Reducing the Impact of Change Orders
Change orders remain one of the most frustrating issues in the construction industry, seeming to sneak up on owners and contractors to spike costs and prolong project schedules. Even when all financial and planning systems are in order, a last-minute alteration can throw everything out of sync, leaving decision-makers feeling like they have no other choice but to throw more money at the project to keep it on schedule. On average, change orders account for approximately 8-14% of all capital construction dollars. 24% of the time change orders account for over 10% of the total project costs. See the graph below for the percentage of total project costs that can be attributed to change orders.
Some causes of change orders that keep owners from achieving their repair and renovation goals include:
- Design errors or omissions
- Unforeseen conditions
- Deleted or added work
- Different product/equipment or finishes
These causes of change orders can lead to an increase in workload over departmental resources, delays in project completion, and overpaying for change order work. When handled effectively, however, change orders can be viewed as a positive and proactive approach to construction procurement.
Often times an owner’s top priority is keeping the project on schedule, and when 76% of change orders are negotiated by the in house staff, they may knowingly overpay in an effort to keep the project on its timeline.
Effective use of the change order process allows owners to maximize the value of their projects by capitalizing on opportunities that have developed after the construction has commenced. Luckily, a management solution exists for facilities and infrastructure owners who encounter change owners in their large or small construction projects.
Gordian’s Change Order Management SystemTM (COMS) eliminates pricing disputes and delays. By establishing unit prices for items that could be used in change orders, increasing transparency, and streamlining the entire pricing process, a solution to overcoming the negative effects of change orders is finally here.
When the facility owner and contractor employ COMS, they agree to using preset unit prices at the beginning of the project, simplifying and streamlining the entire pricing process. This way, when omissions are discovered, unforeseen conditions are encountered, work is added or deleted or different products, equipment or finishes are requested, contractors and facility owners simply access the defined pricing that was established at the outset of the project.
When such agreements are handled prior to the commencement of a construction project, change orders simply become another part of the standard project costs. A change order management solution is key to overcoming the negative effects of change orders on the job site.
