Change Orders

how to deal with construction change orders

how to deal with construction change orders

In a perfect world war, divorce, and change orders wouldn’t exist. Sorry, we live in an imperfect world. As for war and divorce – I got nutten. Yet, I can provide some information concerning how to deal with the inevitable change orders that are going to arise during many construction projects.

Change order basics

Construction change orders are used for altering a construction contract. They are contract documents both parties agree to, signifying they understand there is a change to the original agreement. Further, a change order defines the costs and time factors which will affect and alter the original construction contract. That being said, it is well to develop a proactive change order management strategy.

The first way to diminish the use of change orders is to create the best initial contract. And, because unforeseen conditions, designer error or omission, or a change of heart can all be starting points for change orders it will serve you well to have a formal change order request process addressed in your original contract.

Building your change order process

These 5 steps are a good foundation for building your change order process.

  1. Develop the timeframe requirements concerning initiating a change order request

 

  1. Determine what specific information and documentation will be required

 

  1. Note who the authorized agents will be concerning the approval of the change order

 

  1. Lay out how communication between all parties involved will be handled

 

  1. Negotiate terms concerning scope, costs, and timeframe

It is also a good idea to let your clients know that submitting a change order request does not immediately cause work to change. There can very well be time involved in your research concerning the costs of labor and materials as well as other factors.

Other change order considerations

If one phase of the construction must be torn out in order to accommodate the requested changes the costs and time constraints are likely to be considerable. That is probably the easy part for your client to understand.

What they may not know is the other costs you’ll be considering concerning what must be changed. I asked our team here at Schulte and Schulte to give me some ideas concerning what monetary factors you, the construction contractor need to consider when negotiating a change to your original contract.

Depending on which trade you’re a part of, all or only some of these items may be factors.

  • Labor
  • Materials
  • Equipment usage
  • Restocking fees
  • Shipping costs
  • Taxes

Be sure to include each item in your calculations concerning the costs associated with the change.

Change order forms

You can get a general idea about a change order form here.  Of course, this site offers this disclaimer should you choose to use their form. “The forms on this site are provided ‘As-Is.’ By using these forms you agree that you are using them at your own risk. Most of the free forms are not prepared by an attorney and may need substantial modification.”

You can see another example of what your change order form could contain here.

Better yet, (and, this is what we recommend) if you’re using Knowify, there is a simple way to deal with the change order form. Check out the video here.

We’re able to provide information concerning the use of Knowify in your construction accounting process as well as your change order process. Get in touch here or give us a call 480-442-4032 or 866-629-7735.

Job Close Out – Why it is important

What difference does it make?

Whether your job lasts a few hours, a few months, or a few years there is still always a Job Close Out to deal with before the final payout arrives. It doesn’t matter if you’re trying to please a general contractor, a home owner, or a building inspector there is still the bottom line – is everything done, finished, complete?

I’m not talking about a punch list, although a punch list will sometimes be a part of the process. I’m talking about the moment when all parties involved in the construction contract or service agreement are satisfied with the finished work. Closing out the job means your work is complete and you get paid.

Both the negative experiences (change orders, nasty weather, supply delays, and the myriad of other things which pop up during the cycle of completing your project) as well as the positive experiences will fade in the memory of your customer. Yet, there is a psychological tool you can use to enhance your chances of leaving a favorable impression on them.

How does it work?

Here, let me explain. Have you ever been given a list of items to look at for a few moments, then been asked to remember all the items on the list? Chances are you’ll be able to remember the first few things as well as the last one or two items. All the words in the middle are often lost to your short term memory.

This article explains why that happens.

Understanding this psychological circumstance makes it easy to see why not only the first impression you make on your customer, but also the last impression you leave them with are both important for the well-being of your company. And, it is best to not leave Job Close Out to chance or even to a good memory.

Putting this information to use

Systemizing your procedure for closing out your projects augments your customer satisfaction rate as well as saves you time and hassle. Whether you’re a one-man-show or have a large number of employees, making a Job Close Out procedure a priority is a must for scaling your construction contracting business.

This is the first in a three-part series. In the next part we’ll look at the importance Job Close Out plays in mapping a superior customer journey, and in the final part discuss ways to make the process work for both you as well as your employees.