What is a change order?
Change orders are widely used in project management when an original work agreement between a buyer and seller is modified in scope. A change order documents amendments to the original contract such as additional work, substitutions, adjustments to work, or any variation to the agreement.
In residential construction, change orders are used by builders and their clients to add, omit, or adjust work outlined in a construction contract. Change orders help builders + remodelers keep a paper trail of all adjustments to the building project’s scope, schedule, and cost. Having this documentation is essential when building companies start billing clients.
Why are change orders important in residential construction?
Changes to a residential construction project come from two factors: clients and the environment or site conditions. As a project progresses, clients survey the work to see how their designs come to life. New ideas or adjustments to the original plan bubble to the surface, making their way to project managers and field supervisors. Clients may communicate these wishes to anyone they find on the project jobsite or associated with the building company.
Building firms may also encounter unexpected site conditions or environmental factors that require changes to the original plan. From hitting rock during excavation to discovering rotten floor boards under the kitchen floor, builders risk increased costs outside their control. If not documented and tracked, building firms risk surprise bills from subcontractors and vendors that eat into their carefully crafted margins. Without a clients signature on these changes, builders and remodelers lose any chance of a client footing the bill and any additional profit.
Change order documents offer an avenue for building firms to write down client changes and unexpected site conditions, plus obtain a clients approval for any additional costs or timeline changes. If every change gets documented, no matter how small, builders and remodelers protect their margins and get paid for additional time spent managing these adjustments.
How do builders + remodelers document changes to a project?
To successfully set appropriate expectations with clients about a change to a project, builders + remodelers should document the change in detail and evaluate a new cost. Builders + remodelers who write detailed change orders protect their businesses from unnecessary risk and uphold their bottom line. Here are three critical pieces that should be included in a change order:
- A description of the altered agreement and information on how and when to pay for the change
- An updated timeline for the project to demonstrate the change order’s impact on the project’s completion
- A method for getting approval to move forward with the change order, such as eSignatures to speed up the approval process
There are a couple ways builders + remodelers complete the change order process. There are manual methods, various software tools and programs, as well as integrated construction management tools.
1. Manual Methods
Many builders + remodelers hesitate to implement software tools in their businesses because these tools often require extra skills and knowledge from every employee in the field. It is common for builders + remodelers to track project changes by memory and spontaneously adjust the build’s schedule and financials. Although this method seems simpler and requires fewer forms and exchanges with clients, committing project changes to memory can cause big problems for builders + remodelers when it comes time to send an invoice. Without documented change orders, builders + remodelers cannot justify the amount owed by the client.
There are many resources online designed to help builders + remodelers approach the change order process efficiently and effectively. A simple google search turns up numerous results for templates and tools to help with change order documentation. Change order software services like PlanGrid and eSub allow builders to automate the change order process, thereby speeding up the approval process. Going digital solves many of the issues faced with relying on memory plus solutions for communicating information to clients. These change order tools often operate outside of other project details, such as the schedule and project scope of work. Even if the exact scope change get captured on the change order document, any client, building team member, or trade partner looking for project scope details must hunt around for the most recent details across disparate systems and tools.
3. Integrated Construction Management Tools
Other builders + remodelers look to implement cloud-based construction management tools in hopes to integrate their building process and run their companies more efficiently. Software tools like CoConstruct make processing change orders, invoices, and schedule changes much quicker so builders + remodelers can keep their building projects moving forward. CoConstruct’s system is integrated. This means that a builder can open their project’s financials, enter a change order, send that change order, and then make schedule adjustments in just a few minutes. Since change orders details tie directly to the project scope of work, there’s no more question about what work is being performed. This process saves time and money and also ensures that builders + remodelers get paid their fair share at the end of a build.