality. However, the process of handling change order in construction can be complex and is often a source of disputes between contractors and owners.

To navigate this challenge successfully, it’s crucial to adopt a standardized approach that includes clear documentation, well-defined pricing standards, and proactive issue identification before the project commences. Additionally, the use of technology, such as project management software and BIM tools, can greatly enhance efficiency and transparency in managing change order in construction industry.

Understanding the potential causes of change order in construction , whether engineering-related or due to errors and omissions in contracts, empowers all stakeholders to address issues promptly and professionally. Ultimately, collaboration, communication, and accountability are key to ensuring that change orders do not result in costly delays, disputes, or decreased project profitability.

By following best practices and learning from past experiences, construction professionals can streamline the change order in construction process and contribute to successful project outcomes. The construction industry’s ability to adapt and respond to changing conditions remains central to its continued growth and success.