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Change Order Best Practices: What Contractors & Clients Need To Know

Let’s start this off with a picture. Below is an image of two boats – one is a large, expensive boat and the other an inflatable dingy the owner uses to ferry out to the big boat from land. The small dingy is named “original contract” while the large, luxurious boat is named “change order”. I first saw this picture in college and laughed, but didn’t quite understand. After working for many years on a variety of commercial projects, it makes a lot more sense. While this picture is funny but obviously way off scale, the point is clear. Regardless of what the original contract consists of, projects can be made or broken by change orders – that goes for clients AND contractors! In this article, we’ll be discussing a variety of change order best practices that will benefit both owners and contractors alike.

A quick disclaimer: While I have worked as a Project Manager in construction for many years, I am not an attorney or any form of legal counsel. I speak from my experience of working with contracts and overseeing the execution of many change orders, but always speak to your own legal counsel for any matters related to contracts, terms/conditions, payment, etc.

What Is A Change Order In Construction?

A change order is a written, legal document that outlines and represents a change of some kind to an existing contract (“base contract”). For a change order to be official and legally-binding, the document must be signed by the Client, Contractor and often a third party such as an Architect hired by the Client. At a minimum, it must be signed by the Client and Contractor to become legitimized.

Why Are Change Orders Important?

Change orders are an important part of a project that both Clients and Contractors need to know about. Sure, change orders are legally-binding additions to the existing base contract, but most people only care about one thing when it comes to change orders: payment .

For Contractors , change orders are an essential part of getting paid for the work you do. If you perform additional work on a project that’s not a part of your base contract, you should be compensated for the time and costs of doing this work. Change orders submitted by Contractors usually claim additional time AND costs – completion timeframes should be increased in many instances, too. In construction, no one wants to do work they aren’t being paid for! However, it’s not as simple as just sending a change order to the Owner and waiting to be paid. We’ll discuss the specifics of change order protocol for contractors below.

For Owners, change orders can account for a large portion of the total construction costs on a project. We hear about this everywhere – people begin a project with a certain budget in mind, and end up spending WAY more than planned when all is said and done. A rule-of-thumb to keep in mind is that on the average construction project, change orders equal about 10% of the original project value. If an original contract is worth $1 Million, it’s reasonable for Owners to anticipate an additional $100,000 worth of change orders in project cost on top of that. Owners must have a contingency fund set aside to pay for changes on their project. The average 10% figure is purely an estimate – your project could have higher or lower percentages depending on the scope of work and nature of the project.

Do All Projects Have Change Orders?

There are construction projects that do not require change orders, but they’re usually the exception.

Simple residential projects, for example, usually don’t require any change orders – the scope of work and terms agreed upon are simple for most repairs and small projects. The work is done for the agreed-upon price in a timely manner because there aren’t surprises or an ill-defined scope of work.

Projects done on a Time & Material basis (T&M) are performed in a “bill-as-you-go” manner. For Contractors, T&M projects have minimal risk of change orders – you’re billing the Client for the work being done as you do it, not billing them against a firm price in a Lump-Sum contract scenario. Owners have more to worry about in the change order department – if the Contractor isn’t done but they’ve exceeded their original budget, they’ll need more money!

What Are The Reasons For Change Orders In Construction?

Change orders can arise on construction projects for many different reasons. Here are a few common scenarios on a construction project that result in a change order being issued to a Contractor by the Client:

• The Client has asked the Contractor to do additional work.
• The Contractor comes across “unforeseen conditions” on the job that require additional time and costs to address.
• A portion of the scope of work is vague and not entirely clear. The Contractor in turn claims additional cost to cover what they feel is not part of their contract.
• The Owner has agreed to pay the Contractor more money for them to work overtime, so the project gets done faster.
• The Contractor requests additional time and costs when delayed outside of their control.

Projects come in all shapes and sizes – so do change orders. There are countless reasons for change orders to arise on construction projects!

Change Order Best Practices: Tips For Owners & Contractors

Contractors and Owners alike can quickly run into many problems when change orders aren’t handled properly. We’ve already outlined the legal and financial importance of change orders in construction, so lets get into some change order best practices !

• Don’t Do ANY Additional Work Without A Signed Change Order! If You Have, Stop Immediately. The Rest Of These Practices Will Be Chronological But This Point Is Extremely Important.
• Account For Some Change In The Original Contract.
• Minimize Risk Of Change By Clearly Defining Variables & Objectives.
• Define What Is NOT In The Contract, Too (Exclusions).
• Outline The Contractor’s Hourly Rates, Overhead & Profit In The Contract.
• Meet With The Client & Review The Work That Must Be Done First.
• Quantify The Additional Work Via Takeoffs, Calculations & Breakdowns.
• Tie The Change Order To The Schedule When Possible.
• Include A Detailed Scope Of Work In The Change Order Documents.
• Backup Documents Are Essential – Payroll, Receipts, Etc.

