Change orders are inevitable in any construction project, but they can also cause delays, disputes, and cost overruns if not handled properly. To ensure proper authorization of change orders, you need to follow some best practices and use some tools that can help you document and track them effectively. In this article, we will discuss how you can do that and avoid common pitfalls.
The first step to ensure proper authorization of change orders is to define the change order process clearly and communicate it to all stakeholders. The change order process should include the roles and responsibilities of each party, the criteria and procedures for initiating, reviewing, approving, and implementing change orders, the forms and formats for change order documentation, and the methods and frequency of change order reporting. Having a clear and consistent change order process can reduce confusion, errors, and disputes, and ensure that all changes are authorized by the appropriate parties.
This is where you check your contract first!! Use what the contract says as the basis for your process. And if there is not clarity in the contract: don’t do work without something in writing.
To guarantee that change orders are properly authorised in projects, a clear procedure must be established, change orders must be documented, reviewed, and approved by all relevant parties. Complete paperwork must also be kept up to date, and change orders must be monitored and tracked. Compliance requires observing legal regulations, contractual commitments, and industry principles.
In my experience, the better the change order procedure is defined (not necessarily "detailed") IN the contract, the better the Parties will work. WHAT constitutes a CHANGE? HOW changes are ordered, or implied? WHEN the Contractor is authorized to carry it out? WHEN the right for payment is consolidated, according to the Governing Law? The details can be decided in a second phase, for every Client will have different ideas on how an instruction qualifies for a change and what won't, and likewise the Contractor. At the Subcontractor level (especially when in a back-to-back environment) the more defined a change process, the better its handling and inevitable, subsequent discussion; resulting in a smoother process: possibily more cooperative.
A comprehensive change order procedure with buy-in from all project stakeholders helps minimise changes which may impact the project in various unfavourable ways. A well-defined change order procedure improves clarity to all concerned stakeholders and this in turn reduces disputes, claims and scope creep
At the time of awarding contractual documents and drawing. A few Items are not considered by the Client’s end. However, the same is added later on that sounds like an alteration to the scope of work originally specified in the contract, whether by way of an addition, omission, or substitution to the works or through a change to the manner in which the works are to be carried out. Well, construction field applications help you to deliver projects on time and on budget by issuance of Variation orders and Change orders. A change order is an agreement to revise the original terms of a construction contract between a project owner and contractor.
The second step to ensure proper authorization of change orders is to use a standardized change order form that captures all the relevant information and details of each change. The change order form should include the following elements: the change order number, the date, the project name and number, the original contract amount and completion date, the description and reason for the change, the impact on the scope, schedule, and budget of the project, the signatures of the authorized representatives of the contractor and the owner, and any attachments or supporting documents. Using a standardized change order form can help you avoid missing or inaccurate information, and provide a clear and concise record of each change.
In my experience, having a standard change order form is important to ensure that the required level of detail is pre-agreed upon between the parties prior to the contract execution. Depending on the contract type (lump sum or unit price), the level of detail required to grant or reject a change order remains very important. Lacking details will result in claims and disputes. Parties might resort to an independent estimator to evaluate change order. Furthermore, having a standardized form is paramount for consistency, traceability, accuracy and presentation to key stakeholders and decision makers. It is also recommended to agree on authorized personnel to sign the change orders. It can vary depending on the magnitude of the change order.
Part-2 One particular instance comes to mind when we had to make a significant change to the building's electrical system. The client had decided to add more outlets and lighting fixtures, which required extensive modifications. Instead of relying on verbal discussions or informal emails, we immediately utilized the change order form. I filled out the form, clearly describing the requested changes and the associated costs. I also attached any relevant drawings or specifications to provide a comprehensive understanding of the modifications. Once everything was complete, I submitted the form to the client for approval.
