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Managing Change for Better Construction Contract Performance

You’ve often heard people say that change is inevitable, and this is certainly true when it comes to construction projects. Despite the presence of plans, specifications, and a detailed bid estimate, the need to make changes will arise on a project. These changes may be the result of incorrect assumptions in the original design, errors or omissions in the contract documents, safety demands, quality control issues, acts of nature, and more. Successful project management goes beyond monitoring scope, maintaining the schedule, controlling costs, prioritizing safety, and ensuring quality. Changes to the project, regardless of the underlying reason, must also be managed.

Understanding Change Orders

Before determining what goes into an engineering change order template, it’s important to understand how changes are accounted for on a project. When a contractor is awarded a job, there is a contract that is agreed to that dictates the requirements for that job. There’s an original plan that the contractor or builder agrees to with the client or owner, involving several key project elements:

  • Scope of work: This defines all of the work to be completed by the building company.
  • Schedule: The agreed-upon time frame to complete every activity required for the project.
  • Cost: The total cost to complete the work as defined by the contract and contract type.

Deviations to any of these factors constitute changes to the contract. When the need for a change is identified, a change order request must be submitted for discussion, review, approval, and implementation.

Managing Contract Changes

It’s critical that a formal change order process is established for a project. Some clients or owners may have an existing process that includes a change order request form that they’ve created. A formal process not only helps to standardize the way changes are handled but also to minimize the time it takes to implement changes. While change is inevitable, it’s in the best interest of project performance to minimize the impact of the change. If work needs to be added to the scope, time added to the schedule, or funds added to the budget, the changes should be optimized for the least impact. For example, if a change is needed to solve a field problem, the most cost-effective and time-sensitive solution is most ideal. The change order process itself should not disproportionately affect project progress.

Developing a Construction Change Order Form

Because a formal change order procedure is essential, it’s important to develop a construction change order form. If one exists, it is worth discussing if it needs to be modified according to the project features and requirements. Maintaining project documents and records is a key quality of a well-managed project. There needs to be uniformity in tracking the details of a requested change from the moment it’s identified all the way to when it’s included in the project record. This change order request form needs to track the following information at a minimum:

  • Project Details: This includes the name of the project and identifying details such as project ID, contract number, control number, or work authorization info. The name of the contractor and the owner or client should also be included.
  • Change Order ID: There should be a unique ID for each change order request. Often, this is a simple numeric value, e.g: Change Order #1.
  • Description: This field identifies the proposed change. This should be straightforward and simple. For example, “Add precast concrete inlet at Station 25+45.”
  • Justification: A clear justification for the change order should be provided. It should explain the need for the change and how the issue started. Was there an error in the plans? Were field conditions different than what was indicated in the drawings, specs, or reports? Is this an owner-requested change? The justification should explain the issue succinctly and make the case for the proposed change.
  • Cost Breakdown: An itemized list of costs based on the number of workers, hours worked, equipment used, materials purchased, subcontractor costs and other allowable markups should be shown. If a total change request is $20,000, there should be a breakdown showing how the cost is derived. For example, 10 laborers x 5 days x 10 hours/day x $20.00/hour = $10,000 for labor. Let’s suppose the equipment costs are $5,000 and the inlet to be installed is $5,000. The total change order cost (assuming no other markups) would be $20,000.
  • Time Component: A complete contractor change order form should also include the days that need to be added to the schedule for the proposed change. A justification for the number of days may be included as part of the form or done as a separate time impact analysis, according to the owner’s requirements.
  • Affected Sheets or Specifications: If the change will impact any plans or specifications, it should be noted here for the record.
  • Related Documents: Sometimes change requests arise from a contractor’s request for information (RFI) or a submittal. That information should be noted on the form.
  • Funding Source: Some contracts or funding agreements may have language regarding the reasons for the change. For example, an error in the plans may be covered by federal funds, but a utility conflict in the field can only be paid for with local or state government money.  The construction change order form should make note of this.
  • Review and Signatory Acknowledgments: The form should document the various approvals required for formal approval and acceptance.

Fluix brings your team a cloud-based solution for generating a construction change order form that can be generated, completed, tracked, and accessed by many stakeholders on laptops, tablets and smartphones without coding or a specific operating system. Harness powerful technology to better manage project changes by checking out our 14-day, no-obligation trial today.

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