Avoid Inflated Construction Costs: How to Stop Change Order Charges

You’ve calculated your budget, solidified your vision, and now you’re ready to get your construction project started. But before you sign the contract, you need to be aware of and prepared for change orders.

Without preparation, change orders can stall the length of time it takes to complete your project. They can tack on additional charges that you could have avoided, and cause friction with your contractor.

Read on for our best tips on how to avoid change order charges and keep your project under control!

What is a Change Order?

Although change orders can occur in any industry, you’re most likely familiar with the term because of construction horror stories. Change orders amend the current construction contract to document any kind of change to the original work.

Most of the time, they either increase the contract price, increase the time it takes for the contractor to complete the work, or both.

Construction projects can be incredibly complex, making it impossible to predict every challenge that could occur. This makes change orders necessary because they’re a way for the owner and contractor to agree to the new parameters, price, and time of a job.

For example, let’s say you want to add a window to a wall that wasn’t in the original plans. A change order allows for this modification and ensures everyone is on the same page.

Although they can be unavoidable, it’s important that you avoid change orders as much as possible because they prolong the current job. Moreover, contractors will typically add 20% to a contract after they calculate the cost of materials and labor or a flat fee.

Include More Detail

The first and most important step to avoiding change order charges is to ensure that the project design is as detailed as possible. Change orders commonly occur because of exclusions, additions, and unforeseen events.

You can reduce the chance of needing a change order for exclusions and additions, also known as discretionary change orders, by cutting out as much ambiguity as possible. Make sure the structure, engineering, fits, finishes, and materials are finalized.

You want your expectations to perfectly align with what you’re seeing in the project details. Here are a few specifications that you should also include and go over before your project begins:

• Land surveys or geotechnical samples so that there’s an understanding of the land where your construction project is going to be built
• Go over floor plans in detail with your design team before approval
• Detailed blueprints based on your approved floor plan that are stamped by a designer or engineer
• Detailed Scope of Work written by the contractor
• Have any specific requests and instructions in writing

In other words, design, planning, and any final decisions should be made before the work begins.

A great way to avoid this all together is to work with a construction company that includes design and permitting as part of their process. A one-stop-shop or design-build model is a great choice.

Establish Clear Communication

You can’t plan for unforeseen events that are usually revealed during demolition. These could be termites, mold, and hidden structural issues. It’s important that in these cases, your contractor has a standard procedure in place for processing change orders, including notifying you beforehand.

When a contractor suspects that a change order will be needed, you want to be informed as soon as possible so you’re not hit with unexpected charges later on.

If you do need a change order for exclusions or additions, it’s best to communicate this with your contractor early on. As your project comes closer to completion, your change orders will become more timely and costly, and the changes may even push your contractor’s schedule back for other jobs.

A good change order from your contractor includes:

• Signature lines
• All changes in specific terms
• Provision about calculating the cost of changes, along with schedule and equipment adjustments
• Identifies the deadline for an owner to accept or reject the change order

Avoiding Disputes

The majority of legal cases in construction contract disputes are caused by change orders. During complex construction projects, communication can easily break down.

Of course, the best way to avoid charge order disputes before you even establish a relationship with your contractor is to look over their contract. Contracts with these provisions are enforceable, and protect you from essentially handing a contractor a blank check:

“No claim for extra work or cost shall be allowed unless the same was done in pursuance of the written order of the Engineer, approved by the owner.”

You can also give implied consent, which means that the contractor informed you of change orders that needed to be made, and you didn’t tell them to stop. It’s common for courts to search for any kind of implied consent during change order disputes.

Rule of thumb: It’s best to have all your communication and agreements with your contractor in writing!

Staying Within Budget

As you can see, with just some extra preparation, you can save yourself a lot of money by avoiding a change order. Ensuring that both you and your contractor are on the same page with some established rapport will save both of you from unneeded stress.

It’s possible for your construction project to run smoothly if you have a clear vision of what you want. Plus, your contractor’s scope of work needs to outline how they’ll complete your vision. Lastly, you also want to make sure that everything is in writing.

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