The Dreaded Change Order

We have never met an Owner who was happy to hear, “We need a change order.” What we’ve learned over the years is that even though change orders are facts of life in construction, there are strategies to help you avoid them.

Change orders (CO) fall into two categories – owner driven and non-owner driven. Both can be mitigated.

Owner driven change orders happen when Owners change their minds, adding a window here or changing the carpet there. We’ve even seen buildings moved and floors added mid-project, which leads us to the first CO avoidance strategy:

1. Get the Program right! Number of people, building function, institutional culture, growth projections; get this right before a Designer puts anything into CAD. Work with your Designer to develop a well-defined Program. Get stakeholder and influencer buy-in on the Program before thinking about room size and amenities.
2. As the design is developed, confirm that you are within your budget. Keep stakeholders and influencers in the loop to eliminate design changes in the Construction Phase. Non-owner driven changes include things like unforeseen conditions, force majeure and bad drawings, i.e. things that are out of your control. The time to protect yourself from these COs is before you sign a contract, when you still have leverage.
3. Minimize your exposure to unforeseen conditions by thoroughly testing your site and/or inspecting the building for environmental, structural and other hidden issues. This means spending money up front to hire professionals to “kick the tires”, to reveal potential problems. These costs can be anticipated and built into your proforma. Finding that your site is rock or those pipes you planned to reuse are wrapped in asbestos are not the kind of things you want to learn from your construction contractor.
4. Make sure you have good design documents. This starts with hiring a design team experienced in your type of project and providing enough oversight to assure that their documents are thorough, detailed and coordinated.
5. Require that CO mark-up is part of the bid process and your contractor selection criteria.
6. Prepare a good construction contract. Place exposure and risk on the Contractor as the Contractor can most effectively control these costs.

Change orders are inevitable. Anyone who tells you otherwise is lying – or inexperienced. But you can minimize their frequency and impact with these six strategies.