Builders often are involved in home construction projects where the final price tag exceeds the initial estimate. It’s a financial risky proposition for the builder because the homeowner has the option to dispute the difference without clear evidence of what accounted for the increase.
In such situations, a change order—a formal modification to the original construction or remodeling contract—can bring not only a sense of relief but financial security as well.
The importance of change orders in construction projects
Change orders are standard practice in the home construction industry. They provide clear documentation of customer changes, problems on the job site, or material cost increases. The change order process ensures everyone is on the same page.
Change orders are a necessity, not a curse
Change orders are the “safety valves” of your construction project, providing a more controlled path to altering a project’s scope when things don’t go as planned. Change orders provide the necessary documentation when writing variances from the original contract, ensuring that everyone—you, your subcontractors, and your customer—agree with the revised scope, updated timeline, and adjusted costs. Change orders provide the transparency and protection to maintain an above-board style of project management.
Common scenarios requiring change orders
Some of the most common scenarios that initiate writing of a change order is initiated from the customer, the contractor, or other scenarios outside your control.
Customer scope changes: it’s not uncommon for a homeowner to make changes without understanding the downstream ramifications. Adding or removing features and upgrades, no matter how big or small, after construction begins changes the scope of labor and the amount and type of materials.
Contractor Scope Changes: from unforeseen conditions during demolition or construction, to material availability or cost increases, to mistakes in blueprints or specifications that require remediation, a contractor often must devise alternative solutions and adjustments that trigger a change in specifications.
Other situations may include permitting issues, subcontractor availability, or natural disasters/events beyond your control.
How change orders affect project management
As stated, even a small change can trigger a domino effect that adds up. Timelines can change dramatically, crews may need to be rescheduled, and budgets will fluctuate based on material expenses and unforeseen indirect costs, like permitting. These shifts can lead to delays, cost overruns, and even homeowner disputes if not handled carefully. This is why it’s critical not to leave the change order process to a verbal agreement or even an email that can be lost or accidentally deleted.
How to create and manage change orders
Managing change orders is critical for any construction professional, and communication is vital. Establishing a transparent process for documenting changes using a standardized change order form that captures details and signatures from both the customer and you, the contractor is essential.
Key elements of a change order as part of a construction contract
Here are key elements to include in a change order agreement:
Project information
Date of the changes
Detailed description and reason for the change
Scheduled impacts
Cost breakdown and revised budget
Signatures
If appropriate, attach or include supporting documentation for additional support.
Implementing a change order agreement
Steps may vary depending on the project or your company policies as well as the type of change, but for simplicity, we’ve outlined how to implement a change order:
- Recognize when a change is necessary and clearly define the scope of the change and how it deviates from the original contract.
- Use a template or standardized document to capture all the relevant details and supporting documentation as needed.
- Communicate or discuss with your customer in detail, being transparent about the impact on the timeline and budget. Answer any questions or concerns your customer may have.
- Update all the appropriate master documents, including the schedule and budget.
- Proceed with the revised work as outlined and keep detailed records.
- If possible, maintain a change order log to track and manage all the changes throughout the project.
How technology streamlines change orders
Technology has rapidly transformed how construction pros like you manage change orders. Cloud-based platforms make the process more efficient, transparent, and accurate with real-time collaboration, digital documentation, and automated workflows, streamlining everything from creation, to approval of a proposed change, to documenting an entire project history.Â
Digital tools for managing change orders
Think of your digital tools as an all-in-one command center for handling project changes. Most cloud-based platforms offer a centralized hub for creating, tracking, and managing change orders. The end game is to reduce errors, improve communication, and lead to more efficient and profitable business.Â
How Buildxact simplifies a change order agreement
Buildxact simplifies change order management by centralizing everything in one user-friendly platform. Imagine having a digital command center where you can effortlessly create, track, and manage all your change orders and the impact on project scope and your project team. With Buildxact, you can quickly generate professional change order forms, automatically update project budgets and timelines, and easily communicate with clients.Â
Buildxact allows you to make changes or adjustments to the contract. The process is the same regardless of your choice, ensuring a charge or credit is made to the contract. It also allows you to mark up items as you see fit. Once you finish a change or adjustment, you can send it to your customer for a digital signature with your customized, branded change order estimate.
It’s a powerful tool that simplifies change orders, saving time and money while running your projects smoothly.
Buildxact solves challenges with construction change orders
Keeping construction projects on track can feel like a never-ending job, and change orders can complicate the process if not managed properly. Common challenges include miscommunication and keeping track of multiple change orders.Â
We recommend prioritizing clear communication, detailed documentation, accurate cost estimates, and embracing technology like Buildxact to streamline the process.
Miscommunication between general contractor and stakeholders
If you, your customer, subcontractors, and other stakeholders have different ideas about any project changes, it can cause chaos. Establish a clear and consistent communication pattern to eliminate misunderstandings that could lead to disputes, delays and project budget blowouts.Â
Tracking multiple change orders
As a project and a project budget evolve and change, keeping track of all the moving parts takes dedication. It’s the greatest juggling act, and you’re not in the business to be a juggling act.
Each change request adds to the project’s complexity, and keeping track of change requests can be overwhelming. A systematic approach to documenting, organizing and tracking can get lost in the paperwork shuffle, leading to confusion and the domino effect described above, where timelines and a project budget shift as change requests alter the completion date.
Simplify change orders with Buildxact
Ready to say goodbye to the headaches that come with writing change orders? Meet Buildxact, an intuitive cloud-based platform that will simplify the change order process. Our software centralizes everything you need in one user-friendly place. You’ll be able to create professional change order forms, automatically update project budgets and timelines, and seamlessly communicate with clients—no more shuffling paperwork that alters contract terms. With features like digital signatures and integrated cost tracking, you’ll save time, reduce errors, and keep projects flowing smoothly.Â
Buildxact empowers you to manage change orders simply and reliably. Start today with a risk-free, 14-day free trial, or schedule a demo.