Notice how many of the above steps take place BEFORE a contract is signed! Preventative action is the best. Let’s discuss each of these steps in a little more detail…

1. Don’t Do ANY Additional Work Without A Signed Change Order!

There’s nothing worse than a Contractor performing (extra) work, finishing it, then dropping a surprise bill in the Owner’s mailbox. This creates confusion, disagreement, stress and even hostility between the Contractor and Owner. Many lawsuits arise from scenarios like this.

The Owner is now strapped with additional costs that they didn’t expect for reasons they don’t fully understand. The Contractor has performed work, spent time/money and is now worried about not being paid.

Even worse, the base contract work will suffer while the Owner and Contractor squabble over the change order work!

It’s a lose-lose either way . This is the fundamental reason why Contractors should NEVER do what they feel is additional work without a signed change order in hand.

2. Account For Some Change In The Original Contract

In construction, change orders are extremely common. It’s important for Owners and Construction Managers to anticipate change orders when budgeting their project.

As we said earlier, it’s not uncommon to exceed the original contract value by 10% when factoring in change orders. While the specific project ultimately dictates what this percentage should be, Owners must ensure that they have the money on-hand to pay for cost increases.

Generally, the more complex, vaguely-defined and high-risk a project is, the more Owners should expect to pay in change orders from the get-go. Having said that…

3. Minimize Risk Of Change By Clearly Defining Variables & Objectives

The more a project’s scope of work is defined up front, the less likely the project will require change orders.

When an Owner is developing a scope of work, it’s absolutely critical to be as specific as possible about what the project’s objectives and deliverables are – taking into account every step that the project will require and identifying the risks associated with doing the job.

What if the project still has unknowns after defining the scope?

In construction, there are many ways to define unknowns in the early stages of a project. Here are a few ways that Owners can implement up-front strategies to save time and costs on their project:

• Hire design professionals (Architects, Engineers) to bring the Owner’s vision to life, while considering aesthetics, structural requirements, building codes, etc.
• Perform a mockup or test run of a finished product before doing all the work.
• Hire expert consultants related to the type of work being done. They can help steer the project in the right direction and make Owners aware of potential risks, etc.
• When renovating a building or structure, open ‘test probes’ in floors, walls, etc. to check out conditions that aren’t visible.

4. Define What Is NOT In The Contract, Too (Exclusions)

One of the easiest change order best practices to implement is to include an “exclusions” list in the final contract.

Simply put, an exclusions list is a summary of everything that the contract does NOT include. This is an easy way to clarify whether or not a particular item is included in the contract value.

Exclusions should be provided to the Client at the time of bid, as opposed to being a last-minute addition to the contract before signing it.

Some items that are often excluded from construction contracts include:

• Hazardous Material Removal
• Change Or Interruption To Existing Utility Services
• Engineering & Design Costs
• Site Survey
• Dept. Of Buildings Filings
• Testing & Inspections

Obviously, every project, client and scope of work will have its’ own unique set of exclusions to consider.

If you’re not sure if a particular item should be excluded or not, make note of it as a discussion point with your client during the bidding phase.

5. Outline The Contractor’s Hourly Rates, Overhead & Profit In The Contract

The construction contract between an Owner and Contractor should include an hourly/daily/weekly rate schedule for field workers, management, overhead and profit. Overhead and profit are often a fixed percentage i.e. 15% added onto labor and material costs. This should be discussed and agreed upon up front, prior to the contract being signed.

When these rates are established, it does two things:

• Owners know what to expect when change orders do come up. They know what an hourly field worker or a manager will cost on a unit-price basis and will be able to understand the price they’re given.
• Schedules and durations take on a whole new dimension when one can estimate the costs (workers, managers, overhead) as well as the profit that will be incurred in the schedule.

Defining these variables is a crucial change order best practice.

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6. Meet With The Client & Review The Work That Must Be Done First

Whether the Client has asked their contractor to perform additional work, the Contractor has discovered unforeseen conditions or any other reason for a change order, it’s best practice to review the work with the Client before doing anything more.

Not only does this prevent the Contractor from charging the Client after the work was done, but it allows the Client the chance to see the work, understand what they’ve got on their hands and strategize their next steps.

Ultimately, additional work that’s outside your contract is not yours to perform or make decisions about!

For example, a Client may elect to hire a different contractor to do the additional work. Perhaps a speciality contractor will be needed. If the contractor already on the job does the work, they might not complete it as thoroughly, cheaply or efficiently.

If you don’t have access to any sort of field conditions to see the additional work, at least refer to drawings and written specifications for the Owner to review. Speaking of which…

7. Quantify The Additional Work Via Takeoffs, Calculations & Breakdowns

If you hear that a particular car costs $40,000, your first reaction might be that it costs too much money. This is based on seeing the car at a glance and then hearing the price. When that car is presented in detail, with its’ features, performance and reliability on full display, you might feel surprised that the same car costs “ONLY” $40,000.

