Change Orders (COs) are contractual changes –it is a document used to record a modification to the original contract. Work that is added/deleted from the original scope of work of a contract, which can alter the price of the contract and the completion date. They are additional services that will be provided to the customer for extra compensation and time. Here are a few points to keep in mind about Change Orders.
Basic Change Order Rules
- Change Orders are not Extras
What does the contract say? Somebody else has the incomplete or problem. You did not design the plan, create the problem, upgrade the project, nor create the site conditions. Make sure that COs are not Extras you provide.
- Never give it away
The problem always looks small in the beginning and it may seem simpler to just do the work for them for free. But why is it so hard to get it in writing? People don’t like the paperwork and don’t want to delay the project any longer. But, a $10 change order is a $10 change order. In the beginning, it is important to charge and set the standard since it may grow into a gazillion dollar problem. If you start this task for free, you will be finishing it for free.
- Charge the right price
Maintain a fair, reasonable, and defendable CO position upfront. That means asking for reasonable time and costs to do the work. If you overprice, it will be much more difficult to get the next CO through. The price you charge should include material costs, admin costs, plus 10% or a reasonable % profit to make sure the CO is worth it for you.
- Follow the contract and document
Before starting work, review the terms of the contract. Sit down with the customer and set a process in place. Set a “no work without a written change order” –unless there is an unforeseen condition that needs to be fixed immediately. If the contract says that every CO needs to be in writing, then you can push timely approvals during the contract later on.
- Always get approval in writing and ask for extra time
Every change costs time to schedule and you do not want to get penalized for it. Make sure to have a standard field memo system to request COs, a standard cost breakdown (admin + tools + equipment + costs), and a standard delay clause.
- Start early
The Change Order process must start early; train your customers to start early. For every CO, make sure to do the paperwork as soon as you get the notification to.
- If it’s not in writing, it didn’t happen!
Make sure to have everything in writing to ensure a paper trail. Following these tips will ensure your Change Orders be executed efficiently.