As critical as it is to go into any type of project with a plan, it’s just as important to remember that plans can and will need to change. The old saying that “no battle plan survives first content with the enemy” holds just as true in construction. The moment crews set foot on the jobsite, they will encounter unexpected variables that can lead to revisions to the plan, and in the industry these are what’s known as change orders.
Construction change orders are formalized documents that must be filed whenever changes have to be made to the overall plan as outlined in the original contract. For example, if a vendor is no longer going to be able to fulfill an order for windows in time to complete the project on schedule, a change order will be needed to document the alternative vendor. If severe weather introduces delays to the construction schedule, a change order will be needed to adjust the timeline. If a subcontractor’s bid turns out to be different from what was originally quoted, a change order should reflect the new budget.
Although change orders may be inevitable, that doesn’t mean owners and contractors shouldn’t take care when writing them. A poorly communicated change order can result in added friction between stakeholders that can have cascading effects on a project. This is why understanding how to write a change order as clearly and accurately as possible is an important skill for project owners as well as contractors.
Required Elements of a Well-Written Change Order
With so many factors that can influence a construction project, it should be no surprise that there are a lot of different reasons that a change order may be needed. These include:
- Design Changes: Whether due to an error made during the design phase or for some other reason, revisions to the project’s original plans require a change order.
- Material and Labor Concerns: Supply chain problems and labor shortages can impact the timing of construction work in such a way that they can fundamentally change the outcome.
- Regulatory Needs: There could be changes to regulations and building codes that take place between the creation of a project’s plans and the groundbreaking.
- Owner-Driven Changes: Project owners can change their minds about certain aspects of the project, removing elements or requesting different materials that necessitate a change order.
- Site Conditions: Unexpected site conditions may require soil modification or other additional work.
- External Factors: Weather conditions, jobsite accidents, and other unforeseen problems can have an impact on a project’s original plans.
Common Reasons Change Orders Occur
To ensure a project remains on track, a change order must be clear, detailed, and easily understood by all stakeholders. This is why it’s a good idea to use a templated document that can be filled out with all the pertinent information. Most well-written change orders include the following:
- Basic Information: This includes the name and location of the project, as well as the contract number. This section also should contain the names and contact information for the owner, general contractor, and architect or engineer. Change orders should be assigned unique numbers to ensure there is no confusion when referring to them, as there are likely to be many different change orders issued throughout the lifecycle of the project.
- Change Description: In short, this is the section in which the necessary change is explained in clear and simple terms. This section also should contain a brief description of the conditions that led to the change becoming necessary. If at all possible, supporting documents including photos or drawings should be attached to support the rationale for the change.
- Adjusted Budget: If the change is expected to have an impact on the project’s budget, this is where it needs to be explained. The estimated increase or reduction in the budget should be spelled out here, as well as an itemized list of additional costs or savings in terms of materials, labor, taxes, equipment, and any other expenses.
- Impact on Schedule: A change that will lead to an adjustment in the project’s timeline should be detailed here. For example, if the completion date changes, it needs to be spelled out in this section. The change order should explain how many days will need to be added or taken off the schedule as well as the reasons for the adjustment.
- Approvals: Finally, change orders must be signed by the project owner, the general contractor, and the architect/engineer. The date of final approval should be noted, as well. This is crucial for resolving disputes as well as meeting audit trail requirements.
Documenting Cost and Schedule Impacts Accurately
Filling out a change order with rough estimates instead of clear, verifiable data is a surefire way to add more confusion and complexity to a project. Instead, it’s essential for stakeholders to provide detailed breakdowns of any changes in cost or scheduling to ensure everyone understands what is happening and why.
When creating a change order that involves adjustments to the project’s budget, this should include an itemized list of any additional labor, materials, markups, or other elements that impact cost. This goes for any changes that reduce the project’s overall cost as well as those that will increase it. In the same way, any changes that are expected to move the scheduled completion date back or ahead need to be documented. Doing so ensures transparency and clarity throughout the rest of the project, preventing any disputes that could lead to further delays and complications.
Review and Approval Workflows for Owners
Owner approval workflows need to be just as clear and well-defined as the change management process itself. Owners should specify who exactly will be responsible for approving change orders on their team as well as at the contractor and the architect or engineer’s office. These need to be defined and agreed upon as early in the process as possible. The workflow also needs to include timelines for review and approval, with clearly defined deadlines for all parties.
Not only is a well-designed workflow crucial for construction risk control, but also to ensure accountability and consistency for the entire project. Timely review and approval for change orders helps cut down on delays, and clearly defined roles ensure no unauthorized changes find their way into the project.
Tracking Change Orders Across the Project Lifecycle
Document management workflows are essential for construction projects, and managing change orders is no exception. This is why it’s important to have a central repository platform that allows all involved parties to view change orders. This gives them the ability to see the cumulative changes to the entire project as well as follow standardized workflows for review and approval.
Keeping tabs on change orders also provides stakeholders with visibility into trends. By seeing where and how most changes emerge, they gain understanding they can use to make more-informed decisions in later stages of the project and even on future projects.
How Clear Change Orders Reduce Owner Risk
Change is inevitable, and well-composed change orders are crucial for project teams to roll with the punches. With the right change order documentation, teams can reduce disputes and limit their exposure to audits, as well as support defensible decision-making and transparency. Projectmates’ software provides project owners with powerful tools to manage change orders alongside all other aspects of their workflows including cost tracking, bid management, and analytics. To learn more about what this platform can do to provide capital project controls, reach out and speak with a member of our team to request a demo.