This is because in the latter scenario, you know exactly what you’re getting in that $40,000. The same can be said for change orders.

This is why all construction change orders should include a breakdown of costs i.e. labor, equipment, materials, etc., drawings outlining the work, quantities of additional work that’ll be performed and any other document that helps the Client understand the work.

The more a change order is quantified to the Client, the more likely that they’ll be agreeable to it, with fewer questions and more trust.

8. Tie The Change Order To The Schedule When Possible

This section mostly refers to managerial and overhead expenses – tie the change order to the schedule!

When including overhead expenses in a change order, the Client will want to understand how the Contractor has priced these expenses. As we said earlier, managerial and overhead are often billed as a percentage on top of the cost to do the work, but can also be agreed upon via hourly/daily/etc. rates.

Here a simplified example: a contractor is doing a large landscaping project for a property owner. The contract states that their project management expenses are $5,000 per week and their overhead expenses are another 15% on top of that.

The Owner has asked them to do some work in the building’s courtyard. After reviewing the drawings and scope, the Contractor has estimated that the courtyard will be done twelve weeks after the original forecasted completion date.

The Contractor then includes a revised schedule upon submitting the change order proposal. In addition to this, they’ve claimed twelve additional weeks’ worth of time in the C.O., plus $60,000 in management costs [$5,000 x 12 Weeks] and $9,000 in overhead expenses [$60k x 0.15].

For the Contractor to have a leg to stand on, they must be actually hitting milestones and completion dates along the way already! Without this, the Client won’t trust what the schedule says and doesn’t legally need to trust it if there’s a history of delay on the project.

9. Include A Detailed Scope Of Work In The Change Order Documents

This one’s a combination of many points above. A change order submitted by the Contractor should include the following:

• A summary of the scope of work, as understood by the Contractor.
• Marked up drawings, specifications and other project documents.
• An updated schedule showing the impact that the additional work will have.
• Based on this schedule, a time extension request.
• A breakdown of all costs by task and type.
• Specific exclusions related to performing the work.

By including all of this information, the Contractor has covered themselves and is protected from many potential problems later. In turn, the Owner can understand the additional work on a much more comprehensive level.

10. Backup Documents Are Essential – Payroll, Receipts, Photos, Etc.

Last but not least… document, document, document!! This is, of course, after a change order is officially executed.

During the performance of work, contractors MUST take plenty progress showing not only the work in progress, but the conditions before it began, the conditions surrounding/adjacent to the work, and the labor, equipment, materials, tools, etc, in action at various stages of the additional work.

All labor costs should be backed up by payroll reports and other costs associated with it like taxes, benefits, insurance, etc. Material and equipment invoices provide backup for the Contractor to support the work taking place.

If the Client has questions later, needs to review specific costs or even just wants these documents before releasing payment, there will be much less room for speculation, misunderstandings and disagreements when all of this information is clearly documented.

Change orders can be scary. They change how a project will move forward, they cost the Owner more money and they increase a Contractor’s time, costs and resources. It’s essential to get change orders right for maximum performance and profitability. Using the change order best practices we’ve discussed in this article, you’ll stay protected from change-orders-gone-bad and will be prepared the next time a change order arises – whether you’re an owner or contractor! I hope you’ve found this article helpful and thanks a lot for reading.

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Mark, I am pretty sure that I have seen that image more than 1-2 years ago from some other site, so that does not jive with your "Original Photographers" time frame. Check with Michael Stone. That just may be where I saw it several years ago, but I am not 100% certain. I have seen it so many times that the original time frame is blurry to my memory now too. Oh, I know.....Thats My Boat...Yeah, thats it!!! :no: Ed  

Thanks. The photographer is confident it is him, and the details are so great as to be accurate (but others may have taken similar pictures, presumably, i notice at least one other image on google images). Although I haven't been able to speak with the contractor directly, I have verified his identity through local construction associations in Memphis.  

The joke is as old as dirt. I'd bet you'd find it in hieroglyphs on the pyramids. :laughing:  

I believe the picture was taken on the Mystic River Mystic Ct.  

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'Change Order' is one of the newest Hatteras GT59s available. She is broken in and ready for the next owner. This 3 stateroom, 2 head layout with the master aft and tackle room provides the comfort and fishability for long extended fishing excursions. The main deck layout has the preferred peninsula galley with subzero drawer fridges, range and a dinette to stbd.  Also to stbd is a popup TV in the Satin teak cabinet and bottle storage with icemaker. The salon sofa has storage and a coffee table with storage that can raise to dining level. 

Equipped with Cat C32s, she cruises at 30 knots and has a top end of 37 knots. These engines are still under Platinum Plus warranty until 2025 and can be extended further. 

All new Garmin electronics package in 2022. 

