Understanding how to manage change orders is essential for maintaining project budgets, timelines, and stakeholder relationships in commercial construction. This guide offers developers a comprehensive overview of change order processes, considerations, and best practices. The American Institute of Architects provides standardized contract documents and change order forms widely used in the construction industry.
What Is a Change Order?
A change order is a formal amendment to the original construction contract that modifies the scope, cost, or schedule of work. It ensures that all parties acknowledge and agree to adjustments before implementation.
Common Reasons for Change Orders
- Design modifications requested by the developer or architect
- Strong contractor-developer partnerships built on transparent communication help minimize unnecessary design changes.
- Unforeseen site conditions (e.g., hidden utilities, poor soil quality)
- Regulatory or code changes during construction
- For senior care projects, specialized construction planning accounts for complex regulatory requirements that could trigger change orders.
- Value engineering or scope reductions/additions
- Material availability or supply chain disruptions
Types of Change Orders
- Time-Only Change Orders: Extend the project schedule without altering the budget.
- Cost-Only Change Orders: Adjust the contract price, keeping the schedule intact.
- Combined Change Orders: Impact both cost and time, requiring coordinated adjustments.
The Change Order Process
- Identification:Any party (developer, contractor, subcontractor) identifies the need for a change based on drawings, site conditions, or external factors.
- Request Submission:The requesting party prepares a written change order request, detailing the scope adjustment, cost estimate, and schedule impact.
- Review & Negotiation:All stakeholders review the request. The contractor provides a detailed quote; the developer and design team assess feasibility and budget implications.
- Approval:Once terms are agreed, the developer signs the change order. This amendment becomes part of the binding contract.
- Implementation:The contractor executes the change, tracks actual costs and time, and updates project documentation.
- Documentation & Closeout:Upon completion, all parties confirm final costs and schedule adjustments. The change order file is archived for future reference.
Key Considerations for Developers
- Transparency: Maintain open communication to prevent disputes and foster trust.
- Budget Contingency: Allocate a percentage of the project cost (commonly 5–10%) for potential changes.
- Thorough pre-construction planning helps identify potential changes early, reducing the need for costly mid-project adjustments.
- Timely Decisions: Delays in approving change orders can stall the project and increase costs.
- Legal Review: Ensure all amendments comply with contract terms and local regulations.
- Documentation: Keep detailed records of requests, approvals, and cost/time impacts to support audits or claims.
Best Practices to Manage Change Orders
- Implement a standardized change order form to capture all necessary details.
- Industry organizations like the Associated General Contractors offer resources and templates for effective change order management.
- Hold regular coordination meetings to identify potential changes early.
- Use project management software to track change requests, approvals, and status in real time.
- Set clear deadlines for response and approval to avoid schedule slippage.
- Conduct post-change order reviews to learn from each instance and refine processes.
Conclusion
Change orders are an unavoidable aspect of commercial construction, but with the right processes and proactive communication, developers can minimize disruptions and control costs. By understanding the types, following a structured process, and adopting industry best practices, you’ll be equipped to handle changes efficiently and keep your project on track.