How to deal with change orders
If you’ve ever overseen a project – whether it was for your high school science fair or the development of a multi-million-dollar, mixed-zone property – you’re likely aware of Murphy’s Law. Or at the very least, you’re familiar with the sentiment behind it: Anything that can go wrong will go wrong.
At first glance, the adage might seem like the very definition of a pessimistic perspective. However, the phrase only exists as a counter measure to what psychologists refer to as optimism bias. No matter our gender, nationality, cultural background or age, we all tend to believe obstacles are less likely to affect us than others.
Of course, most humans aren’t commercial construction suppliers. For those working in this field, Murphy’s Law might be better updated to “Anything that can be changed will be changed.”
Change orders
On big projects, changes are something to be anticipated. Even if the specifics of a change are completely unknowable, we can be assured that the more complex the project the more likely it is that changes will occur. When that happens, it’s dealt with through change orders.
Almost everyone in the construction industry – and many other sectors by now – will be familiar with change orders. In its simplest form, a change order is an agreement that details any alteration to an original plan. It will document the cost of the change and its effect on the project’s original timeline.
The benefits of change orders
Having these agreements in place ensures transparency, improves communication and protects everyone involved because…
- Costs are agreed upon before work is started: Budget overruns and timeline delays can be an enormous source of trouble for all parties involved in a project. A proper change order ensures everyone is aware of the changes to the original budget and initial timeline so there are no surprises.
- All changes are documented: There’s no need to rely on memory or put undue trust in a verbal agreement. Because modifications are agreed upon in a formal contract, both parties are bound by its stipulations.
The challenges of change orders
The practice may be common and the benefits clear, but as Murphy’s Law would suggest, that doesn’t mean problems don’t arise. The largest issues businesses experience with change orders are the result of…
- Not grasping the scope of the change: Too often, a change order will be agreed upon with only a quick reference to the original contract. Without a deep understanding of the initial agreement, changes can’t be properly analyzed and determined to be worthwhile. You may be signing your business up for something it can’t deliver or that will lead to increased costs.
- Not having a process in place to deal with change orders: While most businesses will log their change orders in some fashion, maintaining these records can be overwhelming. Just as you need a good understanding of the original contract to make informed decisions, you also require knowledge of every subsequent change to that agreement. Without a process for managing the change orders, the time it takes to manually find, sort, track and even create new change orders can add up quickly and lead to errors.
contractERP
While Access IT can’t quite eliminate Murphy’s Law, our contractERP solution can provide some sound reasoning for your optimism bias.
For commercial construction suppliers, contractERP equips you with the tools necessary to manage every aspect of your jobs from bid to closeout – including change order management. We know that change orders can make or break a job. And we understand the challenges specific to your industry. That’s why we designed contractERP’s change order solution to be tied directly to the master contract.
Because every project-related quote, change order and billing entry is connected and grouped under the initial agreement, you have full visibility into each project’s costs, profitability and schedule. And you can find, sort and track change orders with more ease, speed and accuracy than ever before. Not only does contractERP provide you with the right information, it also streamlines your process to reach the right decision – and avoid taking on additional costs or increasing timelines.
Reducing your risk while increasing your profit is part of our mission at Access IT, and this is exactly what our contractERP solution is designed to provide. We’d love the opportunity to show you how.
To see firsthand what contractERP can do for your commercial construction supply business, schedule a demo with us right now by clicking here.