I believe it would be beneficial to address cost, duration, risks, and impacts in the change order form. Understanding the financial and schedule implications of the change is crucial for both parties. Completing the change order form on time is helpful. Document and approve changes promptly. Failure to submit change orders promptly results in miscommunications, disagreements, and project timeline extensions. Consider using a centralized database for change order tracking. The system should facilitate convenient retrieval of change orders and provide comprehensive reporting and analysis options for changes. A well-structured system for managing change orders improves understanding and informs implementation decisions.
Each company will have forms developed for this reason, and there is an authorization level depending on the claimed value. Commonly, there are two forms: a variation order and a potential variation order. The first form is used to process the variation order, and the second one is an internal form used to approve the related budget. It is important to ensure the related discipline manager is one of the team members who reviews and signs the form to ensure everything is covered and to reduce bias in the process.
When I was working as a project manager for a construction company, we were in the midst of a large-scale commercial building project that involved multiple contractors and subcontractors. As the project progressed, it became apparent that changes were needed to the original plans due to unforeseen circumstances and client requests. To ensure that the changes were properly documented and implemented, we decided to use a standardized change order form. This form was designed to capture all the necessary details, including the nature of the change, its impact on the schedule and budget, and the approval process.
The third step to ensure proper authorization of change orders is to track and monitor them throughout the project lifecycle. You can use various tools and techniques to do this, such as a change order log, a change order register, a change order dashboard, or a change order management software. These tools can help you keep track of the status, progress, and impact of each change order, and alert you to any issues or risks that may arise. Tracking and monitoring change orders can help you manage them effectively, and ensure that they are aligned with the project objectives and expectations.
To my experience, it will be good to red line over the construction drawings to reflect all the approved change orders so it serves a better communication in later stages with site execution team as well as contract administration team. It will ease the final stage of as built drawings preparation as well
Unless you're on the world's worst project an Excel workbook will usually suffice for your needs. Always remember - keep track of your time bars (from the Contract) to make sure that you aren't missing the opportunity to claim a variation and that the Principal is complying with their obligations. These days, it's not uncommon for larger projects (or larger Principals) to provide a document management system such as Aconex which makes the tracking and time bar management a much more automated process.
To ensure proper authorization of change orders, organizations should establish a formal change control process that includes documenting change requests, defining authorization levels, educating stakeholders, maintaining proper documentation, and conducting regular reviews. By following these steps, organizations can effectively manage and control change orders, mitigating the risk of unauthorized or poorly managed changes and ensuring that any changes made are properly reviewed, approved, and documented.
Change order log or register is usually simple as it does only include the basic information about each change order and the details are in the change order or supporting documents. It can be traced on any table/database to easily trace and monitor the changes throughout the project lifecycle.
For long duration projects, a proper online system with a tracking of all orders is must with a red flag provision to trigger the end date of the ongoing agreement and alert the stakeholders involved .
The fourth step to ensure proper authorization of change orders is to review and verify them before approving and implementing them. You should review each change order for completeness, accuracy, validity, and compliance with the contract terms and conditions. You should also verify the source and authority of each change order request, and the calculations and assumptions behind the cost and schedule estimates. Reviewing and verifying change orders can help you avoid errors, omissions, and discrepancies, and ensure that they are reasonable and justified.
The review of the change orders is usually a time consuming process and that's why it is recommended to establish timelines and scope of each stakeholder and ensure that you abide by those guidelines. Furthermore, aligning those with the CCB meetings to be able to consolidate the feedback and render a decision prior to communicating it to the contractor is key.
Every change order should be scrutinized to assess its necessity and impact on the overall project. This includes reviewing the reasons for the change, its effect on the project timeline, and cost implications. Verification by key project stakeholders, such as project managers or senior supervisors, is essential to ensure that the change aligns with project goals and client expectations. It's also crucial to have a clear, documented approval process, where all changes are formally agreed upon and signed off by authorized personnel before implementation. This maintains project integrity and ensures transparency and accountability in managing project modifications.
