Managing Change Orders in Construction: A Comprehensive Guide -lceted LCETED INSTITUTE FOR CIVIL ENGINEERS

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Jun 16, 2024

Managing Change Orders in Construction: A Comprehensive Guide

Completing a change order correctly minimizes risk, improves the chances of approval, and helps contractors get paid faster. This guide contains information on how to fill out a change order form, key details to include, and pitfalls to avoid during the change order process.


Table of Contents

  1. What is a Change Order?
  2. Changing the Scope of Work
  3. Six Key Elements of a Change Order
    1. Project and Contact Information
    2. Dates of the Change
    3. Details of the Work
    4. Updated Schedule
    5. Cost of the Change
    6. Updated Contract Value
  4. Submitting a Change Order
  5. Match the Payment Application
  6. Get it in Writing — and Save it
  7. Change Order Template

What is a Change Order?

A change order is a document used to alter the original agreement on a construction project. It details the changes in the scope of work, cost, and schedule that are required. Many construction contracts dictate the change order process, providing specific guidelines on how to manage and process the change order.

Change orders can significantly impact the project scope and schedule and can affect a contractor’s liability and payment.


Changing the Scope of Work

Construction projects often undergo changes due to various unforeseen conditions. When changes occur, contractors should request a change order and obtain the property owner's signature to ensure payment and limit liability.

Types of Scope Changes:

  • Owner-Initiated Changes: More or less work requested by the project owner.
  • Site Condition Changes: Conditions that differ from what was expected, impacting the cost or feasibility of the original scope.
  • Top-Down Changes: Change directives without the contractor’s input, also known as work request directives.
  • Minor Changes: Architect’s Supplemental Instructions (ASI) for immaterial changes not affecting cost or schedule.
  • Value Engineering Change Proposals (VECPs): Suggestions for changes that reduce costs without impacting performance, common in federal projects.

Six Key Elements of a Change Order

To ensure a change order is approved, it must contain the following essential details:

1. Project and Contact Information

Include:

  • Contract number
  • Owner’s name and contact information
  • General contractor or architect’s name and contact information
  • Project name and address
  • Contractor’s name and contact information
  • Change order number (tracking all orders submitted)

2. Dates of the Change

Include the date you complete the change order. Additional helpful dates might include:

  • Date of initial notice of the change
  • Date of change order submission for approval

3. Details of the Work

Describe the work changes in detail:

  • Reason for the change (e.g., site conditions, design changes, regulations, force majeure events)
  • Detailed description of extra work or work no longer required
  • Attach supporting documents such as photos, drawings, and written descriptions

4. Updated Schedule

Include:

  • Number of days to complete the change
  • New completion date
  • Detailed analysis of the impact on the overall project schedule if required

5. Cost of the Change

Provide a detailed cost breakdown, including:

  • Positive and negative charges
  • Overhead, profits, tax, insurance, and other extra costs
  • Unitized breakdown for all costs, if applicable

6. Updated Contract Value

Reflect changes in the contract’s value:

  • Original contract value
  • Value of all past approved change orders
  • Cost of the current change order
  • New proposed contract value
Managing Change Orders in Construction



Submitting a Change Order

Once completed, the change order is signed and submitted to the owner or owner’s representative. The contract typically specifies how long the project owner has to accept, reject, or request additional information. Upon approval, the contractor can begin the work.


Match the Payment Application

Ensure the change order format closely matches the application for payment or schedule of values, facilitating easy comparison against the original contract value. Avoid starting work without written approval, as this could lead to non-payment.


Get it in Writing — and Save it

Always get approval in writing before proceeding with any changes. Save copies of all change orders and associated documents for record-keeping and future reference. Government projects may require document retention for 3-10 years, while other projects may have different requirements.


Change Order Template

Below is a comprehensive change order template that includes all necessary details for a change order.

Field

Description

Change Order Number

Sequential number for tracking all submitted change orders.

Contract Number

The contract number associated with the original construction agreement.

Project Name

The name of the construction project.

Project Address

The physical address of the project site.

Owner Name and Contact Info

Name and contact information of the project owner.

General Contractor/Architect Name and Contact Info

Name and contact information of the general contractor or architect.

Contractor Name and Contact Info

Name and contact information of the contractor requesting the change order.

Date of Change Order

The date the change order is completed.

Date of Notice

The date when notice of the change was first given (if applicable).

Date of Submission

The date the change order was submitted for approval.

Description of Change

Detailed description of the work changes, including reasons for the change and supporting evidence.

Updated Schedule

New schedule including the number of days to complete the change and the new project completion date.

Cost Breakdown

Detailed cost breakdown including labor, materials, overhead, profits, taxes, and insurance.

Original Contract Value

The value of the original contract before any changes.

Previous Change Orders Value

The cumulative value of all previously approved change orders.

Current Change Order Value

The cost associated with the current change order.

New Contract Value

The updated contract value after including the current change order.

Approval Signatures

Signatures of the owner, general contractor/architect, and contractor indicating approval of the change order.


By following these guidelines and utilizing the provided change order template, contractors can efficiently manage change orders, reducing risk and ensuring timely payment.

 

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