Construction Change Order Process & Tips

A construction change order is an inherent reality, representing adjustments to the original construction project scope of work due to unforeseen circumstances or evolving needs. While offering flexibility, they can also pose significant challenges. When not handled effectively, change orders can trigger cost overruns and schedule delays—potentially straining client relationships and jeopardizing project success.

However, a change order construction also offers opportunities for problem-solving and innovation. Let’s explore strategies to turn these challenges into positive outcomes.

What is a Change Order in Construction? 

In the construction industry, change orders are modifications to the original construction contract between the contractor and the construction project owner. This could mean adjustments to the project scope of work, materials, or timelines. 

They are common in construction, often arising from various factors that can influence the project’s trajectory. These factors can range from design changes initiated by the client to unforeseen site conditions. 

Many reasons can trigger change orders, such as:

• Material shortages or substitutions 
• Client requests for additional features or upgrades
• Ambiguities or errors in the original construction contract documents 

A change order in these cases can clarify or resolve issues, driving the project forward.

Types of Change Orders 

• Additive Change Orders: This type of change order in construction involves adding new work or materials to the project, typically resulting in increased original contract value and potential project delays.
• Deductive Change Orders: This change order construction contractors adjust to involves removing work or materials from the project. This can lead to a decreased construction contract price and a shortened construction project timeline.
• Time Extension Change Orders: This construction change order primarily affects the project schedule without necessarily altering the scope of work.

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Change Order Process 

While the specific details may vary depending on the construction contracts and projects, a typical change order construction process involves several key steps.

1. Initiation 

A construction change order is typically initiated when a party involved in the project identifies a need for a change in the scope of work, materials, or timeline. This could be due to a project owner request, unforeseen site conditions, design changes, or other factors discussed earlier.

2. Documentation 

The initiating party, usually the contractor or project manager, prepares a detailed change order construction request. This document includes a clear description of the proposed change, its impact on the project schedule and construction budget, and any supporting documentation, such as revised drawings, specifications, or calculations.

3. Review and Approval 

The construction change order request is then submitted to the relevant parties for review and approval. This typically involves the project owner, architect, engineer, and any other stakeholders affected by the change. The review process ensures that all parties understand the implications of the change and agree on the adjusted contract scope, cost, and construction schedule.

4. Implementation 

Once the change order is approved, the contractor implements the outlined changes. This may involve adjusting work schedules, ordering new materials, or coordinating with subcontractors.

5. Closeout 

Upon completion of the changed work, the contractor submits a final change order document for review and approval. This document details the actual construction cost and schedule impacts of the change, ensuring that all parties have a clear record of the adjustments made to the project.

Tips for Effective Change Order Management 

Effectively managing change orders is a required skill for any contractor, as it directly impacts project success and client relationships. Here are essential tips to streamline the process:

• Proactive Risk Mitigation: Anticipate potential changes through meticulous planning and thorough risk assessment. This includes comprehensive site investigations and detailed proposed contract reviews to identify and address potential issues early on.
• Clear Contract Language: The original contract should explicitly outline the change order process, approval authorities, and documentation requirements. This clarity ensures you and the client are on the same page, minimizing misunderstandings and disputes during the project.
• Prompt Communication: Encourage timely communication of potential changes from all stakeholders. Proactively address any issues or requests that may lead to change orders, ensuring all parties are informed and aligned.
• Accurate Impact Assessments: Conduct thorough cost assessments and schedule implications of each change order. This allows informed decision-making and fair negotiations with clients.
• Effective Negotiation: Develop strong negotiation skills to reach mutually beneficial agreements with clients regarding change orders. Foster a collaborative approach while safeguarding your business interests.
• Technology Adoption: Leverage construction management software to streamline documentation, track change requests and approvals, and gain real-time visibility into the project’s status. This enhances efficiency and transparency throughout the change order process.

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Role of Insurance in Change Order Management 

While proactive change order management is essential, contractors must also acknowledge the financial uncertainties inherent to project modifications. Insurance serves as a vital safeguard, offering protection against unforeseen costs and liabilities that can arise from change orders.

Builder’s risk insurance, a must-have coverage for construction projects, typically protects against physical damage to the project itself, including materials, equipment, and structures, from perils like fire, theft, or natural disasters. However, it can also extend its reach to cover certain construction change order scenarios.

For example, if a change order construction requires additional materials or equipment, builder’s risk insurance may help cover these newly introduced assets against potential damage or loss. If a change order leads to project delays, the policy might extend its coverage duration, ensuring continued protection during the prolonged construction period.

Pro Tip: Thoroughly review your insurance policies, including builder’s risk, to understand their stance on change orders. Pay attention to exclusions and limitations related to modifications, and consult an insurance professional if needed to ensure adequate protection.

Protect Your Project with Contractors Insurance 

Change orders may sometimes be inevitable, but their impact can be controlled. At Contractors Insurance, an award-winning specialty commercial insurance brokerage in Ontario, we understand the unique challenges construction professionals face. Let us help you navigate the complexities of change order construction and ensure your business is protected.

Our team of experienced insurance brokers can assess your specific needs and tailor a comprehensive insurance program that safeguards your construction projects. From builder’s risk to professional liability insurance, we offer a range of solutions to address the diverse risks associated with change orders.

Contact us today for a personalized consultation and discover how we can help you.