Avoiding the Dreaded Change Order

Change Order.  Perhaps the two dirtiest words in commercial real estate and construction. Everyone involved with a construction project wants to avoid them. 

  • Owners don’t want the additional costs added to already stressed construction budgets 
  • Architects don’t want to be seen as the cause of the additional costs 
  • Most General Contractors, contrary to popular belief, don’t want them because of the high administrative costs, the delays they cause, and the bad feelings they create.

While some change orders are inevitable, they can be significantly reduced by taking actions in advance. Change orders have different causes so they need to be combated in different ways. Owners and their teams can totally avoid or certainly minimize the impacts of most change orders.  

The “I Wish I Had X-Ray Vision Change Order” 

If you can’t see it, measure it or test it, it’s a mystery. In new construction this is limited to what happens from the ground down.  In renovation, alteration or adaptive re-use projects, information or access is often limited and assumptions must be made when pricing work. If those assumptions turn out to be incorrect, a change order ensues.  Try these steps to help take the mystery out of existing conditions.  

  • Find and Make Available Original Construction Documents. The original construction documents provide a wealth of information.  The time spent locating them is very often well worth it. 
  • Perform Exploratory.  Ensure your design or construction team is given the time and resources to expose hidden areas, perform demolition as needed, record video of pipes and difficult to access cavities, and take multiple soil borings. Eliminate as much mystery as possible. 
  • Test and Inspect. When applicable, ensure your project team is testing existing materials, inspecting their condition and that they know up front what will need to be modified or replaced. 

90% or more of hidden condition change orders can be eliminated by identifying the work before  contract values are established.  Sometimes this requires early engagement of the contractor and collaboration between contractor and design team.  It is a matter of pay now…or pay more later. 

The “This Is Hardly Up For Debate” Change Order 

The design team and contractor are not the only players in a project. There are multiple authorities that have jurisdiction (AHJs) over construction work and their decisions are often final, can have a significant impact and sometimes cause change orders. Inspectors, utility companies, health departments, and accrediting agencies can each unilaterally issue a directive or require a process that was unexpected. The key to eliminating or minimizing this type of change is to have the right design and construction team that will expect the unexpected and be proactive when something arises. Try these to eliminate surprise decisions from AHJs impacting the project. 

  • Hire the Right Team. There is no substitute for experience in your design team and contractor when it comes to knowing the way AHJ third parties typically act and how to react. Experience in the work sector and the jurisdiction is absolutely critical. 
  • Get Some Face Time. While not always the easiest thing to accomplish, with the right approach most third parties can and will meet and review plans and provide early feedback.  Make sure your GC makes this a priority.  Focus up front can save time and money later. 
  • Address Issues Early. Adopt a posture of bringing issues or concerns to the attention of the AHJ as soon as they are identified, instead of hoping they won’t have issue, or that they will entirely overlook it. There is only a fractional chance your team will be bringing up something that might not raise its head eventually and the proactive approach typically promotes goodwill and respect that positively influences the outcome. 

The “That’s Not What I Expected” Change Order 

Many change orders are initiated by owners who are either surprised by the information documented in construction drawings long after they are issued, or simply change their minds about the desired final product. At times this is understandable. Organizations requiring construction are dynamic. It makes sense that needs can change between the time drawings are created and actual construction occurs, so some changes are unavoidable. Many however are the result of a failure to fully understand what is being built or a failure to think through needs thoroughly and communicate them to the rest of the team. Try these to minimize the disconnect between what is desired and what is delivered. 

  • Don’t Shortcut at the Front End. Initial concept plans are developed with minimal information. Sometimes the process to advance them to final construction documents can be rushed with not enough time spent reviewing each and every aspect of the work. Instead, carve out the time to review as drawings are developed and less time and money will be spent correcting errors. Make sure all of your goals and requirements for the project are known so others on the team can help you achieve them. 
  • Get Guidance. Owners shouldn’t be expected to understand construction drawings any more than a lay person should know how to read an MRI. Either the design team or GC needs to be engaged to “walk” you through the drawings, explain, interpret and do whatever it takes to foster an understanding.  As the owner, you need to provide the focused time. 
  • Make Regular Site Visits. Construction drawings are two dimensional and our world has three dimensions. Some things are difficult to see on paper but come to life in person.  By regularly visiting the site and observing progress, expectations can be verified, and adjustments can be made before it is too late. Walk the project with the site supervisor or project manager and have them point out items and explain what is going on. 

Every participant is better off when change orders are avoided. It is the responsibility of the entire team to take a proactive approach and utilize suggestions like those offered to promote success.