In construction, changes are bound to happen. Unexpected site conditions, material delays, or client requests frequently necessitate adjustments to the original plan. This is where understanding how change order management impacts projects and estimates becomes essential. Managing these changes effectively helps keep everything organized, from budgets to timelines.
When handled properly, change order management helps keep costs under control, avoids delays, and fosters good communication among all parties. But if it’s not managed well, even a small change can cause confusion, extra expenses, and project setbacks.
In this blog, we’ll explore how effective change order management affects both project success and estimating accuracy, and how you can handle changes smoothly to keep your construction projects on track.
What is Change Order Estimation?
Change order estimation is the process of determining the additional cost and time required when a construction project changes. These changes usually happen after the contract is signed. It helps everyone understand how a change affects the project’s budget and schedule.
A change order is a formal request to update the original agreement between the contractor and the client. It can include changes in the work scope, materials, labor, or project timeline. Accurately estimating the extra cost and time is crucial. It helps keep the project on track and avoids confusion or disputes later.
What is the Change Order Process?
The change order process is a series of steps that help manage changes in a construction project. Each step ensures that every change is handled clearly, fairly, and efficiently. Let’s go through them one by one.
1. Identifying the Need for a Change
The process starts when the contractor notices a need for change. For example, the project may require specialized equipment, additional personnel, or extended time. Sometimes, changes occur due to design updates or unexpected site issues.
2. Reviewing the Original Contract
Once the change is identified, the next step is to review the original contract. This helps everyone understand what part of the agreement needs to be updated. It also ensures that all parties are aware of how the change will impact the project’s cost, scope, and timeline.
3. Preparing a Change Order Proposal
After reviewing the contract, the contractor prepares a formal change order proposal. This document outlines the necessary changes and their rationale. There are a few common types of change order documents:
- Construction Change Directive (CCD): A written order from the owner to the contractor when the details are still being discussed.
- Architect’s Supplemental Instructions (ASI): A note from the architect that clarifies or explains specific project details.
- Request for Information (RFI): A request used to gather more information or compare products, services, and prices before making a decision.
4. Reviewing and Approving the Change
Next, all parties, including the owner, contractor, and sometimes subcontractors, review the proposal. They discuss the cost, timeline, and impact of the change. Once everyone agrees, the change is officially approved.
5. Updating the Contract
After approval, the contract is updated to include the new terms, costs, and schedule. This keeps everything official and prevents confusion later. Once the updated contract is signed, the work can continue.
6. Documenting the Change Order
Finally, all changes must be properly documented. This includes details like the reason for the change, costs, and time adjustments. Keeping clear records creates a paper trail that helps prevent future disputes or misunderstandings.
Why Clear Communication Matters
Although the change order process may seem simple, it can quickly become complicated. Changes often impact the project’s budget and timeline, which can lead to delays or confusion.
That’s why clear and timely communication is essential. When everyone stays informed and organized, change orders become easier to manage, and the project stays on track.
Why Change Orders Happen
Change orders are standard in construction because projects often don’t go exactly as planned. Many things can cause changes during work. Here are some of the most common reasons:
- Unforeseen Site Conditions: Occasionally, hidden issues such as rock, poor soil, or underground utilities are discovered after work commences. These issues require extra work or materials.
- Design Changes or Client Requests: Clients may change their minds or ask for new features. Design updates can change the project’s scope, cost, or timeline.
- Material or Labor Delays: Shortages, delivery delays, or bad weather can slow down progress. These unexpected issues may require adjustments to the schedule or plan.
- Errors in the Original Estimate: Occasionally, mistakes or missing details in the initial estimate lead to cost or scope changes later.
Because construction projects are complex and constantly changing, change orders are a regular part of the process. In fact, large projects often have several change orders before they are completed.
How Change Order Management Impacts Projects and Estimates
Change order management is very important for every construction project. When project changes occur, such as design updates, site issues, or client requests, they can impact cost, time, and quality.
Handling these changes properly helps keep the project organized and on schedule. It also makes cost estimates more accurate and easier to update. In simple terms, good change order management helps projects run smoothly, saves money, and avoids confusion.
