Changes are inevitable in any project. However, to keep the project on schedule and within its budget, these changes need to be effectively managed. A change order (or an amendment) is a mechanism that identifies, defines, and tracks these changes in a way that is acceptable to all parties. This includes any additional costs or time required to implement the change.
Having a change order and a change order log are particularly crucial documents in construction project management, where contracts between the project owner and the various contractors working to execute the plan are vital to a project’s progression. However, a contract change order can apply to many industries.
What Is a Change Order?
A change order is a change management document that addresses any change in the project scope, detailing what needs to happen, how much it will cost, and when it can be expected to reach completion.
The change order is a means to modify existing construction contracts and, in effect, adjust the price and timeline of the project. Because of the impact a change order has on the budget and schedule, change orders are not acted upon until both the owner of the project and the contractor responsible for the change agree on terms and conditions.
When Should You Use a Change Order?
As mentioned, a change order is used when a change is requested by a project owner or the contractor who is executing the work. There are several reasons why a change order might be used in construction projects:
When Project Risks Occur
Some risks might delay the project or affect the contractor’s ability to complete the work in the way that was established by the initial construction contract.
When the Project Scope Changes
Sometimes, project owners ask for more or less work to help minimize costs or stay on the planned schedule.
When Site Conditions Aren’t as Expected
Inclement weather or unforeseen circumstances such as obstructions can alter site conditions and require adaptation.
When Drawings Are Inaccurate or Ambiguous
If the original drawings do not accurately reflect the job, a change is required.
When Workers or Materials Don’t Arrive
If your human resources change or you are unable to access certain supplies, it can shift how projects evolve.
Accommodating change orders into your project schedule without causing a disruption is a delicate task. Project management software, like ProjectManager, helps teams accommodate change and stay on track. With powerful Gantt charts that have baseline tracking, drag-and-drop updates, and dependencies, you can be confident that your changes won’t negatively affect your timeline. Plus, you can track resources, costs, and your critical path as the project unfolds.
Types of Change Orders
There are two main types of change orders in construction: additive and deductive change orders.
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Additive Change Orders
An additive change is one that could be as simple as a different color of paint or moving a structure from one place to another on the project site. They do not take anything away from the project; they simply change a part of the execution.
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Deductive Change Orders
On the other hand, if you are requesting the deletion of a portion of work, that’s a deductive change order. Unlike the additive change order, a deductive change will more likely result in a reduction of costs and could even shave some time off the project schedule.
Change orders are a critical part of the change control process. They are often part of a process that begins with a request for information (RFI), which is a document that responds to any questions that may arise throughout the execution of a construction project. It is used to clarify something or ask for additional information. This can often lead to a change in the contract, which then triggers the change order form.
What Should Be Included In a Change Order?
Change orders vary from one project to another, but most of them include the following basic elements:
- Project information such as the contract number, contractor’s name, project owner’s name, and change order number.
- A description of the proposed changes and how they compare to the original contract.
- A detailed description of the costs for each activity proposed in the change request, including any subcontractor costs.
- Supporting documentation such as construction drawings.
- An effective date for the change order.
- An updated version of the contract that reflects how the change order affects its value, schedule, and duration.
Change Order Process
Now that we’ve covered the basics of change orders, let’s explore a step-by-step change order process that you can implement.
1. Review the Contract and Identify the Reason for the Change Order
We’ve outlined some common reasons for change orders above. Make sure to identify the reason and look over the contract to make any needed adjustments.
2. Create a Change Order Request
The next step is to make it official through a change order request. Here, the owner or contractor will make an addendum or amendment to the original contract and scope of work.
3. Reach an Agreement About the Change Order Proposal
Make sure to carefully read and understand the new terms in the contract as it could require specific information and documentation that is not yet secured. If there is conflicting language, make sure to address it and come to an agreement with the other involved parties.
4. Get Approval on the Change Order and Adjust the Contract
Once the language is cleared up, you’ll need to negotiate the costs and get authorization in writing to begin the work. Make sure to communicate with all parties involved, such as the owner, subcontractors, etc.
5. Use a Change Order Log to Keep Track of Change Orders
If the change order is approved, it should be registered in a change order log. A change order log captures all change orders of a project and ensures they are going as scheduled.
Best Practices for Construction Change Orders
The point of a change order is to manage changes and deliver your project on time and within its budget while giving both the owner and the contractor a chance to agree on terms and avoid later disputes.
To make sure your change orders are fulfilling these functions, and to manage the process for the best results in the overall project, it’s important to follow best practices. The following are a few suggestions that can help you keep your change orders doing what they’re supposed to do.
Know Your Original Contract
The change order amends the contract you’ve already agreed on; therefore, you must be very familiar with that original contract. The scope of work agreed on will let you analyze the change and help you determine how comfortable you are making that change (and taking on more costs).
Agree on Costs Before Doing Work
The project budget will be impacted by the change order, but unless those costs are identified and agreed on, there can be trouble. For example, small changes might be considered just part of the original project. Everyone must be on the same page before any work is done.
Get Your Change in Writing
It might sound obvious, but a change order form is created to avoid miscommunication. A handshake or a verbal agreement isn’t a change order. It can be the spark that sets the change order in motion, but any decisions must be detailed on paper and agreed upon.
Have a Process in Place
Without a process to deal with change orders, you’re going to have problems with contractors, budgets, and schedules. A change order log is the first step in organizing your process, but creating and tracking them can be streamlined with project management software.
Conclusion
Effective management of change orders is crucial for the successful delivery of construction projects. By understanding the importance of change orders, recognizing when to use them, and adhering to best practices, project managers can ensure that changes are seamlessly integrated into the project workflow. Change orders help in maintaining transparency and agreement between all parties involved, thereby reducing the risk of disputes and delays.
Ultimately, the key to successful change order management lies in preparation, clear communication, and the use of effective tools. By implementing these strategies, project managers can keep their projects on schedule, within budget, and aligned with the original project goals. Embracing change as an integral part of the project management process will lead to more adaptable, resilient, and successful project outcomes.