Reducing Change Orders: 9 Tips for Managing Project Cost and Schedule
For anyone who has worked on a construction project, the term “change order” probably makes your ears perk up a bit. Change orders or “extra work orders” can derail a construction schedule and push project costs over budget. Organizations set budgets and schedules to support predictability, but change orders disrupt both.
Though change orders are a reality on most construction projects, they can be kept to a minimum when a project is designed and coordinated carefully from inception to completion. Below are some tips for reducing or eliminating unwanted change orders on construction projects.
- Ensure a clear project scope. Many change orders occur because the project did not have a well-defined, clear, and concise scope. The project scope should be well thought out and identified at the project’s planning or inception stage. Some clients define this as the project’s “purpose and need.” Failure to define the scope early on often leads to scope creep and unnecessary increases to project cost.
- Provide clear project specifications. Most change orders result from incomplete or ambiguous specifications. Project specifications should clearly describe the work elements, materials required, implementation, monitoring and evaluation, delivery of contract goods and services, and payment method. The specifications, in combination with project plans and/or blueprints, should explicitly state the work to be performed, location, timeline, deliverable schedule, performance standards, and other applicable special requirements such as security. Any missing elements could increase the likelihood of change orders.
- Perform a detailed constructability. Quite possibly the most critical step you can take to reduce change orders is to complete a constructability review. This review should assess the two primary elements of project procurement: buildability and biddability. To prevent/reduce construction delays, certified construction personnel should confirm that the project can be built as designed using the prescribed construction sequence and specifications. A biddability review is a cost control measure to determine whether the project’s estimate has adequate quantities and unit prices for each work element.
- Avoid the “silo conundrum.” Nearly every project includes work elements designed by different disciplines. Problems tend to arise when a project manager or architect isn’t coordinating the plans, sequence, and specifications of each discipline. This results in a silo design approach and often leads to conflicts in the field, which necessitate redesigns and added cost and delays.
- Have an established change order process. Contract documents should always include a process for initiating, authorizing, performing, and paying for change order work. Having an established process up front will help prevent unauthorized change orders and other disputes as the project progresses and will ultimately minimize impacts to the schedule and budget. This process should clearly outline the steps to follow as soon as a potential change order is identified.
- Have an established quality control process. To minimize change orders, ensure that a quality control process is in place for all project stages and tasks. These include the design process, technical documentation, specifications and engineering changes, testing and inspection reports, and other processes and procedures in the contract requirements. The project manager should have an inspection system to verify that quality control is implemented.
- Include all disciplines in regularly scheduled progress meetings. Having regularly scheduled progress meetings is an integral part of any project. In effective meetings, potential problems can be solved before they cause issues, and each discipline should participate. You can never predict when an issue may arise that can either directly or indirectly affect work. By preparing in advance and gathering the right individuals at the table, problems find solutions, and the project is the beneficiary.
- Have a clear subcontractor compliance program. The contractor is responsible for ensuring that all subcontractors and the goods and services they provide meet or exceed the contract requirements, and that team members are employed according to federal contractor and subcontractor legislative requirements. As an owner, though, having a program to track and verify that proper protocol and documentation is in order is vital. Contractors may assume that subcontractors are doing things properly without verification or oversight. This can cause delays and have a ripple effect that can trigger a time-based change order if left unattended for too long.
- Promote effective communication. Communicate! Disputes can often be traced back to a breakdown in communication. Effective communication includes being transparent, open, and honest. When each stakeholder takes ownership of the overall project and its goals, it’s much more likely that the project will be successful. “Partnering” is a global commitment from all team members to put the project goals above individual goals. Using this approach will benefit all stakeholders and minimize unnecessary disputes.
Change isn’t always bad
Of course, sometimes owners will issue change orders that are beneficial to them, possibly to accommodate changed circumstances or to add work items to the scope without the cost of a separate contractor. Owners may make changes to extend the limit of work, add additional safety elements, add more luxurious finishes in a facility, combine multiple contracts into one, and so on. Negative circumstances might also prompt changes, such as project funding limitations or reduced need.
At times, change orders issued to the design team are for the owner’s benefit. The design team is familiar with the project site conditions and the owner’s needs and can design an addition faster and in coordination with the existing design. For example, the design team could be asked to design an addition to an existing building while renovating the building.
But for other change orders that are not as “desirable,” I hope these tips will help readers consider ways to reduce or eliminate change orders during their construction projects.
Brett Deane, CCM, is a senior construction manager for EBA Engineering, Inc. He can be reached at 302.803.0380, email@example.com, or on LinkedIn.