How Change Order Management Impacts Projects
How Change Order Management Impacts ProjectsHere are the significant ways change orders affect project delivery:
Impact Area | Description | Result/Effect |
Cost Impacts | When a change order is approved, costs often increase (or sometimes decrease). Extra expenses may include labor, materials, or rework. | It can lead to higher project costs and reduced profit if not appropriately managed. |
Schedule & Time Impacts | Changes can delay the project because tasks need to be rescheduled or new approvals are required. | Late changes can cause bigger delays since the project is already in progress. |
Scope & Productivity Issues | Change orders can add, remove, or modify parts of the project. This affects how crews work and the efficiency with which tasks are completed. | Reduced productivity and coordination challenges between teams. |
Risks, Disputes & Paperwork | Poorly managed change orders can create confusion about what’s included, costs, or deadlines. | Leads to disagreements, administrative overload, and project stress. |
Quality & Client Relations | If changes aren’t managed well, the final result may suffer, and clients may lose trust. | Good change management maintains quality and improves client satisfaction. |
How Change Orders Impact Estimating
Change orders have a significant effect on estimating. They help improve accuracy, update budgets, and make your estimating process stronger over time. Here’s how:
- Learn from Past Projects: By keeping track of all change orders, their causes, costs, and time impacts, you build valuable data for the future. This historical information helps you make more accurate estimates in the future. It also allows you to spot common issues early and plan for unexpected changes.
- Update the Original Estimate: When a change order happens, the original estimate must be updated. You need to include new materials, labor, and equipment costs, as well as any schedule changes. Without updating the estimate, your project might go off track or over budget.
- Plan for Contingencies and Risks: Since changes are common in construction, it’s smart to plan for them. Add a small contingency or risk allowance in your estimate to cover unexpected costs. This makes your budget more realistic and helps you handle surprises smoothly.
- Improve Efficiency with Tools: Utilizing estimating software or templates enables faster and more accurate management of change orders. These tools reduce manual errors and allow quick updates when changes occur. As a result, your estimating process becomes more efficient, consistent, and reliable.
Best Practices for Change Order Management
Managing change orders effectively helps avoid confusion, mistakes, and delays. Here are some simple tips to keep your project organized and running smoothly:
1. Set a Clear Process
Have a simple process for handling change orders. Make sure everyone follows the same steps for every project. Assign each team member a clear role and corresponding duties. This helps process changes quickly and reduces confusion.
2. Keep Good Records
Always keep complete and organized records. Use a change order log to track every change, associated costs, and approvals. Try to use the same format for all your documents. Good record-keeping makes reviews easier and helps resolve disputes if they arise.
3. Communicate Often and Clearly
Keep everyone informed about project changes, including clients, contractors, and team members, to ensure transparency and effective communication throughout the project. Share updates regularly, even for small changes. Clear and open communication prevents misunderstandings and keeps everyone on the same page.
4. Use Estimating Software
Manual work can cause errors and waste time. Instead, use estimating software to manage change orders. It can automatically track updates, record data in real-time, and utilize templates to expedite the process. This saves time and reduces mistakes.
5. Stay Organized and Efficient
Following these simple steps ensures a smooth and efficient change order process. It helps you save time, avoid costly errors, and keep the project running without stress. Effective change order management ensures your project remains precise, efficient, and successful.
FAQs
What Is The Difference Between A Purchase Order And A Change Order?
A purchase order is used to buy materials or services. It confirms what will be bought and for how much. A change order updates the original contract. It adds, removes, or changes work or costs.
How Can Change Orders Affect The Overall Cost And Timeline Of A Project Under A Lump Sum Agreement?
Change orders can increase or reduce the total cost. They may also delay the project. Extra work, materials, or approvals take more time. This can affect both the schedule and budget.
What Happens After A Change Order Is Approved?
After approval, the contractor updates the plan and budget. The team starts working on the changes. All updates are documented. This keeps everyone informed and prevents confusion in the future.
What Should Be Included In A Change Order Estimate?
A change order estimate should list the change details. It includes labor, materials, and equipment costs. It should also mention schedule impacts and updates to the total cost. This ensures clarity and accuracy.
How Should Change Orders Be Managed To Minimize Their Impact On The Project Schedule And Budget?
Manage change orders with clear communication. Keep detailed records of all changes. Use estimating or project software to track updates. This helps control costs and avoid delays.
Conclusion
Effective change order management ensures that construction projects stay on track. It helps control costs, prevent delays, and maintain clear communication among all parties. It also improves future estimates by learning from past project data and avoiding repeated mistakes.
Understanding how change order management impacts projects and estimates allows contractors to stay organized, efficient, and profitable.
If you want accurate construction cost estimating services and professional support for managing change orders, Prime Estimation is here to help. Contact us today to make your next project smooth, efficient, and stress-free!
