Change Order Analysis: Why You Should Analyze Change Orders

The change order process can be a bit of a tricky one. First and foremost trying to follow your client’s orders and satisfying their expectations is something you generally want to be doing. 

However, you can’t just brashly say “Yes!” to everything demanded from you, so you’re going to want a system in place to keep your change orders both organized and easily understood, by all parties, so everyone stays happy and in the know.

Let’s take a look at analyzing your change order process to make sure everything stays on a level you’re comfortable with any time they occur.

How to Analyze a Change Order Proposal

Here’s what you should look at when analyzing a proposal for a new change order.

Refer to the Contract

Before you even start to think about doing the work requested, you need to double-check your contract. What are the limits to what can reasonably be requested from the client without needing a change order? Has the client exceeded those limits?

If they have, then what is the protocol in place to receive compensation for these changes? Check the contract before anything else and let that be the guide for any further action on your part. 

Establish the justification for the change order.

If a client has asked for a change that is outside of the scope of the original agreement, then you need to be able to show them why a change order is going to be needed. 

How are you putting together the information to show why things are now needing a change in order to continue onward? It’s important to have consistent reasoning behind the decisions you make in response to your client’s demands

There’s much less chance of any kind of dispute if you can reasonably justify the reasoning behind the change order. Always make sure that, at least to you, the change order question you’re putting out feels justified.

Put together a narrative description of the changes.

Outside of the tangible costs that can be shown during a change order –materials, time, etc– you need to make sure you’re able to explain how things came about the way they did..

Be able to read back exactly what has been said, and when, so that there’s no question of the timeline of events and what has been asked of you. 

A work diary that accounts for all conversations that have taken place between you and the client is a classic way to show the way things have gone down is a solid way of doing this.

Prepare itemized logs and checklists.

This is the other side of the previous point; as well as keeping track of the client’s changes and talks you need to be able to show their material costs and why a change order is needed to be able to cover them.

How are you keeping track of your costs? Is it unquestionably detailed and easy enough to parse that if another party went over them they wouldn’t leave with questions?

Show your costs and make sure they’re listed in such a way that the previous questions can’t be disputed. Your figures need to show the material reality of what is needed for the job to continue in the way that the client is requesting.

Determine the nature and extent of the change in scope inherent in the change order.

Make sure your change order is acknowledging the difference between what was originally agreed upon and the differences between that and the client’s new wishes.

There shouldn’t be vagaries and questions coming up that may lead to the idea of whether you were just not prepared for the scope of the project. Detail how and why the scope has changed, and why it’s not covered under you contracted under.

The previous discussion topics should cover this, but make sure the message makes this clear enough.

Analyze Your Change Order Processes to Make Them More Efficient

If you take the time to make sure the way you go about your change orders is consistent, then you will be less likely to have to deal with rushing and corner-cutting on the job site to meet your bottom line costs.

If you’ve had particularly rocky change orders in the past, then take note of why they didn’t go as you wished. Anytime change orders are not at least keeping your profits in line with what you originally planned for the project, then you need to figure out why.

Outside of the monetary aspect of keeping track of it all, you can save yourself a fair bit of time once you’ve fully streamlined your change order process by being able to check off exactly what is needed to make a reasonable change order argument.

How Change Order Analysis Helps With Negotiations

 When you’re creating a change order you’re basically stating a case as to why you need more compensation to continue with the project as the client has decided they want it to be. This is all out of contract and passed the initial agreement to the scope of what the project was supposed to be.

Being able to analyze exactly where disputes can show up and always have a counterpoint makes it so that any questions are already answered. This means that the client’s ability to out-negotiate you into taking a loss is removed.

Software to Help

Coming up with your own system to analyze each and every incursion of change orders onto your job site can be difficult, and inconsistent. 

We’re recommending Trak Changes to help with this. Trak Changes allows you to clearly update your client on every instance of additional costs beyond the initial agreement that accrue on the job site.

Clients, and anyone else involved, are updated immediately via email and are given to the option to sign off on changes right away and legally. This amount of transparency helps show your position and lessens the need to constantly analyze these interactions.

Change orders can go from a huge hassle, into being a legitimately profitable event this way.