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Interior Cabinetry In Satin Finished Teak 

Leather Sofa With Storage And Pull Out Berth 

Teak Coffee Table In High Gloss Teak With Flip Up Desk Style Top, Storage 

Leather Dinette With Storage Under And High Gloss Teak Table

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Miele 4 Burner Electric Cooktop - Model km56212

Sharp Microwave - Model R-1881lsy

U-Line Icemaker Opposite Galley - Model uln-B195cb-03a

Emerson Garbage Disposal In Stainless Steel Sink

Corian Blue Countertops 

Storage Cabinets & Full Height Pantry

Amtico Flooring

• Bottle Storage In Bar Opposite Galley
• Large Doghouse Storage Forward Of Galley

MASTER STATEROOM AFT

Queen Berth with Storage

Cedar Lined Hanging Closet

Nightstands with Drawers

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TV & Soundbar Built in to Wall

Head with Separate Shower 

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Mirorred Medine Cabinet

Tackle Room To Stbd

Lockable Storage For Rods/ Reels

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Bunk Stateroom To Stbd

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Nightstands With Storage For Both Berths

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Cedar Lined Hanging Lockers

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Head With Separate Shower

Solid Surface Countertops & Floors In Head

Mirrored Medicine Cabinet

Companion Laundry

• Haier Full Size Vented Dryer (New in 2022)
• Haier Full Size Vented Washer (New in 2022)

Deck Equipment

• Wing board Rod Holders 3-Port, 3- Starboard
• Circulating Livewell with LED lighting in Transom Fish Box
• Lift Up Coaming Gate
• Companion Helm Chair Port Side
• High Gloss Teak Helm Pod
• 8 Cubic Foot Top Loaded Freezer on Flybridge
• Electric Bow Thruster
• Raw Water Wash Down Outlet
• Bow Stainless Anchor Shoot and Windlass
• Pipewelders Hardtop with Outriggers
• Eskimo Ice chipper Feeds into Stbd Deck Fishbox
• Swim Platform
• Electric Grill in Cockpit
• Fresh Water Washdown Bow Locker
• Gunnel Racks for Storage
• Teak Covering Boards in Cockpit
• Lumitec Sea Blaze Underwater Lights

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• By Caroline Shelly, LEED-AP-BD + C, CID
• Feb 21, 2018

Change Order Protocol

I recall being at the shore watching boats pull into dock. It is always remarkable to see what boat owners name their boats. A boat named “Change Order”, struck me as a little arrogant; if a change order is a blatant money maker to a contractor, it is likely a headache for the owner on a project. To a certain extent, it should be a vessel in which all professionals assigned to the project should learn from, and work together on.

What is a Change Order?A change order is a just a technical term for modification to a construction contract. When you hear change order, think contract change. Why? Because a change order is a two-sided agreement between the parties involved on the contract.There are various reasons for the creation of a change order. For example, a design modification which may come in relation to potential improvements to a design; or perhaps business changes which result in adjustments to the initial vision. Errors and omissions within the preliminary drawing set, and specifications may also cause change orders when the design firm misses a key detail. Unanticipated site conditions such as uncovering asbestos tile can result in added costs by the contractor. Facility Managers may also add to the scope or work and/or reduce the scope of work depending on business needs. Adjustment to the schedule may cause either an acceleration or deceleration to the work to accommodate unforeseen needs. The sequencing of work may also impact a job resulting in a change order such as requiring a portion of the building to be completed before the entire job. Unit pricing may also cause adjustments to pricing due to unforeseen circumstances such as gas shortages or natural disasters. Regardless, the reason to initiate a change order, it is important to document the amendment to the project in detail so it is processed in a fair, equitable, and timely fashion. A change order contractually alters an original agreement. It is key that all change orders must be approved by the Facility Manager. The change order should then be signed by the parties involved, whether it is the designer/architect or contractor. There should be sufficient detail describing the change; what is being changed, why extra work is being done, the cost impact to the project and the revised total on the project. Once approved, the change order is part of the official plan, and specifications on the project.Disagreements are not unusual because change orders affect each party involved in different ways, whether it is the contractor, design firm or Facility Manager. When developing a change order, it is imperative to keep the wording straightforward when describing the reason for the change(s). Detail should go into the impact the change has to the overall job, budget, and schedule.Overall, it should be the goal of both the facility manager and construction manager to reduce the number of change orders affecting the dollar amount as a percentage of the overall construction costs. Mark up on the change order should be in harmony with the contract previously agreed upon for overhead and profit. Backup paperwork should be included with the submittals along with the impact to the schedule. Ideally, a change order summary sheet should track all change orders from the start of the project through completion. This allows for easy review of the overall job at the end to help alleviate any potential headaches to resolve final invoicing by the contractor.

Caroline Shelly, LEED-AP+BD-C is founder & principal of HF Planners.

