Any time there is a change to the original contract you have with a property owner, you must issue a change order. These changes can originate with you or the homeowner. It may be to accommodate unforeseen problems or because the homeowner has decided they want to do things differently. These can be changes to the scope of the work, cost, or schedule. No matter the reason, you will need to issue a change order to protect you and the homeowner with a written record of all changes to the original contract.
Change orders affect more than one-third of all construction projects. Therefore, writing a good change order is a skill you need master. Because of the nature of the construction business, unexpected issues arise frequently. Ensure that your change order is complete, legal, and that all parties understand how this affects the finished product.
1. Follow the procedure from your contract
It’s imperative to have a signed contract before beginning work on a project. You should take the time to talk through the entire contract with your client to be sure that all information is clear and expectations are understood. Being detailed in the contract will prevent a lot of future change orders.
In your contract, also include information on how change orders will be handled. Include time frames for approving change orders, who must be involved and documentation that will be required. Having this in the contract will give you a blueprint for writing any change orders that are needed.
2. Don’t ignore or delay the need for a change order
As soon as you realize a change order is needed, address it with the homeowner. The longer you delay, the more time and money a change will require. Dealing with a change promptly lets the owner know you are responsible and capable of dealing with problems.
Discuss all of these changes with your subcontractors and suppliers so that they understand their responsibilities to ensure that the owner is satisfied with the finished project.
3. Write your change order
In order to make a change order complete and useful, include all of the following information:
- All identifying information for the project. Include the contract number, address of the property, owner’s name and contact information, and general contractor’s name and contact information. Also include the dates the document was prepared and submitted to legally protect you.
- A description of the change and how it compares to the original contract. Change orders are for when more or less work will be done at the site. It can be due to a requested change, an unexpected problem, a vague drawing, or a weather delay. Including photos or drawings can help make the change more understandable.
- An itemized list of the total costs of the change. The document must include the total cost of the change. You also need to break down where this money goes. Include costs to subcontractors, employees, taxes, insurance, and materials so your client understands how the change order affects their budget. Take the time to get accurate quotes so the homeowner understands exactly what the change will cost.
- How this change affects the completion date. Because the completion date was in the original contract, you must document any changes to that date in a change order. Remember to give your subcontractors enough time to complete the work. Manage your client’s expectations by being realistic about how much extra time the changes will take.
- Signatures. Once you have written the change order, submit it to the homeowner. Your contract should specify who the order goes to, how long they have to review it, and what steps to take if there is a conflict. Just like with your contract, once the change order is signed, it indicates that both parties understand the changes and agree to the new terms. Don’t do any of the additional work until you have a signed change order from the homeowner.
Knowing that change orders are standard practice in the construction industry, it’s a great idea to have a set procedure for your business to write them. Create a template that you can refer to each time you need to issue a change order. This will ensure that all the information is included, and that it sets clear expectations and instructions.