Change order

Developed by Kamma Christensen

Change orders are a common problem within the construction industry. A change order is a change within the original plan for the project which might cause changes in terms of delaying the project and add to the original budget so the project becomes more expensive than first estimated, it is, therefore, desirable to reduce the number of change orders within a project. A change order might occur both in the design and construction phase of a project. A change order can be a change in the placement of pipes and the free height in the building. If there are pipes which are placed at the same place, the free height might not live up to the requirements from the building owner, and therefore there has to be a change in the design. Another change could be that the building owner wants to make changes to the design of the building as it did not live up to his or her expectation. The earlier the change the better as the changes are more easily integrated into the project and therefore it reduces the risk of delays and exceeds projects.

There are several ways one might be able to reduce the number of change orders. For instance, BIM and virtual reality will make the building owner able to see the building before it is built and thereby make sure it looks like what he or she wants it to.

Change orders in the construction industry

Change orders is a common thing in the construction industry and almost every project will at one time or another experience a change in the original project plan. It can be in terms of changes in the design, like the materials used in the building, the placement of walls if the usage of the building changes and in general the overall design of the building. The request for changes like this will can come from the building owner, which through the project has changed his or hers mind about the design or their economic change throughout the project. Another reason the design might need changes is if a new regulation is launched, which the building then need to live up to. This can make changes in the design in terms of new requirements for the fire safety which might change some part of the building.

Change of the project can happen both in the design phase of the project but also when the actual construction has begun as some problems might not the seen before the construction has begun. The changes found in the design will often cost less compared to changes later on in the project, as there will not be a charge in terms of redoing things that has already been made. Change orders that might occur when construction has begun can be placement of different system within the building as there might be a collision between these if this has not been checked before the construction is started. Another problem might be bad soil condition which was not foreseen before, which then might lead to a need for a different and maybe more expensive foundation for the building. This can be discovered in the design phase and maybe even before the contractor has bought the materials for the original foundation, which will reduce the cost of the change.

A change order can also occur if the project has not been estimated correctly from the beginning of the project. This can be due to misunderstanding the scale of the problem and thereby unintentional underbid on the project. If the bid is not properly looked through before accepting this, then it will create a problem further on as it is realized that the scope is not correctly estimated, and there fore the cost will be larger than first told. .

Why is change orders a problem

Change orders is a problem as it might up the cost of a project and therefore the budget might exceed what it is suppose to be. It is normal that the cost of change order will be around 10-15% more than if the change has been included in the original bid on the project.. Changes in the orginal plan might also reduce the overall cost of the project. This can for instance be of there is a change in the materials used in the construction, though changes like this might have to be done before the construction has begun as the contractors have to buy the materials in order to build. And of the original materials have been bought the owner might have to pay for the new ones, as the contractor otherwise is going to lose money on the owners decision.

Another problem with change orders is that it might prolong the project as it takes time to make changes in the design of the building especially if the change first is made when construction has started. The problem is bigger if the construction has been started as there is a schedule for the different construction workers, as there are some parts which has to be done before the next part can start. Then this can result in a work stop from some of the workers if they then end up with conflicting project. A change that might occur after the construction phase is stated is fixing already built things, like a damaged installation, which then need to be changed for a new one, which will cost more as there need a new part and then there is the added cost of man hours to remove the old and install the new.There often are a compensation to the contractors if the project is delayed which then again result in a higher cost of the project than firstly estimated.

Confusion within the project and the plan for this can also be a problem in terms of change orders. This will most likely only become a problem if there are a made a lot of changes without good communication to all involved in the project. When this happens more errors might happen and then this result in more changes to the project. .

How to reduce change orders

There are different ways which can help reduce change orders when doing a construction project. One could be using BIM, which is short for building information modelling, and virtual reality as a integrated part of the project. When using BIM and thereby information sharing both in 3D and digital the amount of misunderstandings and mistakes is reduced. One of the ways this is done is by using different programs in combination with ones 3D drawings, like the program Solibri, which is a model checking program, which can help check is there a collisions between several models. This could be the models show where the pipes, which have different uses, should be or it could be checking that the architect model is consistent with the structural model. It can there by be used as a first check of the construction before the actual construction and there by reduce the mistakes made in real life.

In the 3D model of the construction it is possible to ad all the components of the building and their properties. This help the contractor by giving a count list which the material cost estimation can be based on, and there by give a better actual cost estimation on the project, as all the properties is known at the beginning.

