Managing Change Orders
Are you tired of dealing with project disputes stemming from change orders? You’re not alone. Contractors all across the nation are forced to deal with unreasonable change orders every day. Many of these change orders expand the scope of work in unsustainable ways, while others impede progress or tie-up contractors in projects for longer than they anticipated.
There’s no ignoring the fact that change orders are a significant pain point in the construction industry. They have the ability to turn contractors and owners against each other, which often manifests in the form of finger-pointing and name-calling once cost overruns and completion delays have been brought to the forefront. Change orders have been utilized in the construction industry since the beginning, and there’s little chance that they’ll be disappearing any time soon. Planning for every possibility in construction is a tall task, even for relatively simple projects. Because of this, our Jacksonville construction lawyers recommend that contractors embrace a clear and structured system for handling change orders. Contractors who have taken the time to develop a well-defined process can get a grip on change orders from the beginning, before they have a chance to create logistical issues that result in disputes.
In this article, a Jacksonville construction lawyer from Cotney Attorneys & Consultants will provide several tips for contractors who need help managing change orders. Change orders can occur for any number of legitimate reasons, including unforeseen conditions, inaccurate specifications, and drawing errors and omissions. Regardless of the reason you’ve been issued a change order, a Jacksonville contractor lawyer can ensure that your business is provided with the time and financial support required to complete the change order in a timely manner.
Dealing With Cost-Related Concerns
Did you know that change orders negatively affect anywhere between 8 percent and 14 percent of capital construction projects? As Building Solutions writes, “When change orders happen mid-project, the cost in delays and construction schedule setbacks may be so great that you do what you can to resolve the matter quickly – no matter the cost to your bottom line.” In other words, change orders elevate costs, and in many cases, all or part of these costs fall on contractors.
Related: The Do’s and Don’ts of Change Orders
Why does this happen? Poorly drafted contracts is one major contributor to change order frustrations. Failing to partner with a Jacksonville construction attorney can also expose contractors to additional project-related risks, especially when it comes to requests that alter the scope of work in significant ways. And in many cases, change orders do alter the scope of work in significant ways. One study proves that, on average, change orders result in cost overruns of as much as 11 to 15 percent of the project cost. To make matters worse, change orders can extend projects by as much as 20 percent past the original, agreed-upon completion date. As a contractor, you understand the value of lost days spent working on projects that should have already been completed when new projects await in the pipeline. Lost work can be a devastating financial blow to any construction company.
One way to avoid change order disputes is to establish an institutionalized change order process. In order to do so, your construction firm must be willing to facilitate clear channels of communication between contractors, subcontractors, consultants, and owners. If you can get everyone to embrace your process, it means all parties will be on the same page from the start, which can greatly decrease your chance of becoming embroiled in a dispute.
How to Improve Your Change Order Management Process
If you want to improve your process for dealing with change orders, it’s imperative that you take the time to create a clearly defined plan and follow it to a T. Our Jacksonville construction attorneys recommend that all contractors follow these five tips to get a handle on their change order management process:
- Review Every Contract in Anticipation of Change Orders: Contracts are king in the construction industry, and the owner’s ability to request change orders will be dictated by the terms and conditions found in the contract. If you want to safeguard your business against unfair change orders, have a Jacksonville construction attorney review your contract to ensure that it covers all facets of the change order process. Clear, concise terms may even dissuade an owner from making unnecessary requests.
- Review Project Plans Before You Break Ground: The scope of work plays a key role in permitting change order requests. Ideally, your scope of work leaves little room for questions and doesn’t contain any ambiguities, errors or omissions that could throw a project off course. Remember, document revisions are much less time- and cost-sensitive than actual change orders.
Related: Perfecting the Scope of Work
- Maintain a Record of All Change Orders: Change orders must be delivered in writing and clearly detailed before all involved parties can sign off on them. Those that haven’t been recorded in writing are difficult to collect on, so if you haven’t seen a change order, you should avoid performing additional work until you do.
- Establish Communication Protocols: When it comes to change orders, just about everyone on the project is affected in some way or another. Establishing communication protocols will ensure that every project leader is alerted to a change order — the fewer surprises, the better.
Related: 6 Ways to Improve Communications on the Construction Site
- Embrace Technological Solutions: As the industry continues to evolve, more and more contractors are turning to tech-based solutions to help them overcome obstacles. Project management software for contractors now incorporates change order functionality to keep everyone on the same page. Systems offer several different change order templates, which can be sent digitally to streamline communication and mitigate confusion.
If you would like to speak with one of our Jacksonville construction attorneys, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.