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 sends a shiver down your spine. Change 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 any construction project, they can be kept to a minimum when a project is designed and coordinated carefully from planning to construction. Below are some tips for reducing or eliminating unwanted change orders on construction projects.
1. Establish a change order process up front. 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.
2. Provide a clear statement of work. Most change orders result from a sloppy or ambiguous statement of work (SOW). An SOW should clearly specify the development, implementation, monitoring and evaluation, and delivery of the contract goods and services. The SOW should explicitly state the work to be performed, location, timeline, deliverable schedule, performance standards, and other applicable special requirements like security. Any missing elements could increase the likelihood of change orders.
3. Eliminate or minimize change orders resulting from incomplete design. Change orders can also occur when the contract documents do not include sufficient details for a contractor to price it reasonably. For example, failure to include details for underlying fabric in pavement construction will result in a change order. More detail in the project’s design will mean a smaller chance for change orders down the road.
4. Coordinate design among the project’s various disciplines. An architect or a design team leader coordinates the design performed by other disciplines. Problems arise when separate plans and specifications prepared independently by each discipline are not managed and coordinated. Construction documents should not be completed and submitted for bidding without considering other disciplines and reasonable assumptions.
For example, the mechanical engineer might assume that the civil engineer will connect the roof drains from the building to the storm drain system. The plumbing plans simply show a graphical representation of a line coming out of the building at one or more locations without specifying horizontal and vertical locations. When these plans are not provided to the civil engineer, the site plans will not include drain connections to the site drainage system.
5. Coordinate all project elements. Lack of coordination might result in two work items at the same location. For example, the electrical engineer may place a transformer in the same location where the civil engineer designed a storm drain inlet or a sanitary manhole. Or, perhaps structural components interfere with the HVAC design for duct installation. If all project elements are not coordinated properly, change orders are likely.
6. Collaborate within disciplines. Lack of coordination among design team members of the same discipline may also result in change orders. For example, the drainage engineer’s drain pipe and the sanitary engineer’s sanitary pipe may cross each other at the same elevation. Or the highway engineer’s road elevations may not provide enough cover to the pipes designed by the water systems design engineer. Collaboration is key.
7. Include a process for managing quality control. To minimize change orders, ensure that a quality control process is in place for all stages and levels of the project. 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 and verify that quality control is implemented.
8. Ensure subcontractor compliance to the SOW and other regulations. It is also the contractor’s responsibility to ensure 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. In other words, the contractor is responsible for carrying out all contract requirements, providing and maintaining an inspection system, and proving documentation. Otherwise, change orders and even contract termination could result.
9. Support transparency. The most critical element in successful project management is transparency. The greater the transparency from inception to completion, the more likely that team performance, task ownership, accountability, and communication will be effective. Team members are more productive, accountable, and responsible when their tasks and efforts are visible to everyone.
As is clear from this list, coordination and collaboration are key to preventing change orders and protecting the client’s schedule and budget. When project teams work closely and transparently, problems can be identified and resolved before they lead to costly change orders.
Change isn’t always bad
Of course, sometimes owners will issue change orders when they 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 add additional space, more luxurious finishes, an upgraded facility, and so on. Negative circumstances might also prompt changes, such as project funding limitations or reduced need.
At times, change orders are issued to the design team, which are also beneficial to the owner. The design team is familiar with the project site conditions and the owner’s needs and can design the 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.