Further more one of the features of the 3D modelling is to give a better view of the building before it is built. This can either be by different rendering styles within the programs, or by using virtual reality. This makes it easier for the owner to visulize how it is going to look in real life, and this can help reduce changes in the design later on in the project..

It terms of the design of the building it can be important to know what gives the building value for the owner. Sometimes this can be a problem to determine because the client himself do not know what is needed in order to give the building value. In this case is can help including users of the building and let them give suggestions of what they need within the building. This can be done in different ways e.g. by using questionnaires or focus groups. Furthermore it is designers can help the owner realize what the given options is for the building, as the building owner might not know this as his or hers experience is not as big as the designers. The designers might be able to use solutions from other projects they have been part of and include them in the given project and there by up the value for the owner. Though this can be hard for the designers if the vision for the design that the owner has, has not been communicated clearly. Miscommunication and held back communication can be a problem which might be solved by the owner working with the same design team on several projects, as this create trust and knowledge about each other and ones goals. .

How to manage change orders

As mentioned change orders is part of almost every project and in order to manage these different reservations should be made, so there in the contract will be a clear definition on what to do when change orders will occur. When managing change orders one should be aware of two types of change orders, required and elective. The required change orders can be changes made because of different law requirements or because of safety standards not being met. Required change orders need to be made, while it is not necessary to implement a elective change order, as these are changes which are improving the project.

One of the things which should be determined and agreed on in the contract is how the price of the change order is calculated. There are different practices which can be used. The three most common is unit price, lump sum and time and materials. Unit price is where the price is based on the unit price which has already been agreed upon, when the contractor handed in the first bid. Lump sum is when the contractor and owner decide on a fixed price based on the new work scope. This document should be detailed in a way so that it is possible to make a comparison with the owners own cost estimation. When using time and material the price for the changes is based on the actual time, which the contractor has to use and material prices. These prices are often determined either as part of the contractors bid or when the contractor has won the bidden. If this method is used the contractor will each day send a document to the owner of the project which contain the work load and material used at the given day. This is done in order to make sure that all the work and material and nothing more or less is being payed for by the owner. This is practice is often used when the scope of the new work cannot be determine before hand and therefor a fixed price cannot be made.

Example of change order form .

When a change order need to made there are different forms which is part of it. The first step is to introduce the extra work which can be done by using one of three forms, depending on who is initiate the change order. The first form is called the deviation form, which is a request made by the contractor when extra work might need to be added to the original scope of the project. It is then the owner job to either reject or accept the request. The second one is called initiator change order request which purpose is to make an estimate of the extra work needed in order to make the change, which then is used in order to determine if the change order should be accepted or not. This form can be made by different part, the owner, a engineer which is part of the project or the contractor. The third form is change order technical justification. This purpose of this is to provide the owner with the needed reliability with the work needed to complete the change. When the change order has been accepted by the owner a change order form is made. This document should include the additional work and cost of this, and this will work as a binding document for all part when they have accepted. When the work of change has started a change order log can be made. This tells the current status of the work, and should be accepted by the owner. .

Anotated bibliography

For more information about change order management the following articles and book chapter are suggested:

• Rodriguez, J., Situations That Might Trigger a Change Order Request, 2016. Available at: https://www.thebalance.com/change-order-request-triggers-844405

This article tells more about the different factors which might increase the risk of change orders in a project. It gives five different factors and explain these and how they affect the project and how to avoid some of them.

• Alfano, S., 10 rules for change orders, 2015. Available at: https://www.proremodeler.com/10-rules-change-orders

The focus of this article is to present different "rules" or guidelines which can be helpful when having to deal with change orders in a project. It give a quick overview of the different guidelines presented.

• Lee, C, BIM: changing the construction industry., Paper presented at PMI® Global Congress 2008—North America, Denver, CO. Newtown Square, PA: Project Management Institute. Available at: https://www.pmi.org/learning/library/building-information-modeling-changing-construction-industry-6983.

This provide information about BIM's influence in the construction industry and how the tools within BIM can be used in order to reduce the change orders in a project.

• Winch, Graham M., Managing Construction Projects - An Information Processing, Chapter 9.3, 2010, Approach. United Kingdom: John Wiley Sons Lt

This chapter is about the briefing problem which can be part of the problem with change orders as the alignment of information and values are important factors when trying to reducing change orders.