Commercial – Change order in construction

Change order in construction: Here's what you need to know about change orders

What is change order in construction?

A change order in construction is piece or phase of project work which is added, deleted or altered from the original scope of the project and project contract due to an unforeseen change or circumstance.

Change orders are the formal mechanism and medium for project parties to communicate changes which require a project party to action or do something which falls outside of that initial scope.

What is a change order for in construction?

As anyone who has worked on a construction project knows - construction projects don't always (or ever) go to plan. And they never will.

No matter how well a construction project is planned and outlined ahead of time, there will inevitably be changes and alterations made during the course of the project.

Some of the forces which cause these changes and alterations are within the client, contractor and subcontractors control including:

The client uncovers a specific challenge or opportunity which opens up a new path to delivery or management
Parts of the project were incorrectly estimated
The asset gets new features or design changes

While there are many external forces at play too including funding and financial issues and changes, technology changes, weather conditions and more.

Change orders are critical processes in construction projects because they enable projects and project parties to be flexible in their approach to completing a project while ensuring there are formalities and fairness around people getting paid for the work they do.

Without change orders, owners and contractors would find it extremely difficult to manage the changes required to get a project completed. A contractor may ask or issue an instruction to a subcontractor to change their plans and approach to a phase of works, but then the subcontractor must shift the resources around which cost them time and money, and then they are not sure exactly what's required etc.

The change order is the glue which ties these communications together, gives everyone the information they need, and formalises the agreement so that there is more than a handshake or verbal agreement governing how and what people get payed for when work does fall outside of the scope of that initial contract.

How do you write or document a change order?

There are a few ways that construction companies write their change orders - all with the goal of simply communicating and outlining the change which needs to be made in a clear and concise manner.

The most common way that people write a change order or document the change orders is through change order form.

While there are a few different change order forms floating around and while construction companies do have the scope to customise what their change order form looks and feels like, most companies use a pretty standardised approach to communicating change orders.

Every change order will obviously need to include the important logistical and record keeping information like the date of the change, type of change and description of change - while the rest of the document should be focused on giving the subcontractor or change recipient the detail they need to come back with an estimate or action the change immediately.

You can see the change order example below, or read more about what should be in your change order form here.

Preview the full change order

Use and customise this change order form for your own company.

See the template →

What's the best change order process in construction?

Paper-based and manual construction change order process

Many construction companies still use a traditional change order process which resembles many of their other processes - which are conducted using paper-based forms, folders and email.

A client or contractor will write up a change order on a change order form, letter or email, and then send it to the change recipient.

This recipient will then open or receive the change order and respond with their thoughts or a signature or signoff that they agree to the change and can get it done.

While this process certainly works, manually managing this process does take time and resources. Collaborating via email or phone and writing up these forms requires admin and effort - not to mention that emails and other important information can easily get lost or buried.

Streamlined change order process

It's for the above reasons that more construction companies today are beginning to use the power of change order software and automation to better manage their change order process.

How and why?

With software and change order automation, these companies can streamline and standardise the change order creation, management and approval process.

Construction companies can create a change order form inside of these platforms in a digital format, and setup simple and powerful construction workflows which automate the collaboration and change notification process.

When a client or contractor issues a change order, they simply fill out the form and signoff on the document - which then automatically notifies the receiving party that the change is sitting in their 'column' ready to be signed off.

They can then stamp their approval signature on the form and it can be closed off and agreed to. Once signed and closed, the record of the workflow and the document itself is safely stored in the platform in case it needs to be referred to later on in the project.

What's the best change order process for your construction projects?

There are some obvious benefits to running your change order process digitally, including the fact that changes can get made faster and with less communication and collaboration delays, while it also improves the professionalism of how each party manages the process.

In saying this, if you don't already use software and only manage a couple of change orders a year, then writing letters and using manual processes may still be efficient enough for you, which is relevant for small residential construction companies and similar.

It's at scale that managing change orders this ways become virtually impossible, and massively increases commercial risk and losses. This is where proper systems thinking is necessary.

Change orders in construction are a critical component of good project management, and they will continue to be for as long as construction projects require changes during the course of the project - which I have a feeling will not change any time soon.