Change Order Protocol
I recall being at the shore watching boats pull into dock. It is always remarkable to see what boat owners name their boats. A boat named “Change Order”, struck me as a little arrogant; if a change order is a blatant money maker to a contractor, it is likely a headache for the owner on a project. To a certain extent, it should be a vessel in which all professionals assigned to the project should learn from, and work together on.
What is a Change Order?A change order is a just a technical term for modification to a construction contract. When you hear change order, think contract change. Why? Because a change order is a two-sided agreement between the parties involved on the contract.There are various reasons for the creation of a change order. For example, a design modification which may come in relation to potential improvements to a design; or perhaps business changes which result in adjustments to the initial vision. Errors and omissions within the preliminary drawing set, and specifications may also cause change orders when the design firm misses a key detail. Unanticipated site conditions such as uncovering asbestos tile can result in added costs by the contractor. Facility Managers may also add to the scope or work and/or reduce the scope of work depending on business needs. Adjustment to the schedule may cause either an acceleration or deceleration to the work to accommodate unforeseen needs. The sequencing of work may also impact a job resulting in a change order such as requiring a portion of the building to be completed before the entire job. Unit pricing may also cause adjustments to pricing due to unforeseen circumstances such as gas shortages or natural disasters. Regardless, the reason to initiate a change order, it is important to document the amendment to the project in detail so it is processed in a fair, equitable, and timely fashion. A change order contractually alters an original agreement. It is key that all change orders must be approved by the Facility Manager. The change order should then be signed by the parties involved, whether it is the designer/architect or contractor. There should be sufficient detail describing the change; what is being changed, why extra work is being done, the cost impact to the project and the revised total on the project. Once approved, the change order is part of the official plan, and specifications on the project.Disagreements are not unusual because change orders affect each party involved in different ways, whether it is the contractor, design firm or Facility Manager. When developing a change order, it is imperative to keep the wording straightforward when describing the reason for the change(s). Detail should go into the impact the change has to the overall job, budget, and schedule.Overall, it should be the goal of both the facility manager and construction manager to reduce the number of change orders affecting the dollar amount as a percentage of the overall construction costs. Mark up on the change order should be in harmony with the contract previously agreed upon for overhead and profit. Backup paperwork should be included with the submittals along with the impact to the schedule. Ideally, a change order summary sheet should track all change orders from the start of the project through completion. This allows for easy review of the overall job at the end to help alleviate any potential headaches to resolve final invoicing by the contractor.
Caroline Shelly, LEED-AP+BD-C is founder & principal of HF Planners.