Change orders are an inevitable part of construction. How they're managed can mean the difference between a successful project and a budget disaster. This guide provides owners with strategies for effective change order management.
## Why Change Orders Happen
Changes occur for many reasons:
- **Design errors or omissions** - Issues not caught during design
- **Unforeseen conditions** - Underground utilities, soil conditions
- **Owner-requested changes** - Scope modifications after construction starts
- **Regulatory requirements** - Code changes or inspector requirements
- **Value engineering** - Cost-saving modifications
## The Cost of Poor Change Order Management
Without proper controls, change orders can:
- Increase project costs by 10-20% or more
- Delay schedules significantly
- Create disputes that damage relationships
- Result in claims and litigation
- Compromise project quality
## Best Practices for Owners
### 1. Invest in Pre-Construction Review
Before construction begins:
- Conduct thorough constructability reviews
- Identify potential conflicts and issues
- Coordinate between design disciplines
- Review specifications for clarity
### 2. Establish Clear Procedures
Document processes for:
- How changes are identified and reported
- Required documentation for change requests
- Approval authority and thresholds
- Timeline requirements for responses
### 3. Require Detailed Pricing
For each change order, require:
- Itemized labor, material, and equipment costs
- Markup percentages clearly stated
- Time impact analysis
- Supporting documentation (quotes, calculations)
### 4. Negotiate Fairly but Firmly
- Review pricing against industry standards
- Question excessive markups
- Verify quantities and labor hours
- Consider schedule impact carefully
### 5. Document Everything
Maintain records of:
- Original request and justification
- All correspondence and negotiations
- Final agreed pricing and terms
- Authorization signatures
- Actual work performed
## The Role of Construction Management
A skilled construction manager can:
- Identify potential changes early
- Review change requests for validity
- Negotiate fair pricing
- Track cumulative change impact
- Maintain proper documentation
- Prevent claims through proactive management
## Key Metrics to Track
Monitor these indicators:
| Metric | Target |
|--------|--------|
| Change orders as % of contract | <5% |
| Average processing time | <14 days |
| Disputed changes | <10% |
| Changes from design issues | Track and report to designer |
## Conclusion
Effective change order management requires preparation, clear processes, and constant vigilance. With the right approach, owners can minimize changes and manage those that do occur fairly and efficiently.