#CarolineShellyCIDLEEDAPBDCHFPlanners #carolinecommunications #HFPLANNERSLLC

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CHANGE ORDER Yacht for Sale

Change Order Yacht for Sale - 59' Hatteras

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Content Sections

Interior Cabinetry In Satin Finished Teak

Leather Sofa With Storage And Pull Out Berth

Teak Coffee Table In High Gloss Teak With Flip Up Desk Style Top, Storage

Leather Dinette With Storage Under And High Gloss Teak Table

Carpet Flooring With Amtico Floor At Entry Door

Samsung 40" Tv With Electric Lift In Teak Counter Fwd Of Dinette

Denon Salon Av/Receiver - Model avrx3600hbke3

Samsung Blue-Ray Player

Definitive Technology Subwoofer - Model Supercube 2000

Two Jenn-Air Drawer Fridges (2 Drawers Each) - Model judfp242hxo1

Miele 4 Burner Electric Cooktop - Model km56212

Sharp Microwave - Model R-1881lsy

U-Line Icemaker Opposite Galley - Model uln-B195cb-03a

Emerson Garbage Disposal In Stainless Steel Sink

Corian Blue Countertops

Storage Cabinets & Full Height Pantry

Amtico Flooring

• Bottle Storage In Bar Opposite Galley
• Large Doghouse Storage Forward Of Galley

Accommodations

MASTER STATEROOM AFT

Queen Berth with Storage

Cedar Lined Hanging Closet

Nightstands with Drawers

Cabinet Storage

TV & Soundbar Built in to Wall

Head with Separate Shower

Solid Surface Countertops

Mirorred Medine Cabinet

Tackle Room To Stbd

Lockable Storage For Rods/ Reels

Storage Cabinets

Bunk Stateroom To Stbd

Over Under Bunks

Nightstands With Storage For Both Berths

Cedar Lined Hanging Locker

Vi Stateroom

Queen Berth

Flip Up Bed With Storage Underneath

Cedar Lined Hanging Lockers

Storage Overhead In Bulkheads

Head With Separate Shower

Solid Surface Countertops & Floors In Head

Mirrored Medicine Cabinet

Companion Laundry

• Haier Full Size Vented Dryer (New in 2022)
• Haier Full Size Vented Washer (New in 2022)

Deck Equipment

• Wing board Rod Holders 3-Port, 3- Starboard
• Circulating Livewell with LED lighting in Transom Fish Box
• Lift Up Coaming Gate
• Companion Helm Chair Port Side
• High Gloss Teak Helm Pod
• 8 Cubic Foot Top Loaded Freezer on Flybridge
• Electric Bow Thruster
• Raw Water Wash Down Outlet
• Bow Stainless Anchor Shoot and Windlass
• Pipewelders Hardtop with Outriggers
• Eskimo Ice chipper Feeds into Stbd Deck Fishbox
• Swim Platform
• Electric Grill in Cockpit
• Fresh Water Washdown Bow Locker
• Gunnel Racks for Storage
• Teak Covering Boards in Cockpit
• Lumitec Sea Blaze Underwater Lights

• Capabilities

Change Order Do’s and Dont’s

From the  Mo-Kan Construction Law Blog  by  Lee Brumitt

Three things are certain in life: death, taxes, and change orders. There are very few projects that don’t have some measure of change or different site conditions which should result in adjusted compensation to a contractor and a change in scheduled date of completion. The change order process doesn’t begin when a potential change is encountered. In fact, the process starts before a bid is submitted and long before a contract is delivered for signature. When a contract if finally signed, it should precisely define the scope of work being undertaken in such a way that parties can determine whether work encountered after commencement is within or outside of that scope. The following Do’s and Don’ts take this reality into account and provides tips to follow to both avoid change orders and assert the right to a change order:

Bidding, Contracting, and Planning for Change Orders

• Do  review and have a complete understanding of the work description, drawings, specifications, time limitations, and anticipated contract terms and look and account for errors in design when preparing a bid.
• Do  bring design errors to the architect or engineer’s attention and prior to submitting a bid.
• Do  provide a detailed description of the scope of work  included  in your bid and provide a complete list of work, materials, equipment, and services that are  excluded  in your bid and, ultimately, your contract.
• Do  make bid prices contingent upon  written  assumptions about the time and conditions allowed for performance of your work and build in protections for seeking adjustments in contract price, time of completion, or right of termination in the event of delays or other conditions out of your control.
• Do  identify the labor billing rates and mark-up on materials which you will use to price extra work encountered on a project.
• Do  make certain that the scope of work defined in your contract is accurate and does not exceed the scope of work defined in your bid.
• Don’t  sign a subcontract which does not accurately describe your scope of work and any exclusions to that scope of work and which does not match the scope of work defined in your bid.

