Change Orders Part 4

March 20, 2003

Submitting and Negotiating Change Orders

Change orders in their completed form must be submitted as soon as possible. This will require soliciting and receiving material and subcontract prices in a timely fashion. Depending upon the customer and your established relationships, you should deliver your change order requests in person, taking with you, of course, a signed transmittal.

Before actually submitting the change order, check that all figures, information, and back-up material are correct and in order. The better your preparation, the less chances there are for conflicts and misunderstandings. You should conduct a final review of the change order prior to submission.

In the absence of an established time period for review and approval, the submittal should set a reasonable date to accept or deny the change order. In preparing for negotiations, it is advantageous to anticipate the customer’s position. Your presentation should be planned to address that position so as to defuse objections. Ask someone else in your firm to role-play your presentation, taking the owner’s point of view, prior to making your presentation. Regardless of what practicing you do, though, nothing will have as much impact as complete and well-documented back-up material. This will expedite change order processing, and will help your customer sell it to the customer’s upper management.

Approved change orders
Your firm should have a policy on who in your company may authorize your employees to begin work on change orders and the limits on the amounts they can approve. Your field personnel should be trained to refuse to do any work that has not been properly authorized by someone qualified to do so. Doing a "quick favor" for the GC's superintendent that only took a four person crew a 1/2 hour to do can end up costing your company several hundred dollars.

Just as importantly, establish in writing (before the job begins) who representing the General Contractor is approved to sign change orders and to what dollar amount they are authorized.

Once the change order is formally approved, necessary modifications to subcontracts and purchase orders can be made. Approved change orders will also be entered on your subsequent progress estimates and reports.

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