How Do I Handle Change Orders In Construction?

How to Handle Change Orders in Construction: Key Steps and Strategies

Managing change orders effectively is one of the most critical aspects of successful project management in construction. Change orders can easily derail your project if not managed properly. In this blog, we’ll cover key strategies and actionable advice to ensure your projects stay on track, even when change orders arise.

The Importance of Managing Change Orders:

Change orders will likely occur on your projects—it’s not a matter of “if” but “when.” Managing them requires precision, clear processes, and a proactive approach.

Here’s why it’s important:

• Unmanaged change orders can cause delays and budget overruns.
• They often introduce chaos if not handled systematically.
• Properly managed, they can minimize disruptions and maintain client satisfaction.

Key Rules for Handling Change Orders:

• Project Contingency First: Always ensure potential change orders are projected from a contingency fund. Never execute work without financial authorization or an open potential change order (PCO).
• Separate Contract Work from Change Orders: Focus first on the contract work. Handle change orders with separate crews and administrative support to avoid mixing and overburdening teams.
• Clear and Consistent Processes: Document changes thoroughly. Do not proceed without approvals and ensure proper release forms are in place.

How to Manage Change Orders: 12 Steps

1. Establish Clear Contract Language: Define the process for handling change orders upfront in the contract.
2. Document Changes Properly: Ensure all changes are well-documented with clear approvals.
3. Estimate Impacts: Create a rough order of magnitude or detailed cost estimates for each change order.
4. Obtain Client Approval: Never proceed with work not explicitly authorized by the client.
5. Standardize the Process: Use templates or standard workflows to streamline approval processes.
6. Track All Changes: Keep updated records in your project management software.
7. Control Scope Creep: Avoid unnecessary or excessive changes that increase costs and complexity.
8. Communicate Regularly: Keep all stakeholders informed about the progress of change orders.
9. Collaborate with Trade Partners: Involve trades in estimating, planning, and executing changes.
10. Include Buffers and Contingencies: Account for uncertainties in change orders.
11. Avoid Scope Confusion: Clearly define the limits of each change order.
12. Address Disputes Early: Resolve disagreements promptly to avoid delays.

Common Challenges with Change Orders:

• Overburdened Teams: Mixing change orders with contract work can overwhelm project teams.
• Lack of Documentation: Skipping proper documentation leads to disputes and financial risk.
• Inefficient Approvals: Delayed approvals can stall progress and create confusion.

Tips to Stay on Top of Change Orders:

• Focus on Key Priorities: Always prioritize core contract work first, ensuring the primary scope stays on track.
• Use Visual Aids: Mark change order areas on zone maps to track progress visually.
• Stay Organized: Maintain accurate, up-to-date records for budgeting, progress, and approvals.
• Collaborate: Work with your trades and stakeholders to streamline the process and avoid bottlenecks.