What Is A Change Order In Project Management?

In this blog post, I’m going to share with you the 10 commandments of change orders and how to keep them from derailing your team. You’ll find these principles invaluable, so let’s dive right in. 

What Is a Change Order?

A change order is a document used to alter the original agreement. It details changes in scope, cost, and schedule. Often, the construction contract will dictate the change order process, which can arise from design changes, unforeseen conditions, or any reason to add or adjust the scope of work. It’s crucial not to proceed with work until you have financial approval. Always open a draft change order in your project management system to stay organized.

Commandment #1: Know Thy Contract

Success with change orders begins with understanding the contract. Know the change order process and the rules that govern it.

Commandment #2: Do Not Give Away Leverage

The owner wants the project, including any changes, completed. You just want to be compensated for the work. Don’t give away your leverage by doing the work without having financial approval in place.

Commandment #3: Know the Point of Release

Never, under any circumstances, perform change order work without a signed and authorized change order. Know the exact point where you can proceed with the work and receive payment.

Commandment #4: Ask for What You Need

When pricing a change order, be specific. If there’s demolition, reinstallation, additional hours, or any associated cost—price it in. Do not assume you can add more later; ask for what you need from the start.

Commandment #5: Time Is Money

Don’t just focus on the financial aspect—ensure you’ve accounted for time. Get the time extension you need, following the contract’s rules.

Commandment #6: Surprise Not the Owner

Never assume the owner knows about delays and disruptions. They need information to manage budgets and schedules. Keeping them informed helps with getting fair compensation.

Commandment #7: Be Persistent

Persistence yields results. If something needs to be resolved, stay on it until it’s done.

Commandment #8: Know Your Bargaining Power

You have just as much bargaining power as the owner because they need you to complete the work. Don’t give away your leverage.

Commandment #9: The Job Isn’t Done Until the Money Is Collected

Unsuccessful managers make excuses, but successful ones ensure profitability. The job isn’t complete until you get paid for the work you’ve done.

Commandment #10: Make It Lawyer-Proof

Ensure all documentation is in the correct format and can stand up in court if needed. Protect your right to compensation by following the proper legal guidelines.

The Reality of Change Orders

There’s a common perception that change orders aren’t great for profitability. The administrative burden can be immense, and many trade partners may be doing you a favor by agreeing to them. Whenever possible, reduce the number of change orders, as they can create significant variation in a project.

How to Prevent Change Orders from Derailing Your Project

Change orders can bring chaos, but if managed well, they don’t have to derail your project. Here’s a foolproof method to keep them in check:

1. Clearly Identify Impacts: As soon as a delay or change occurs, document it in your meeting minutes, daily reports, and legal schedule. Make sure to keep the main part of your workforce moving forward. Change orders should not disrupt your primary work.
2. Allocate Specific Labor: If your team doesn’t have the capacity to manage change order documentation and approvals, hire additional resources. Keep your main team focused on the original contract work, and handle change orders separately.
3. Prioritize the Contract: Always focus on fulfilling your contractual obligations first. Change orders should be secondary in priority to ensure your project team stays on track and avoids distraction.

A Real-World Example

John Kaufman, a General Superintendent, once shared a story on our podcast about recovering a project overwhelmed with change orders. By separating the management and labor for the change orders from the main workforce, the project was successfully delivered. The key was maintaining focus and morale while addressing change orders in a systematic way.

Final Thoughts

The only time change orders derail a project is when they create unmitigated chaos and variation. By following the 10 commandments and keeping your eye on the ball, you’ll avoid those pitfalls.

If you’re ready to master change orders and keep your projects on track, I’ve linked a beautifully formatted guide below that outlines these 10 commandments. Use it to safeguard your project, and let’s continue on the path to success!

On we go!