The simple fact is that almost all variations are urgent as they are typically trying to resolve an unexpected urgent issue. Urgency leads to time pressures, which leads to mistakes. But, typically the Contract is your friend as generally you can submit "holding correspondence" such as Notice of Intention to Claim a Variation which will secure your contractual position while giving time to properly sort out your claim. And don't forget - not only are you entitled to cost relief, almost all contracts allow you to claim time relief, which is at least as important.
Carefully assessing the change order's effects on the project timeline and budget is essential during the review. This involves assessing the impact on critical path, resources, and risks. Review the change order from a broader perspective to preserve project objectives and minimize negative effects. Clear communication is crucial for verifying change orders. This includes the project team, client, contractor, and others involved. Consistently communicate change order updates and address concerns promptly to prevent future misunderstandings and disputes. Review and validate change orders to maintain project integrity. By using a comprehensive approach, changes can be made efficiently and safely, benefiting all stakeholders.
The fifth step to ensure proper authorization of change orders is to communicate and document them throughout the project. You should communicate each change order to all relevant stakeholders, such as the project team, the subcontractors, the suppliers, the consultants, and the regulators. You should also document each change order in the project records, such as the contract documents, the drawings and specifications, the project schedule, the budget, and the quality plan. Communicating and documenting change orders can help you ensure transparency, accountability, and traceability, and avoid conflicts and misunderstandings.
Effective communication is the lifeline of every project. This applies to managing change orders on projects. As project managers, we need to create an effective communication routes which covers all necessary stakeholders on the project. When there is an effective communication mechanism in place, details and implications of the change order will be clearly communicated to stakeholders. This strategy prevents any form misunderstanding which may rise among stakeholders when there is a change order. This will also prevent scope creep to a larger extent. The importance of effective communication on projects, especially with regard to a change order cannot be underestimated.
The sixth and final step to ensure proper authorization of change orders is to learn and improve from them. You should analyze each change order for its causes, effects, and lessons learned, and use this information to improve your performance and processes. You should also solicit and incorporate feedback from the stakeholders on the change order process, and identify and implement any improvements or best practices. Learning and improving from change orders can help you prevent or minimize future changes, and enhance your efficiency and effectiveness.
Never be afraid to ask your Principal for feedback: - What can we do better next time? - Is something we can do to make it easier for you? - Can we provide further detail to facilitate the process? - Is there room to establish a regular meeting to review just our variations?
Three best things 1-Record keeping 2-Record keeping 3-Record keeping Keep documented evidences of all changes with time frame. You will never loose anything!
Maintain an audit trail: Keep a detailed record of all change orders, including the authorization process, approvals, and any associated documentation. This provides an audit trail for all changes made to the project. Provide training and guidance: Ensure that all individuals involved in the change order process are properly trained and understand the requirements for authorization. This can help to prevent unauthorized changes and ensure proper adherence to the process.
- Obtain approval from decision-makers or project sponsors. This may involve presenting the benefits and justifications for the change. - Adjust the project plan including timelines, budget and resources to accommodate the approved change. - Execute the change as per the revised plan, keeping stakeholders informed of progress and any deviations from the original schedule.
The change order is a common practice in construction industry. It can be initiated from the Employer side or from the Contractor side. The change order mechanism shall precisely be narrated in the contract documents and both parties must be clear about it. A written documentation is a mandatory requirement for dealing with the valuation of the change orders. A proper register of change orders on both the Employers side and Contractors side will help to ensure the concurrency. If possible, the impact of cost or time or both due to the change orders should be mutually agreed prior to its execution.
Ensuring proper authorization of change orders demands a holistic approach from pre-construction to post-construction. Begin by selecting the most suitable project delivery method, aligning it with Division 01 specifications, and establishing clear contractual provisions. Collaborate with all stakeholders, including owners, consultants, and field personnel, fostering transparent communication. Embrace cloud-based software to streamline processes, ensuring real-time accessibility and compliance. This comprehensive strategy minimizes risks associated with unauthorized changes, enhances accountability, and maintains transparency throughout the project lifecycle.