Business planning

Four strategies for effective change order management

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The most profitable contractors have a proven process for effective change order management. By following four key change order strategies, you will, too.

1. Set proper expectations with clients.

During the preconstruction phase make sure that customers understand the purpose of change orders. If you have change order processing fees explain them. Show clients a sample of your work order form and walk them through the process.

2. Confirm project scope

When creating contracts make sure that descriptions of work are as detailed as possible. List any services that are excluded. If possible, have a licensed attorney specializing in construction review contracts prior to execution. Finally, establish a formal process for discussing contract terms with project managers and superintendents so that they understand what is covered, and what is out of scope.

3. Don’t procrastinate.

Often, contractors make the mistake of waiting until the end of a project to bill for changes. This can catch clients off guard, and lead to disputes that cause contractors to write off charges to “keep the peace.” Billing in a timely manner for out of scope work will help ensure that there are no surprises for clients, and that you collect for all work done.

4. Implement technology to automate the process.

Software designed specifically for construction can greatly simplify the change order management process. Look for software that includes this key functionality:

  • Tracks potential changes, as well as approved ones.
  • Shows status of change orders.
  • Notifies you when change order requests are overdue or approved.
  • Automatically updates your budget to reflect cost increases due to change orders.