What Are Change Orders and What Causes Them?
Welcome to our comprehensive guide on understanding change orders in construction projects! This article aims to provide you with everything you need to know regarding change orders. We'll first define change orders and explore the common reasons they occur in construction projects, then dive into design and construction-related factors that give rise to these changes.
We also have a companion piece that discuss the impact change orders have on project scheduling, costs, and quality, as well as strategies for effective management. Secondly, we have another article that touches upon the legal and contractual aspects related to change orders so that you're well-equipped to navigate this crucial aspect of construction management. Let's get started!
What is a Change Order?
A change order is a formal document that describes changes in the scope of work, price, or schedule of a construction project. It is generated when adjustments are necessary to the original terms and conditions of the contract between the project owner and the contractor. Change orders provide a means to handle unforeseen circumstances and ensure the project proceeds smoothly, avoiding potential disputes down the line.
The process generally begins with a change request that considers the effect of the proposed change on the project's cost, schedule, and contract terms. After evaluating the impact, the project team negotiates the change order and documents the agreed-upon modifications. Lastly, the change order is approved by the stakeholders, including the owner and architect/engineer.
Common Types of Changes in Construction Projects
There are several common types of changes that can occur in construction projects requiring a change order. Some of these include:
Design Changes:
Modifications in design carried out by the architect, owner, or contractor due to issues such as constructability, site limitations, or various stakeholder preferences.
Material Changes:
Changes in materials can be driven by issues such as availability, budget constraints, or other influences. New materials might affect cost, schedule, and installation methods, necessitating a change order.
Scope Changes:
The scope of work might be adjusted to accommodate additional work, deleted work, or refinement of the project's requirements.
Schedule Changes:
Changes in the project timeline can necessitate adjustments to the construction sequence, or additional resources, both of which can impact the project's budget and schedule.
Site Condition Changes:
Unforeseen conditions might be discovered during construction, such as hazardous materials, differing soil conditions, or buried utilities. These can affect the project’s design, budget, or schedule and often require a change order.
Reasons for Change Orders in Construction Projects
Change orders can be necessary for various reasons, depending on the specific circumstances of the construction project. Some common reasons include:
Design Errors:
Mistakes and omissions in the design documents can lead to confusion, delays, and rework, often requiring a change order to address the issue.
Unforeseen Site Conditions:
Unexpected obstacles encountered on the site, such as hidden utilities or soil conditions, can necessitate changes to the design or construction methods.
Regulatory Requirements:
Changes in building codes, zoning regulations, or other rules can require adjustments to the project's design or specifications, leading to a change order.
Owner-Requested Changes:
The project owner might request changes to their preferences or budget requirements during construction, affecting the overall project scope and necessitating a change order.
Contractor-Requested Changes:
Contractors may propose changes to address constructability issues, take advantage of cost-saving measures, or implement value engineering opportunities.
In summary, a change order is a formal document required to modify the original terms and conditions of a construction project contract. It provides a means to manage and document modifications to the scope of work, price, or schedule of a project and ensures clear communication among all stakeholders. Design changes, material changes, scope changes, and schedule changes are some of the common types of change orders in construction projects. Reasons for these change orders can include design errors, unforeseen site conditions, regulatory requirements, or owner or contractor-requested changes.
Factors Giving Rise to Change Orders
Change orders are modifications to the scope of work in the contract or construction project that are due to unforeseen circumstances or changes required by the owner, contractors, or designers. Change orders can significantly affect the cost, schedule, and quality of a project. Therefore, it is essential to understand the factors that give rise to change orders to effectively manage them. These factors can be categorized into design-related factors, construction-related factors, and external factors.
Design-related Factors
Design-related factors are associated with the quality of the design documents and the project's design. Issues in this category can be due to errors or omissions in the design documents, incomplete design, or unclear specifications. Some common design-related factors that lead to change orders include:
Inaccurate or incomplete design documents:
Errors or omissions in the design documents can result in change orders when such issues are discovered during the construction phase. It is crucial to have a thorough design review process to minimize such errors and avoid potential change orders.
Design changes:
The owner or designer may request design changes during the construction process, which can affect the project's scope and lead to change orders. To minimize the impact of these changes, it is essential to have a clear communication process in place.
Coordination between disciplines:
Lack of coordination between different design disciplines, such as structural, architectural, mechanical, and electrical, can result in discrepancies and conflicts. Addressing these issues during construction can necessitate change orders.
Clarifications or modifications due to building codes and regulations:
Change orders may be needed when the original design does not comply with the applicable building codes or regulations. This can be due to discrepancies in interpretation or a change in codes during the project lifecycle.
Undefined scope or unclear specifications:
A clear scope and well-defined specifications are essential for avoiding change orders. When the scope or specifications are ambiguous, it can lead to misunderstandings and alter the original intent of the design.
Construction-related Factors
Construction-related factors are associated with on-site issues and activities during the construction phase. Various factors can cause change orders at this stage of the project. Some common construction-related factors include:
Site conditions:
Unforeseen site conditions, such as poor soil quality or the presence of underground utilities, can lead to change orders as they require adjustments in the original construction plan.
Construction errors:
Mistakes made by contractors during the construction process can necessitate change orders to correct such issues. Coordination and proper training among team members can help prevent such errors.
Cost and schedule considerations:
Contractors may propose change orders to improve the efficiency and cost-effectiveness of the project. These "value engineering" proposals can alter both the cost and schedule to ensure construction proceeds optimally.
Unavailability of materials or labor:
Change orders may occur when specified materials or skilled labor are unavailable, requiring alternative materials or methods. In such cases, it is crucial to understand the impact on the overall project scope, cost, and schedule.
External Factors Affecting Change Orders
External factors are events, conditions, or situations that are beyond the control of the project team and can lead to change orders. Some common external factors affecting change orders include:
Weather conditions:
Extreme weather conditions, such as heavy rainfall, extreme heat, or cold temperatures, can create unplanned delays or additional work, impacting the project's timeline and cost.
Regulatory changes:
Changes in regulations, building codes, or government policies can require modifications to the design or project scope to meet the new requirements.
Economic conditions:
Fluctuations in the global economy can affect material prices, labor costs, and financial considerations, ultimately affecting project plans and creating a need for change orders.
Natural disasters:
Events like earthquakes, floods, or other natural disasters can significantly alter the construction process and result in change orders.
Understanding the factors that contribute to change orders is essential to better manage them throughout the project. By being aware of these factors, project teams can proactively prepare and mitigate the impact on project cost, schedule, and overall success.
