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March 16, 2016

3 Keys to Navigating Change Orders

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When a scope is clearly defined and everything is planned perfectly, you can usually breeze through a project without any change orders. However, this is not always the case. What if your budget is suddenly cut? What if you realize something you need is not included in your scope? A change order is probably awaiting you.

Change orders are only scary if you do not know how to handle them. Learn how three simple keys and best practices can help organizations navigate change orders to maintain power and make proactive decisions throughout the life of a project.

1. Discuss the Changes EARLY

As a client, you have the power to set the tone. At the beginning of a project, you should share your expectations with your contractor about how important early notification of changes is to the success of the project.

Discussing changes early allows you time to be proactive and change direction if it is necessary. When changes are mentioned too late, organizations can be forced to make fast, reactive decisions equipped with little flexibility.

Mike Woods, CPG Group President, suggests clients and contractors diagnose the ripple effect of a change early in the process. Woods describes the ripple effect as the ability to assess everything impacted by a change, not just the change itself.

Figure 1

Before making decisions, consider how a change will impact your overall project, schedule and budget.

2. Discuss the Changes OFTEN

Be clear about how often you and your contractor will discuss issues within the project. An ideal way to make this a habit is by including change orders as a topic in your monthly meetings. This way, even if there is no change to discuss, it allows the lines of communication to be open.

By talking over your changes frequently, you can avoid the question – How did we get here? You can and deserve to be aware of where you stand in your project each step of the way.

3. Changes should be VERBAL and WRITTEN

If a contractor sends you a change order via email without describing it, run away as fast as you can. All change orders should be written and explained verbally in detail to ensure all parties are on the same page.

For more clarity, you can also require your contractor to be as descriptive as possible in each line item of the change order. This allows your contractor to analyze the ripple effect of a change before it gets to you. Assessing the ripple effect may even uncover a better solution before submittal.

Although it’s no secret that changes can occur before all documentation is completed, you should be clear when you want change order documentation from your contractor. There is no rule of thumb for how often documentation should be submitted because it can work differently depending on the organization.

For example, one of our clients prefers change order documentation be submitted quarterly to minimize paperwork. Another client chooses to request completed documentation 60 days following the change. Whether you decide to request documentation quarterly or every 60 days, you and your contractor must agree on an interval that works for both of you.

Best Practices

Below are several best practices you should apply before you encounter a change order.

  • Designate a point of contact in your organization. If changes occur, you want the contractor to ask the right person for approval.
  • Diagnose the ripple effect. Analyze each area the change could impact on your project.
  • Be clear on who will bear the cost of a change. If this is not discussed with your contractor early, it can lead to surprises in the end.
  • Align your expectations with your contractor so the process and procedures are understood when a change occurs.
  • Collaborate with a trusted contractor about your scope so you can understand what is possible, what is necessary and what can be omitted for your project to be a success.
  • Team with a contractor that has a change management program. If they have a policy in place and a depth of experience with change orders, it can only mean less of a headache for you.

Though we understand change orders are undesirable and often quite complex, you should be prepared for them. These three keys and best practices can help you navigate them more smoothly when they occur. If you want to know more about our change management program and how we are implementing it on our projects, feel free to contact us.

Haskell delivers more than $1 billion annually in Architecture, Engineering, Construction (AEC) and Consulting solutions to assure certainty of outcome for complex capital projects worldwide. Haskell is a global, fully integrated, single-source design-build and EPC firm with over 1,800 highly specialized, in-house design, construction and administrative professionals across industrial and commercial markets. With 20+ office locations around the globe, Haskell is a trusted partner for global and emerging clients.

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