Owner Requested Change Orders

1.              Perform detailed project definition

Prior to launching into detailed design, every project must have a detailed project definition.  The order of operations for a project definition is clearly outlined in Tenzing One’s Process Map.

• Utilize internal stakeholders based on their usefulness not just their seniority. (The facilities manager probably has more relevant information than the CFO).
• Think about the intangible issues that can affect project costs and schedule, i.e. a community group concerned about noise, dust and traffic. Download your Tenzing Checklist here.
• If an issue involves a high degree of risk and cost, bring in the appropriate specialist expertise early while all options are open. You will need them sooner or later anyway.

2.              Herd the cats

• Control decision making and authority among internal stakeholders.
• If stakeholders’ wish lists aren’t balanced against the overall project objectives, and who gives instructions to the project team isn’t controlled, the project will become a change order free-for-all.

3.              Non design and construction project team members

• These project participants vary from project to project, but every project has them (IT, Medical Equipment, Furniture etc.) and are often grouped under soft costs and must be subject to the same discipline and control as the design and construction team. Furthermore, they must be fully coordinated with the D+C team as the project evolves. Failure to do so will probably lead to change orders both construction and soft costs.

 

NOTE : Beware of powerful but unrelated bullies

This is a little controversial but, in some organizations, there are people who hold power and are used to getting their way. Perhaps a critical researcher, a department head. If these people are to be appeased that is an Owner decision and should be reflected in defined scope or allowed in the contingency. If they make demands or give instructions after the project is underway change orders inevitably follow.

 

Contractor requested Change Orders

1.    Error in contract documents

First thing here is to retain a qualified design firm with a robust document coordination and review process.

2.    Unforeseen Circumstances

• Firstly, perform detailed project definition as outlined above to mitigate the likelihood of unforeseen issues.
• Unforeseen issues can come up on any project
• To mitigate the impact, you should incorporate a reasonable contingency for your specific project.
• Contracts should address how unforeseen issues are to be evaluated and priced fairly.

3.    Bring the team together

• In the event of a claimed error in contract documents, you may face a dispute between Contractor and Architect.
• First, you’ll need the people skills to bring the parties together and find a mutually acceptable solution, plus a technical expert. (Hopefully, your owner’s representative has both.)
• Drawings, specifications and contracts need to be reviewed.

4.    Retain an experienced construction attorney

• To ensure you are fairly protected from change orders, claims and the like please retain an attorney qualified in construction law. Your corporate attorney will simply not be familiar with the nuances of the various delivery systems, precedents, etc. of construction law.

 

Change Orders from Design Errors and Omission

1.    Retain a qualified design firm as outlined above

2.    Understand design is performed by humans

• And as such is subject to human error. It will probably happen.
• Generally, 1-3% seems to be an acceptable contingency for design errors.
• Above this range you may be facing a dispute.
• If there’s a dispute, the first rule is to stay calm, polite and reasonable. I’ve yet to see a situation where anyone has deliberately made this kind of mistake.

3.    Bring the team together as outlined above

4.    Retain an experienced construction attorney as outlined above

 

Change Orders from Soft Costs

1.    Key here is to not forget this group.

• They must be subjected to the same control and discipline as above.
• Soft costs range from 20-70% of total project budget depending upon project size and complexity

 

Disclaimer

This is not a comprehensive treatment of change orders, but a concise primer intended as a practical quick reference. For more information on any of the topics above, please contact: iparr@tenzingone.com

Bio

Ian Parr is the Founder and President of Tenzing One, a Process-First capital project management platform that helps owners gain greater visibility, accountability, and control over construction programs. With more than 47 years of experience in project and cost management, Ian has spent his career helping organizations improve project outcomes through disciplined processes and owner-focused oversight.

After founding CCS International in 1979 and leading the firm for nearly five decades, Ian now focuses exclusively on growing Tenzing One, helping municipalities, school districts, developers, and owner’s representatives manage capital projects more effectively from planning through completion.