Change is inevitable, and being able to navigate change successfully is an important skill for any professional. In construction, projects undergo changes all the time. From the moment the shovel first hits dirt, the unforeseen can cause all kinds of alterations to the original plans. This is what change orders are for. These documents are crucial for ensuring all parties involved understand what needs to be changed and why.
As important as construction change orders are, however, that’s not to say that they always go unquestioned. There’s always the chance that general contractors or architects will push back against a change order they feel is unwarranted or unnecessary. If this happens, the results can be catastrophic for a project. It can mean delays as the parties haggle back and forth over the changes, and it can chip away at the trust between them.
Knowing how to negotiate change orders is essential for project Oowners. With the right balance of process and people skills, Oowners can ensure their projects remain on the right track even as disputes arise over change orders.
What a Negotiable Change Order Should Include
Perhaps the most important element of a smooth change order negotiation is the change order itself. If the document has not been created with precision and clear language, there’s bound to be confusion that leads to disputes. Having the most complete and concise change orders is helpful not only for preventing arguments in the first place but also ensuring that the negotiation process goes as smoothly as possible.
Here’s a quick rundown of everything a change order should contain:
- Scope description: Any scope changes for the project are detailed here, making it clear to all stakeholders exactly how the original plansoriginal plans are being altered. This ensures everyone understands what is being asked for and how it will affect the project.
- Cost breakdown: Knowing how the changes will impact the overall budgetoverall budget of the project is critical. Change orders should always include cost tracking software that pricing breakdown s of any new cost impacts and to illustrates how the budget will be altered.
- Schedule impacts: Changes to the project plans can affect the overall project timeline, and that’s why change orders should include as much information about the expected impact to the schedule as possible. This gives all stakeholders the opportunity to adjust their schedules.
- Justification: Just as important as the “what” of a change order is the “why.” Without a clearly stated justification for whatever changes are being requested, it may be difficult for teams to understand what’s being asked of them. Many disputes that end up damaging construction projects come down to change orders failing to include this information.
- Supporting files: Drawings, logs, and field documentation play important roles in helping project teams understand a change order. Owners who don’t provide these support documents in their change orders run the risk of questions bogging down the entire process.
Before submitting a change order, it’s highly recommended that Oowners review the document to make sure all of these elements are present.
How to Prepare Before Negotiating a Change Order
When preparing for a change order negotiation, there are a few steps that Oowners should follow to ensure they know what they’re getting into and prevent any surprises.
Here’s a brief step-by-step breakdown Oowners can use to prepare themselves:
- Review the original contract language closely, making sure to note any allowances, contingencies, and prior Oowner approvals.
- Verify labor, material, and schedule assumptions, as this will provide a baseline for understanding the changes.
- Align Oowner, architect, and primary stakeholders before starting the negotiation, as this will reduce the chances of confusion or disputes arising.
Strategies for Negotiating Change Orders Fairly and Effectively
Owners who want to negotiate change orders without creating unnecessary conflict should take care to have all the documentation at the ready.
Some important strategies they can use to ensure the best possible results include:
- Ask for itemized pricing and clear production assumptions. Too many times, contractors introduce disarray into the change order process by providing only vague estimates of the impact of the work. Spelling everything out in no uncertain terms means there will be no wiggle room for teams to claim they’ve satisfied the change order when work doesn’t match expectations.
- Separate scope validity from price and time discussions. Scope validation ensures the completed portion of the project meets the requirements set forth in the contract. This should be kept separate from any discussions regarding the budget or schedule, as this can introduce complications that will slow down the negotiations.
- Negotiate based on documented facts, not verbal estimates. Documentation is critical for change order negotiation, as it provides Oowners with verifiable figures with no room for interpretation. This means all stakeholders are working from the same numbers and there will be minimal disagreement.
Common Mistakes That Make Change Order Negotiations Harder
Far too many project Oowners fall victim to their own mistakes during the change order negotiation process.
Some of the most common of these include:
- Incomplete documentation: When details are missing from the project documents, it creates gaps that allow confusion and arguments to worm their way into the process.
- Rushed approvals: Trying to speed through the negotiation process is a surefire way to introduce oversights and incomplete procedures that will need to be addressed later.
- Unclear authority: Without clearly defined roles, responsibilities, and workflows, work can fall through the cracks and inconsistencies can start to overwhelm the project.
- Negotiating without a full project impact review: When Oowners don’t fully understand the effect the changes will have on the overall project including timeline and budget, they won’t be able to negotiate as effectively as they should.
Common Mistakes That Make Change Order Negotiations Harder
Owners who want to gain more control over their change orders should start with having configurable construction project management software.
Projectmates is a leading platform for providing the visibility and standardized workflows needed to maintain the right level of project controls in the change order process.
To learn more about how Projectmates can help you manage your capital projects, reach out and schedule a demo today.
FAQs: Common Change Order Questions
Most terms of a change order can be reviewed if the support is incomplete or unclear.
Owners should always request full documentation before approval to any change order.
Clearly defined workflows and thorough documentation are key to keeping negotiations moving as smoothly as possible.
