Depending on who you talk to, the term “Change Order” can solicit a broad range of reactions. The most common reactions might include heavy sighs, eye rolls, or pursed lips, while some uncommon ones could have you ducking for cover as every object within reach comes flying at your head. For many, Change Orders have done more than enough damage to a bottom line to warrant the type of disgust merely whispering the word can invoke. For others, however, Change Orders are the golden goose; these select few have mastered the art of the Change Order, and these are the ones you should be paying attention to. Here are three things to keep in mind to turn your Change Order game around:
1. Don’t feed them after midnight.
Kidding, of course. The first thing to recognize is that Change Orders are, to a degree, unavoidable. Unless you’re building spec homes without a client, Change Orders are going to happen – you should be prepared for when they do. Outline the expectations for dealing with Change Orders in your project’s contract so that you avoid haggling over extra time and money. Estimate the Change Orders quickly and accurately, communicate the Change Order details to your client, and make it easy for them to grant approval. This keeps the project on schedule and prevent you from having to eat the cost of the change to keep things moving.
2. Communicate early and often.
Word travels. Fast. Poor handling of Change Orders can torpedo your reputation and send potential clients running to your competition. It’s easy for clients to feel deceived or like they’ve been given the “bait and switch” when change orders come up. This is where transparency plays a pivotal role. When a change order is necessary, let the client know as soon as possible. You can wait to give the exact cost until you’ve had some time to properly feel it out, but let them know it’s coming – higher costs are only an issue if the client feels betrayed by it.
3. Keep track of your Change Orders.
Since you know they’re going to happen and you know the client has to sign off on them, make sure you’ve covered your bases if any disputes arise. By using a software that documents your change orders, generates professional contracts, and makes it easy for the client to sign off on the change, you’ve got everything you need should someone try to challenge the approval of the extra costs.
In the end, handling Change Orders properly can be the difference in a nice Christmas bonus and unemployment. You may be able to rebuild a hotel, house, or highway, but rebuilding your reputation is a storm not many companies can weather. For examples of best practice using the tips above, check out ConstructionOnline’s Change Order Management.
Interested in more insights about estimating? Take a look at:
- Think You've Got Problems? Falcons’ Stadium Costs Soar with $200 Million In Change Orders
- Learn from the Pros: Markup & Margin
- ConstructionOnline Change Order Management Featured in Construtech
- Better Construction Estimates in 15 Minutes or Less
Originally published August 14 2017, Updated August 24 2018