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Change Order is the Key Profit Loss Center You Can Avoid

Preventing Change Orders is Critical

To lessen the number of change orders, you have to start with a good, solid quality control program. And we have that program here. It’s composed of not only checklists, but it also includes design standards that we put in place. Part of it is that we have all the drawings reviewed in a method that we standardize here at the office.

A lot of firms have their own checklists. What separates ours from theirs is that our checklists focus on change order prevention. When you are thinking about your drawings and about what may create a change order, you can prevent it and address it in your drawings. This is instead of going down through a checklist.

Still, you can have all the checklists you want. But unless you have the discipline to execute, that checklist is worthless. So here we have it all over the office, the discipline to execute. We have that phrase all over the office. We also use it often. Then people would know that these checklists don’t mean anything unless you use them.

Debriefing Process Helps with Hindsight

Furthermore, we have a debriefing process. This means that once the project is complete, we come together to see what we learned. Could we have avoided any mistakes? Were the systems implemented in the correct way? What could we do better? We’re always trying to improve those quality control systems. We’re only as good as the last change order.

I know that our clients are going to grade us on the number of change orders. Everybody has good designers and everybody has good production type architects. But, unless you’re able to address those change orders, none of that means anything. So that is what we work on. We know that we’re graded through change order prevention. We know that our drawings need to be almost perfect. And we need to be thinking about what the contractor is looking at when they’re checking out our drawings.

Change Orders You Can’t Address

We do the best we can to prevent change orders. There are some that you can’t address. There are two that stand out. The first one is unforeseen conditions. There could be underground utilities that you don’t know about. There could be some flaws with the site that were not revealed. It’s possible that there’s contaminated soil in there. There could be some unforeseen conditions on some products. No matter how hard you research, you can’t uncover what those compatibilities are. The other aspect is when the client drives the change order. This happens when they change something halfway through the project, or during construction. That is something that you can’t control.

Here we believe that if we can limit to only customer-driven change orders, we can handle the rest. And we bring that up to the client, that there might be some unforeseen conditions. Or there are some things that they may want to see differently later on. They could realize that if they brought up these other ideas while the project develops, we cannot control those. But we would still let them know that we will work with them to try to cut back the impact of those unforeseen conditions. Things like weather will create delays. It could create floods, it could create some times that during the season that make it difficult to build. That creates delays that will cost the client money. We cannot address those. Those are acts of God.

Scheduling Construction Helps

But we could improve these things by helping the client schedule the construction at a proper time. Then we have the contractor personnel execute the construction. It’s especially preferable during the dry season. That can help some of it. Also, we have the expectation of knowing what could delay the project, whether that’s during the rainy season or the cold weather. Or whatever your seasonal weather interruptions may happen. Then you could be better prepared for that and you might have some contingencies to address those issues.

Change Order

It is difficult to see how much money you can save through the prevention of change orders. Of course, if you don’t have any change orders, you’re not spending any, right? But also, it’s important to realize that a lot of contractors are not so honest. I’m not saying all of them, because there are a lot of very good contractors out there. But, some of the not-so-honest contractors will address a change order as another profit center.

Some Contractors See Change Orders as Profit

We have seen contractors that really focus on those change orders. They will review the drawings before to see any possibility of having any change orders. Often, if they don’t see the possibility for change orders and the competition is stiff, they won’t go after the project. That is how they’re able to make their money. They might bid it low and then they will hit you with that change order at a time of point of no return.

Say you have to occupy that building or you are under schedule, but you promised that building for people to start to move in or start to use it. Or you have some commitments or promises that you made. Some contractors know that you’re going to have to pay it. You’re going to have to pay the money. We don’t believe in that practice. A lot of our clients are very sophisticated and smart to be able to see that but there’s a lot of them that don’t. And those clients are fertile grounds for the contractor to go after that change order.

For us, it’s a very difficult situation to accept. We don’t see it as a proper business practice. They depend on flawed drawings to be able to create the change order. They will look at the design professional. And sometimes, no matter how clear it is, if they want to get a change order, they will try to fight you to get that change order. So far, our project has been able to do very well against that practice. And our hope is that this will continue for time to come.

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