How to Handle the Change Order Process When A Change is Encountered and Identified

• you come upon a site condition which is inconsistent with the plans and specifications and/or you are directed to do work which is outside of the scope of your work;
• you need more time to complete your work…for any reason;
• you have incurred costs due to the delays or performance of other subs, the GC, the design professional, or the owner.
• Do  present a  timely  written claim for adjustment to the subcontract amount or time of completion  before  commencing any extra work, if the contract requires a claim to be made within a certain time frame.
• Do  require a written change order to be signed by the other party  before   commencing extra work.
• is in writing
• acknowledges that the work is extra work requiring additional compensation and/or additional time, and
• is provided by an individual authorized by the party to authorize extra work.
• Don’t  worry about “rocking the boat” by refusing to perform any extra work before receiving a change order signed by the GC or receiving a Construction Change Directive or an Order to proceed.
• you prepare and send a written Change Order Memorandum describing the extra work you have been asked to perform
• confirming the party’s refusal to sign a change order or Change Order Directive;
• stating that the extra work is being performed under protest and with full reservation of right to seek an increase in the contract price and additional time to complete that contract, upon completion of the extra work when all information regarding the consequences of the extra work in known.
• Do  take photographs, prepare a report of the extra work in daily logs and other reports, and maintain detailed daily records of all labor, burden, material, equipment, and other costs incurred in performing extra work and, if possible, obtain the signature of the party with whom you have contracted and/or the owner’s representative on a daily basis.
• Don’t  perform extra work based on  verbal  assurance that you’ll get paid.
• Don’t  just wait for the GC to announce updates and changes to the project schedule without your input and active participation.

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The Wonderful Change Order Form

by Hal | Jan 23, 2013 | Business of Video , Uncategorized | 0 comments

If you look closely at the names of those two boats, you’ll get the concept that has put many kids through college. The big boat is named Change Order . The small dinghy is named Original Contract . It’s a concept I first observed in the construction business. The client wants to change some part of the project from what was specified in the original contract agreement. It may be something like adding a window or moving a door or something even more trivial. These changes generally take more work and that costs money. To make the change, the client must agree to a new contract or change order with new prices and terms.

The concept works in video too as well as in many other fields. But you have to make it part of the deal from the start. It must be prominently placed in the contract. Point it out to your prospective client. Explain it. Invite discussion. Make it an integral part of every contract you offer. It will make your business more profitable and remove those uncomfortable feelings that can come from the grey areas inherent in every artistic business. Clearly spell it out in writing.

I learned this the hard way, but when I figured it out, it changed my business in a good way. I wrote a report about this just for video producers . The strategy is fully explained. The report includes several video production contracts you can use that include Change Order Forms. You’ll see exactly how to use them in your video productions.

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Change Orders Really Float My Boat

• John P. Ahlers
• March 31, 2011
• Change Orders , Out of the Ordinary , Rants and Raves

At the risk of feeding the anxious concerns of owner representatives who may have long suspected that contractors make up for their bidding errors with high priced change orders, we attached this humorous internet photo. The boat owner is likely a contractor who apparently had no qualms about having made up for a bad contract with change orders. Notice the small tender “Original Contract” versus the mother vessel “Change Order” about to be boarded by an attractive woman. This photograph belies conditions in today’s construction market!

No Boat Named "Change Order"

Posted on November 09, 2017 in Blog by Georgia Rei Georgia Rei

We don't make money on you changing your mind.

Advanced Systems Homes does not have a boat named, “Change Order”.

True Story. On a prominent recreational lake in the Midwest there is a big boat named “Change Order”. The building contractor who owns the boat laughingly explains to his friends that the boat is named for where he gets his best profit margin (since the money in effect paid for the boat)…. The change order.

That’s not how ASH operates. Our design team strives to plan for your preferences and customize them into a new country home or commercial building that fits your family or business. We have configurable floor plans or can work from plans you bring in yourself. Once you choose a plan that fits your style, we diligently work with your choices and preferences to fit your budget and estimate the total price of your home.

We’ve been building country homes for over forty years. Our experience allows us to help determine what line items changes do to the “end number” and can identify ways to gain efficiency and allow your style to come in at or under budget. After decades of design and building we can guide you to the choices of floor design, flooring, fittings, cabinets etc, that will help you be happy with your final construction and avoid those pesky change orders. Our designers will develop specifications for the project that define, with great detail, what scope of work will be performed, in what manner, and with what acceptable materials. We will perform an onsite evaluation walkthrough, and generate estimated costs to perform the construction according to the specification’s guidelines.

We are not saying we don’t DO change orders. We do. And unfortunately we have to charge for the change to cover the retrofitting. However, we regularly communicate with our customers in order to minimize or avoid all together the changes. And we don’t make huge amounts of profit on your changes and we don’t have huge yachts named after exorbitant rates charged for change. Contact our design team to get started on your new country home today. 

THE DREADED CHANGE ORDER...and the decision owners can make to minimize them

Construction contract change orders are dirty words, both to the design professionals as well as owners. For those not familiar, a change order refers to the adjustment to the compensation or schedule of the original contract for construction.

Change orders can be caused for more reasons than we are able to list in this post. Many times, they are issued for unforeseen construction conditions, often when working on existing buildings. If the contractor couldn't have reasonably been expected to know the condition existed, and thus was not able to accommodate addressing the condition, then a change order for additional compensation or construction duration is justified.

