Change orders - manage them well or else
Change Orders, if only we could have a project without any changes, clients think we love them and we find them a necessary evil. Changes are a natural part of construction so the best we can do is to manage them well.
The most important thing we can do is to record every potential change into your system. More money is lost over forgotten changes than anyone can imagine, Log them no matter how insignificant they seem, if they turn out to be nothing they can always be voided, no harm, no foul.
The next matter is that of pricing. When you log in the change, record the potential subcontractors involved and enter an estimated cost. The estimate is not always easy but takes your best stab at it. This will give you a potential change value when you review the logs with the client. They may eliminate an idea right off the bat just based on the estimate and save you a lot of work. From here you need to get hard pricing. Each change is a mini contract so make sure it is thoroughly scoped out. Review the scope with the Site Superintendent to make sure you don’t miss anything. You can lose money here with a bad estimate just as you can with a bad job estimate. Get the pricing done as quickly as possible and back to the owner for review. Changes can be schedule killers so the sooner you can implement the work the less schedule impact it will have.
Finally, close out the change with the subs the first chance you get. Don’t wait until you must process their bill and realize their contract is light because the SCO’s were never written. This is a potential billing delay, which is a whole other issue. Stay on top of the changes and close it out 100% while it is fresh in your mind.
Remember, change orders can affect time, cost and/or scope but do not have to include any two or three at once. I.E. you can have a major scope change with no cost impact.
Changes are a lot of work, but they are going to occur so managing them well is key to making sure the project is not managing you.
Management tip: Changes are modifications to the Prime Contract and are legal documents outlining changes to the cost, scope and time. Be thorough in your description of the work proposed so it can be clearly understood by individuals not involved in the discussion. You will be glad you did if you ever must explain a change order you processed two years prior.