A change order is defined as work added or deleted from the original scope of the project, as defined in the contract. A change order affects the original budget and completion date of a construction project. Regardless of the causes behind a change order, it often results in disputes and delays in the project and dissatisfied parties. In adverse cases, change orders lead to extensive delays in the project.
Successful execution of change orders in construction requires thorough planning and sound judgment. Change orders occur for many reasons like design errors, design change, addition to the scope of the project, and unknown circumstances. The main cause of change orders in construction is related to the owner of the project. Successful delivery of the project depends upon the severity of these change orders.
Change orders have several impacts on the construction project. Here are 6 major factors resulting from change orders that impact a project's cost and performance.
Change orders have a significant impact on the costs and schedule that limits contractors to achieve the original scope of the project. There are several direct and indirect impacts on the original scope of the project. If the change order is filed at the beginning stages of the project, it can be managed with ease.
However, if these changes are requested during the later phases of the project, the impacts on the scope become more complex and significant. The reason behind this is that during the later stages of a project, different parties are engaged as construction work is in full swing. It also becomes difficult to implement a change at that phase.
So, if you receive a change order at later stages, consult a quantum expert for quantification of the change requested and its scope.
Change orders often lead to a loss of productivity. When a change order is made, the contractor evaluates how to work for change order will be performed and incorporated into the schedule. They also need to figure out how this extra work will impact the original scope of the project, as described under the contract.
According to the Construction Industry Institute, "on projects with less than six percent of hours spent on changes, productivity was better than planned." Similarly, when more than six percent of work hours are spent on change orders, productivity is a lot worse than expected. Loss in productivity significantly affects project scope, especially if there are limitations in the contractor's labor and equipment.
Change orders lead to schedule interferences, which has significant impacts on the performance and cost of the project. Disruptions in the project schedule resulting from a change order often lead to additional costs, irrespective of the completion date of the project. When a change order is received, the contractor has to consider whether the work that is defined will affect the sequence and duration of the work defined in the contract.
If the scope change impacts the activities on the schedules critical path, then the completion date of the project will be extended unless the contractor accelerates work if possible.
Change orders also affect the construction project because of other parties involved, including subcontractors and suppliers. When a change order is made, the contractor shares the details with the subcontractors and suppliers on the project in order to determine the potential of the change order. They also identify the risks posed by the change order and how it may affect the subcontractor's work.
Based on the information provided to the subcontractor, the involved parties can help evaluate the costs and potential schedule impact of change on the project. Change orders may require their own work scope, so the contractor uses this information in formulating documents that are then sent to the owner.
There are a lot of uncertainties associated with the revised work scope of the project. These risks can derail the project resulting in failure and construction claims. Therefore, when the owner requests change orders, the contractor needs to take into account any risks and uncertainties that are associated with the revised work scope. Additional costs and time needs to be incorporated into the proposal submitted for a change order to compensate for possible losses from undefined risk factors.
Change orders can significantly impact several areas, including contractor's resources like supervision, administration, equipment, site congestion, etc. If the number of change orders becomes significant, and the work scope becomes compressed, the contractor's productivity can diminish altogether. Therefore it is essential to assess the cumulative impact of several change orders on the cost and performance of the project.
It includes identifying cumulative demands in case of extra work required due to the change in scope of the project. A construction consultant can help you quantify these change orders, so you know what to expect from the change in the scope of the project.
Change orders are common in the construction sector, and most projects face it in one way or another. However, change order is not something to be scared of. No. You can turn these change orders profitable with effective change order management. Most of the contractors believe that a critical factor that affects change orders in construction is communication and coordination. With proper communication with the client and other parties, you can minimize the chances of a change order from happening.
In case you cannot avoid change orders, make sure to incorporate these changes as soon as possible because if left unmanaged, they will cause significant delays in the project completion. Thus, affecting the total cost of the project and its performance.