A change order is a modification to an existing construction contract that changes the original project scope by either adding or deducting scope, which potentially impacts project time and contract costs.
Change orders are the most frequent cause of cost overruns for construction projects, and frustrating for many owners who strive to keep projects on time, and on budget. However, a clear understanding of why change orders occur, and careful planning, can help reduce the need for change orders and keep your project on track.
Change orders occur for a variety of reasons, including unforeseen conditions such as underground differing site conditions, weather delays, inaccurate architectural plans, unanticipated increases in the costs of labor or materials, lack of experienced construction personnel, and design changes.
Although sometimes a change order is unavoidable, understanding potential causes of change orders and advance planning during preconstruction can help minimize issues during the project. A project team who anticipates problems can address them upfront in the project design, timeline, budget, environmental assessment, and contract drafting. Some best practices include the following:
- Assess the nature of your project: Certain construction projects are more likely to generate change orders because some conditions cannot be anticipated until you put a shovel to the dirt. For example, laying a parking lot without significant grading is not a project that is likely to generate change orders. However, creating a building with an underground parking lot has the potential to encounter significant unforeseen underground differing site conditions. It is important for the latter project to conduct a thorough site investigation, utility survey, and geotechnical assessment to help identify potential issues or surprises.
- Understand what you want to accomplish with your project: Sometimes change orders occur because the School has not spoken to key constituencies to confirm everyone agrees about project goals and objectives. It is important to seek out input from the School board members, administrators, and teachers before the project begins to confirm everyone is on the same page.
- Hire experienced and skilled personnel: It is important to hire an experienced contractor and architect who understand how to properly plan and budget for a school project. Experienced project personnel can also help anticipate and plan for any delays, including scheduling long lead times for certain materials.
- Integrate Project Delivery: Frequently, contractors attempt to blame the architect when change orders arise citing errors and omissions in the architectural plans and specs. One way to avoid this is to hire a contractor who will perform pre-construction work to ensure that your architect and contractor work together from the beginning of the project, and coordinate project delivery.
- Allow for Contingencies in Your Construction Plan: A well-planned construction project should anticipate weather delays, allow for unforeseen conditions, and may offer alternatives, which the parties can agree upon as the project progresses. For example, weather frequently impacts a construction project. It is smart to include a certain number of rain or snow days in the contract to account for weather-related delays.
- Establish a Change Order Procedure: The contract documents should establish a formal change order application and approval process, which can streamline the handling of potential changes, thereby reducing their overall project impact.
