Why Change Orders Happen in Construction Projects

Navigating change orders in construction projects is a crucial but sometimes puzzling aspect of the process. Although they may bring frustration and unforeseen expenses, gaining insight into their underlying causes can empower you to better oversee your project. This post is dedicated to unraveling the mysteries behind change orders and providing practical guidance on how to successfully navigate through them.

Common Reasons for Change Orders

1. Sloppy Contractor Work

One of the most common reasons for change orders is a lack of thoroughness during the initial project assessment. When contractors overlook details or make hasty evaluations, it can lead to unexpected costs later.

Red Flags to Watch For:

Incomplete Initial Assessments: If the contractor rushes through the initial site visit, it's a sign that important details may be missed.Lack of Detail in Proposal: A vague or overly general proposal can be a precursor to change orders.Missing Items: If items that were discussed or appeared on the inspection report are conspicuously absent from the contractor's scope of work, it's a major red flag.

2. Low-Ball Bids

Some contractors intentionally underbid projects to secure the contract, knowing full well that they'll issue change orders later to make up the difference. This tactic is often employed as a sales strategy, but it can backfire, leading to distrust and tension between both parties.

Long-term Implications:

Erosion of Trust: Once a contractor starts adding change orders, the initial trust can quickly erode.Legal Disputes: In extreme cases, this can lead to legal action.Emotional Toll: The stress and frustration can strain the working relationship, affecting the project's overall success.

3. Hidden Issues

Despite your best efforts during the inspection period, some issues are simply unavoidable. These hidden problems often lie within the walls or under the floors, making them impossible to detect without invasive procedures.

Real-Life Example: In a recent project, we removed flooring only to discover that the prior owner had inadequately repaired the joists. This was an unforeseen issue that significantly impacted both the timeline and budget.

Expert Advice

1. Choosing a Reputable Contractor

Selecting a reputable contractor is crucial for minimizing the risk of change orders.

Vetting Tips:

Check References and Reviews: Always ask for and check references. Online reviews can also provide valuable insights.Case Studies: Reputable contractors should be able to provide examples of similar projects they've completed successfully.Licensing and Bonding: Ensure the contractor is both licensed and bonded to protect your investment and ensure a level of professionalism and accountability.

2. Evaluating Bids

While it may be tempting to opt for the cheapest bid, this can often lead to more costs down the line. A comprehensive bid may seem expensive upfront but can ultimately save you money by reducing the likelihood of change orders.

Key Insight: If a bid seems too good to be true, it probably is. Always scrutinize low bids and consider the long-term implications.

3. The 'Whoopsie' Budget

Unforeseen issues are a reality in any construction project. Therefore, it's wise to allocate a contingency budget to cover unexpected costs. A good rule of thumb is to set aside 10-15% of the total project cost for this purpose.

Additional Tips

1. Regular Communication

Open and consistent communication with your contractor is essential. Regular updates allow you to preemptively address potential issues, reducing the likelihood of last-minute change orders.

2. Third-Party Inspections

For larger or more complex projects, consider bringing in an independent inspector or Project Manager (e.g. Off Leash Construction) for an unbiased assessment. This extra layer of scrutiny can provide additional peace of mind and may help identify potential issues before they become costly problems.

Change orders are an inevitable part of construction projects, but they don't have to be a nightmare. By taking a proactive approach—choosing a reputable contractor, critically evaluating bids, and preparing for the unexpected—you can significantly mitigate their impact. Armed with this knowledge, you can navigate your next construction project with greater confidence and fewer surprises.