Change orders can also be issued due to weather conditions that excessively delay the project. Even omissions by the architect, or adjustments by the owner after contract execution can result in change orders. This very simple one page change order document lists the adjustments to the contract, is negotiated by all parties, and is finally endorsed by the owner, contractor, and architect; it is the main source of project crippling failed negotiations.

During a competitive bid environment, which is often how contracts are originally let for construction, a checks and balances system exists (so long as collusion isn't taking place between bidders). When a contractor bids a certain value for a specified scope of work, that value can be verified against other contractors’ bids. The problem with change orders is the removal of this mechanism to validate schedule and value against other bidders. The change order process relies on other methods of reviewing proposed costs and schedule adjustments as proposed by the contractor, which oftentimes results in discrepancy or disagreement about the impact to the original contract.

As design professionals, our job is to minimize opportunities by contractors to submit change order proposals, or work to alleviate potential claims through the design and documentation phases of the project's development. Architects have a fiduciary duty to protect the owner from escalating project costs and construction schedule extensions that are not validated or are seen as excessive. Unfortunately, some contractors actually hire staff whose responsibility is to find opportunities for change order claims during the bidding process. This allows the contractor to under-bid other bidders who may have otherwise accommodated the cost, and then seek adjustments to the contract after its been awarded.

The economic climate has a lot to do with this tactic. In hard economic times, the competitive nature of the bidding process demands that bidders be as competitive as possible. This system of bidding, coupled with a poor economic climate, results in projects with costs that spiral out of control and construction schedules that miss client expectations. Additionally, the drawings and specifications for construction have grown, and Grown, and GROWN in detail to attempt to alleviate the possibilities of change order requests post award. Projects that would have had 25 drawings in a set 50 years ago now have 100 or more sheets of detailed drawings to ensure that every aspect of work is covered; not necessarily because a contractor didn't know that the scope of work exists, but rather to remove his ability to claim he didn't know to accommodate the cost associated with the work in his bid validating his change order request.

So... what can we do as an industry about this issue? We believe that HOW we bid projects, as demanded by clients is the first opportunity of minimizing potential for escalating project costs after award. Yup, you heard that right, it’s the client fault if they determined that the lowest bidder is the best suited for the project.

We understand that often times, especially on public projects funded by tax dollars, taxpayers expect that the contract be awarded to the lowest bidder. What would be worse than a no-bid-contract? A contract awarded to the HIGHER bidder. However, what is often not seen by taxpayers is the costs of the fully delivered project in comparison to the bid amount. In many cases, the full construction cost including all change orders exceeds the bid of the next lowest bidder. Meaning, the taxpayers are not getting the most cost efficient delivery of the fully inclusive project.

As an industry, we need to encourage and reward those contractors that view the bidding process most accurately, and bid the complete delivery of a building. Sure, design professionals have an obligation to make sure that as much detailed is provided to the bidders, but we think it should go further. Instead of awarding contracts to the bidder who provides the lowest bid, we should be advising our clients to award the contract to the bidder who came closest to the average of all bids. That is, award to that contractor who provided the most accurate bid using the other bidders to validate the true value of construction.

For example, lets assume that we have a bid to 4 contractors bidding for the construction of a doghouse. Bids for the designed, specified, and detailed doghouse come back at $300, $350, $425, and $450 from 4 bidders. In the current bidding environment, the design professional would often recommend that the owner award the project to the bidder who bid $300. We seldom ask why the bidder at $300 was $150 less than the high bidder. Did the bidder who bid $450 see something in the drawings or specified that he considered would require additional cost? Did he simply not want the job, so he intentionally bid high? Or, was it because the bidder at $300 saw opportunities to submit change orders and potentially increase the value of the completed structure to $400? For any of these reasons, the process of installing the work is going to be a continual battle between the owner, the designer, and the contractor. Instead, we believe that we should average all of the bids that results in total construction costs of $381.25. In this case, we would award the contract of the doghouse to the second lowest bidder who was closest to that averaged value without exceeding it.

There is certainly something to be said about minimizing change orders, and different methods and responsibilities to achieve a fully inclusive bid and project delivery. However, we believe that removing the incentive to rely on change orders is the best solution to the problem. At the end of the day, and even with best efforts, change orders will be part of the design/bid/build method of construction delivery. All we can all do is work to minimize them through logical processes.

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BLOG   | Design & Remodeling | Beware the Culture of Change Orders

Beware the Culture of Change Orders

Design & Remodeling , Remodeling , Repairs & Advice

By Mark McClanahan, President of Mosby Building Arts

The remodeling industry is tough on consumers.  The Better Business Bureau typically receives more complaints annually about remodeling companies than any other industry.  Considering this – along with what a person hears firsthand from friends and family –  it’s no wonder why homeowners are gun-shy when it comes to hiring a remodeling firm.

