Change Orders, money makers or serious interruptions to the work, they can be both but only if managed correctly. Changes to the work must be acted upon quickly to avoid major disruptions to the schedule and if large enough may cause or require the projects to be temporarily halted. If this is the case, make sure the client is notified in writing as to the situation and reasoning. Most likely they will not know that their latest round of hand waving was having so much impact.
When you see a potential change, clarify with the owner immediately that there are costs involved and what scope clarifications will be required to price the work. It could be small as a hardware specification or require new drawings to see the full impact.
Price the work as quickly as possible and preferably before you proceed with the work. You do not want to be in the position of “I would never have proceeded if I would have known it would cost this much”. Write it up and get the owners approval, signature is best, but an email is at least something to rely on.
When preparing the change detail is critical, break the change work down into as many pieces as possible and try to include everything you can that will be impacted. The more detail the better, it will help the client understand how the costs were developed and ease their mind that the costs presented are fair. They are now completely relying on you to be fair and honest as they have no other source to perform the work so help them feel at ease. Present the Change in such a way that you can provide supporting documentation if requested. The client has this right, so be prepared to back-up the costs you have presented. The other reason for detail is it is easier to explain you will need another case of nails for the siding change then to have it all rolled up in one big number. Also look at all your costs that are reimbursable, will it add time to the
schedule, with the super be on site longer or working on the change when they should be doing original contract work, are their permit issues, filing fees, extended use of temporary facilities? All will have an impact on your bottom line. If you pick up a day or two with each change you may be covered for the impact of multiple changes that had little impact individually but cumulatively added a month to the job.
Lastly, make your first change order your best change order, if the tone is set then future changes will be received with more understanding as to the fairness of the cost. Changes are inevitable and can have hidden impact on the job overall. Remember to the contractor every job is on time and budget. It may have taken longer and cost more, but these were legitimate changes, the client will see the job as 20% over budget and taking a month longer than original. Keep those lines of communication open.
Final note, be careful not to become a pricing service for every dream the owner has ever had and then never proceeds because “it costs too much”. If you find yourself in this situation you may need to pull the client aside and let them know further changes will include a fee to prepare the change whether it is accepted or not, you may even want to include a 10 change order limit in the contract. All that time spent pricing is costing your business money. You are only making money when you are putting work in place.