One of the most stressful things contractors deal with is having the scope change drastically midway through a project. As much as you may want to avoid change orders, they are inevitable. A change order can happen due to unexpected errors during construction or upon special request by the owner. Since change orders are often accompanied by unplanned expenses, they can be expensive in the long run.
How to Deal with Excessive Change Orders
If you want to avoid excessive change orders, you need to limit the number of changes a customer can make. The best way to do this is to walk the customer through the entire project before it begins. Regardless of how well you communicate up front, there will still be changes in your projects. And by and large, contractors are not very good at raising a flag with the homeowner about changes and reissuing the estimate and getting another signature. While this can be cumbersome, it’s crucial to get the new estimate in writing. It all adds up whether it’s $200 or $2,000. There is no need for the contractor to take it out of their profit when they can easily issue another estimate in minutes using an inexpensive estimating and invoicing app like JobFLEX. Even if the changes only amount to $200 after the customer ends up making three or four changes over the course of the job, it could be a significant impact on your bottom line.
DON’T TRY TO DO AT END OF JOB. At the end of the job it’s too late and most customers, even if they know and agreed verbally, are probably not going to pay you for the change if it is undocumented.
Your business must have a standard process for change orders that always ends in the customer getting a revised estimate (which is promptly signed), and all appropriate team members and subcontractors receiving the revised work order. which can be easily accessed by any member who needs to adjust the project. These forms need to clearly show the amount to be spent so there is no confusion about new charges.
Even if you have standard forms, you must monitor the changes requested and have it signed off on by someone on your team with the authority to do so before any new work takes place. This way, you minimize risk and liability. Pick a trusted and competent team member to approve change orders for your business.
Contract Price and Schedule
Any time there is a change order you need to examine how it will affect the price and schedule. In most cases, the alteration will delay the project beyond the initial timeline. You must let the client know beforehand. If they insist on sticking to the schedule, notify them of the additional costs that will come with such an outcome. Put it down on paper so that you can claim payment for the additional work without any opposition from the client.
Every day before your team resumes work, have a short meeting to talk about the expectations for the day. Let anyone that has a question or concern about the project run it through the proper channels to ask for confirmation on next steps. That way, your team remains on the same page, reducing the probability of change orders occurring.
Know the Risks
If you want to make profits and prevent change orders from messing with your earnings, you need to plan ahead and know the risks that you are likely to face before the project begins. However, the process doesn’t end after the construction has begun, you must keep re-evaluating the risks throughout the life of the project. As an example, if you’re working outdoors you’ll need to monitor the weather and see how it’s likely to affect the schedule.
If you want to avoid excessive change orders during a job, follow the above tips. The biggest takeaway here, though, is that small or large contractors should re-issue estimates when a customer has added or changed the scope of work. If a change in scope or addition is due to unexpected problems or issues that cannot be passed on to the homeowner a change order or new work order should be generated that defines to the lead, team or subcontractor the changes to be made.