Unfortunately, there are some remodeling companies who contribute to the sentiment consumers have about the industry.  Some companies look for ways to make more money once they’re in your house.  I’ve heard this referred to in the remodeling industry as “having a culture of changes orders.”  In layman’s terms, it means a company trains their field associates to sell additional work beyond the original contract and scope of work.

Another way this is accomplished is by initially providing incomplete project bids.  To compete with other companies and land the job, some contractors will purposely provide a lower bid and are fully aware of an upcoming moment when the client’s house is torn up mid-job and something else will need to happen to complete the job. At this point, the client is hooked, and it’s an opportunity to charge more than the original contract price.

This “culture of change orders” has created a legitimate reason for consumers to expect needing 30% – 40% more money beyond what they signed for on a fixed-priced contract. Paying more than initially quoted is not a remodeling industry standard; this is a tactic used by only a small portion of contractors.

So, how can you protect yourself from this change order ploy?  There are 4 key signs to look for:

•  If the remodeling company never visits your house yet has a contract with a dollar amount for you to sign, you should walk away. It is impossible for the contractor to estimate an accurate cost for the work without seeing the conditions of your house first hand.
•  If the remodeling company doesn’t pull permits, you should walk away. There are plenty of instances of an inspector learning of non-permit work underway in your home, and they will halt the job until permits are obtained. This results in a significant delay to the job as well as an increase in the cost of the project.
•  If the remodeling contractor quickly writes out a bid on a piece of paper and hands it over in lieu of a proper contract, you should walk away. This typically does not hold up as a binding contract and is a sure sign of trouble to come.
•  If the remodeling company submits a bid that is significantly less than a competitor, you should walk away. This is a sure sign they’ve left out something important to successfully complete the project. In fact, many companies that appear to have an expensive bid have simply included all expenses in their honest, up-front bid, and do not rely on cost overruns.

Another thing about low bids; Mosby’s St. Louis designer Jake Spurgeon put it best in this article when he wrote: “That low price tag too often means that required work was missing from the initial work scope. Items like an electrical panel upgrade, plumbing stack replacement or code compliant upgrades will come up once the project is underway. These become change orders, and it adds to the final bill.”

Should homeowners expect change orders?

Yes, change orders are a common occurrence, but they should happen for only two reasons:

•  The homeowner wants additional work done because they are happy with how things are going.
•  Something is uncovered during construction that was not in the contract because the house conditions hid something from view. These are usually referred to as “unforeseen conditions” on your initial contact.

Change orders should not be considered a normal (and unknown) part of your home remodeling project cost. A professional remodeling company considers all details of a job to come up with a fair price for expert work backed with a warranty and assurance of future support to you.  What may seem like a higher price tag upfront is really an honest estimate of what it will realistically cost when done without excessive change orders.

Choose a remodeling contractor that gives you an upfront honest price for honest work so that the cost of the project will be worth every penny. I’d like to recommend Mosby Building Arts as just such a company for your St. Louis home remodeling needs. Here are a few reasons why you should choose us . And for any questions, please call us at 314.909.1800 or contact us here .

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353' Benetti 2022 Luminosity

Tivat, montenegro, €135,000,000, 345' oceanco 2024 h3, monaco, monaco, €295,000,000, 315' davinci 2021 il dolce far niente, heeg, netherlands, 282' devonport 1998 chakra, portisco, italy, 262' benetti 2024 simon fraser, genova, italy, 262' isa 2025, ancona, it-an, italy, 262' oceanco 2019 y701, sanremo, it-im, italy, €79,750,000, 262' admiral 2024 galileo 80, carrara, italy, 257' abeking & rasmussen 2011 amaryllis, antibes, france, €89,000,000, 255' custom 1962 hansa, karlskrona, sweden, 253' admiral 2028, viareggio, italy, 251' custom 2015 yersin, marseille, 13, france, €59,000,000, 249' custom 1972 lady sarya, 243' lurssen 2007 global, la ciotat, france, €79,000,000, 243' lurssen 2017 aurora, dubai, united arab emirates, €130,000,000, 240' delta marine 2006 laurel, naples, it-na, italy, $69,500,000, 235' custom 1983 nansen explorer, kristiansund, norway, €15,900,000, 230' admiral 2024 galileo 70, 226' custom 2024, fort lauderdale, fl, us, €70,000,000, 224' armon 2021 wayfinder, portico, it-ce, italy, €55,000,000, 223' custom 2025, €95,000,000, 221' icon 2010 loon, monaco, france, $47,500,000, 220' heesen 2023 yn20067, oss, netherlands, €99,000,000, 213' admiral 2024 admiral 65m u force, 213' marina boats 2024 porto mirabello, la spezia, italy, 210' custom 2011 running on waves, athens, greece, €17,500,000, 209' royal denship 2006 cupani, genoa, italy, $29,950,000, 209' vsy 2020 atomic, san diego, ca, us, $58,000,000, 207' delta 2027 project metaverse, seattle, wa, us, $95,000,000, compare yachts.

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