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Change Orders Demystified: Navigating the Complexity of Construction Adjustments

By Thad Berkes

March 21, 2024

Change orders are a crucial aspect of construction projects, but they are not always fully understood, especially when it comes to their specific classifications, the reasons behind them, and why they might incur additional costs.

What are Change Orders?

In their simplest terms, change orders are written after the execution of a contract that initiate and authorize a change in the scope of work, the fee, or the length of time for a project. They are signed by the owner and engineer or architect and should be highly detailed, as they are legally binding documentation. There are three primary classes of change orders: owners, contractors, and architects/engineers/interior designers. Owner-initiated changes comprise about 90% of change orders and could include things as simple as adding or moving a door or changing lighting. Some are initiated by contractors and might involve requests for information or clarification, especially in renovation projects where they find an issue they hadn’t anticipated or run into something unforeseen that needs to be addressed. Architects, engineers, and interior designers initiate change orders frequently as well, due to alterations that are requested by the owner.

Why are Change Orders Issued?

Reasons for change orders can vary widely. Again, owner changes are the most common and can happen if they’ve changed their mind on something or don’t like what they see. The second most common reason is unexpected conditions that occur. In new builds those can be things like soil issues or underground utilities; in renovation projects they could include something unforeseen in a wall once it’s torn down or larger problems that need to be remediated but weren’t identified ahead of time. Contractor mistakes like quality issues with materials are another reason that a change order might be issued. Finally, change orders can result from errors or omissions. For example, they could be result of mistakes made on initial documents that have to be changed in order to comply with municipal codes or requirements. They could be simply something that was forgotten or not considered initially that will eventually lead to additional costs.

 

The Change Order Process

Clear documentation is essential in this process to keep all of the stakeholders involved in the decision-making and to keep the projects moving in the timely manner when something unexpected pops up. The change order process is typically initiated by one or more of the following documents: a proposal request, an architect’s supplemental instructions (ASI), a construction change directive (CCD), a request for information (RFI), or a request for a change order.

Cost Drivers of Change Orders

There are number of factors that influence the costs involved in change orders. The number of people involved and the time it takes to produce the orders. Change orders don’t only affect the contractor but also impact multiple trades and multiple subcontractors. Reduction in construction in productivity. If, for example, a change order would cause workers to interrupt what they’re doing and switch tasks to focus on something else. That can drastically impact their ability to get work done efficiently. Schedule increase. If the change order includes an alteration to the scope of the project that is going to add time to it, that can add costs both in labor and materials. Redo in-place work. These are costs associated with moving things around or changing something that’s already been done and can have a domino-effect on subcontractors like carpenters, drywall installers, electricians, etc. depending on the project. Trades affected. As indicated above, change orders can trickle down to multiple people who are working on one project. In short, costs often arise as the result of change orders because of the ripple effect they can have on everyone from the owner, contractors, and designers amp; architects to the tradespeople doing the work.

 

Change Orders: Cost or Opportunity?

There is a delicate balance for contractors and project managers who must decide when to pass additional expenses on to the client or when to absorb them into the existing expenses. Every project is different and as a result, the contractor needs to look at the situation as an opportunity to ensure the right choices are being made. Both the contractor and the architect should consider the best interest of the client to meet the design intent of the project and ensure change order cost is minimized.

Change Orders and Legal Implications

As previously mentioned, change orders are legal documents and should be meticulously detailed and carefully reviewed. The responsibility of architects, engineers, and interior designers in ensuring accurate and comprehensive change orders cannot be stressed enough, as they play a pivotal role in protecting the interests of clients.

Submittals

Change orders are clearly a necessary part of any construction, engineering, or design project and are generally widely accepted and unavoidable. Clear communication is essential as all of the people involved work together to complete a particular project.

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