Understanding the different types of change orders in construction
Change Orders are a growing problem for general contractors. The expectation of change order submissions is expected to rise even higher in 2024, according to the recent GCPay market study. Understanding the different types of change orders in construction and implementing efficient processes are crucial for general contractors to better manage change orders, allowing them to allocate more time to other vital areas of business.
Construction change orders are documents that record changes to the original scope of work in a construction project. They are used to document any modifications, additions, or deletions to the project plans, specifications, or contract requirements.
Here are a few key points to understand about construction change orders:
- Purpose: Change orders are created to accommodate changes requested by the owner or due to unforeseen circumstances during the construction process. They play a crucial role in managing and communicating changes in project scope, schedule, and cost, while also addressing the various change order challenges that may arise.
- Approval Process: Change orders typically require review and approval from the owner and the contractor. All parties involved must understand and agree on the changes, including any cost or schedule implications. It’s important to have a clear approval process to ensure proper documentation and to circumvent change order disputes.
- Cost and Time Impact: Change orders specify the impact on project cost and schedule resulting from the proposed changes. This includes details about cost changes, such as materials, labor, overhead costs, and any associated time delays or extensions.
- Documentation: Proper documentation is crucial for change orders. This includes detailed descriptions of the changes, reasons for the changes, associated costs and schedule impacts, and signatures from the parties involved. Accurate and thorough documentation helps prevent misunderstandings and provides a reference for future discussions.
- Contractual Basis: Change orders are typically governed by the terms and conditions of the construction contract. It’s essential to review the contract provisions related to change orders to ensure compliance and understand the processes and requirements outlined in the contract.
Change Directive key features:
1. Scope Change: This type of change order occurs when there is a modification to the project scope, such as adding or removing work or changing specifications
2. Design Change: A design change order occurs when there is a modification to the project design, such as changing the layout or materials used.
3. Schedule Change: This type of change order occurs when there is a modification to the project schedule, such as extending or shortening the timeline.
4. Cost Change: A cost change order occurs when there is a modification to the project budget, such as adding or removing items that affect the overall cost.
5. Contract Change: This type of change order occurs when there is a modification to the terms and conditions of the construction contract, such as changing the payment terms or contractual obligations.
Remember, construction change orders can have significant impacts on a project’s cost, schedule, and overall success. It’s important for all parties involved to understand the process and document changes accurately to minimize conflicts and ensure successful project completion.
Fortunately, for general contractors, GCPay offers an easy-to-use solution that integrates with construction ERPs to automate all types of construction change orders and has change order management software features built-in. Streamline processing, tracking, and management as part of its complete all-in-one product suite. Book a free custom demo today to learn how GCPay can help your business.
