Any discussion of construction change order best management practices would be incomplete without the following:

• Defining a construction change order,
• Noting the causal factors and impacts associated with construction change orders, and
• Methods of mitigating construction change orders.

Definition of a construction change order: A construction change order is work that is added to or deleted from the originally agreed upon and contracted scope of work which alters the original contract amount and/or completion date.

A change order cannot exist without an original construction contract, and may be requested by the construction contractor or the contracting entity/facilities owner. The associated processes and documentation involving change order requests and approvals should be outlined in the construction contract and the associated program/project operations manual/execution guide. The number of change orders and all related requirements have a direct relationship to the construction delivery method being used.

The proper documentation and management of change orders is critical to holding both the contracting entity and the construction services provider accountable. The construction delivery method and associated contract dictates not only how changes orders are managed, but also plays a major role in determining their overall frequency and cost.

Contracting entities or construction services providers that are not willing to be bound within a collaborative, mutually beneficial contract and associated best valued contract, should be suspect and deserving of further investigation.

Major causes of construction change orders

The primary cause of a construction change order is a poorly prepared, poorly written, or poorly communication scope of work, including incomplete/inaccurate project designs. Additional causal factors include owner requested changes due to changing organizational or additional user requirements or any unforeseen conditions.

Change Order Impacts

Approximately 80% of all repair, renovation, or new construction projects are deliver late, over budget, or don’t satisfactorily meet owner, user, and builder requirements. Furthermore, the overall productivity associated with the construction sector lags that of other sectors. The net result is an facilities and infrastructure management sector that is burdened with waste and negatively impacting the organizational mission associated with built structures, the economy, and the environment. Changer orders are a primary source of waste. Change orders often increase the cost of the original contract  by changing the amount or type of work to be delivered.   Additionally while contracts are initially awarded competitively, change  orders are negotiated without competition. Thus without proper oversight, change orders can easily become financial black holes.

Ways to Avoid or Mitigate Change Orders

The best, and proven, way to limit if not even eliminate change orders is to select a collaborative LEAN construction delivery method, and at the vary least, to create and mutually agree upon a detailed, itemized line item, list of construction tasks and associated work requirements and costs. This list should be easy to read and understand by all participants and stakeholders and organized using a CSI Masterformat. All cost data should be locally researched using appropriate labor wage rates, productivity rates, material costs, and equipment costs.

LEAN construction delivery methods establish terms in the original contract and associate operations manual/execution guide, on how change  order pricing will be handled. The workflow for pricing, submitting, reviewing, and approving work approved under a change order are spelled out in detail. Contractors are contractually required to submit detailed line item task listing for all  change order proposals using a pre-approved, locally researched unit price book. Reporting requirements are included to assure proper oversight and audit capability for those overseeing change order pricing.

Any owner should perform detailed reviews of contract change order costs  proposed by contractors. Public sector real property owners, facilities management teams, and procurement professionals are required to do so. Owner should also perform independent cost estimates for projects, or at the very least projects above a specified cost threshold. All owners should technically and financially go through ALL change order requests in detail and not simply perform superficial or spot‐check review.

Without getting in a long discussion of LEAN construction delivery methods, suffice it to say that any method that allows all participants and stakeholders to share information in an early and ongoing manner and work within a collaborative and compliant manner. Two robust, more commonly known forms of LEAN collaborative construction delivery are integrated project delivery, IPD, for major new construction, and job order contracting, JOC, for repair, renovation, maintenance, sustainability, and minor new construction projects. As one might expect, however, not all all versions of IPD and JOC are the same, so do your homework!

LEAN construction delivery methods mitigate the impacts of construction project change orders in the following manners.

 Eliminate the negotiation of change order  pricing. Tasks and quantities can be reviewed, however, pricing is fixed.

 Eliminate the common practice of contractors artificially reducing  (“low‐balling”) initial bids while intending to benefit later  from costly change orders

 Reduce costs associated with comparing  contractors’ proposed pricing to their owner independently  developed estimates

 Promote teamwork with the contractor

 Support a fair, reasonable and equitable business  relationship

 Decrease the likelihood that owners will overpay, and that real property owners meet their fiduciary responsibility as stewards of the built environment.