Change orders can be assets (increase the project value) or liabilities (squeeze your margins) depending on how they are crafted and handled. Here are a few quick-and-easy best practices to make sure yours are the former vs. the latter.
Components of a Change Order
Just like no two construction projects are alike, no two change orders are exactly alike; however, there are some best practices to make sure yours are thorough and steadfast.
- Overview Description: This is a written explanation of why the additional work is needed beyond the scope of the original agreement. In a nutshell: What changed and why?
- Itemized Costs: This is a line-item-level list of all of the additional costs (work and materials) resulting from the change.
- Total Cost: This is the sum of all of the line item changes and hence the total amount you expect your client to pay if they agree to this change order.
- Time Delays: Any impact on the timeline of the project as a result of this change order.
- Signatures: Digital or wet signatures of the original contracting parties (you and the client).
For bookkeeping’s sake, some other information to include are:
- Client’s name and contact information
- Project address
- Original contract # or name
- Your name and contact information
Why you Need a Bullet-Proof Change Order
Crafting a crisp and thorough change order has two real advantages:
- You will be confident that you and the client are “on the same page” before you commence any work. You’ll also have confidence you’ll get paid for that work.
- It creates a well-documented paper trail in case there is ever a dispute.
You can create a template yourself or use an online tool that does it for you like, Trak Changes. A great change order template is a great first step to making change a good thing.