The nature of large-scale construction projects creates unexpected challenges, design variations, scope modifications, and scheduling changes. Effective project change management depends on implementing construction change orders. A construction change order means modifications to original contractual agreements for capital project scope alterations, design changes, schedule adjustments, or budget adjustments. 

In this blog, we will look into construction change orders, their types, the creation process, and best practices for efficient management.

What is a Change Order?

A construction change order is a written document that modifies the terms of a construction contract. It is invoked when the project’s design, schedule, pricing, or scope of work has to change. These changes can be initiated by the contractors, owners, or the design team and must be agreed to by all parties. Construction change orders are normal in U.S. commercial and public projects; however, they need to be managed properly so that delays and cost overruns do not plague the project. 

Common Reasons for Change Orders

There are several reasons why a construction change order may be issued.

• Design Modifications: At any point, stakeholders may request changes in the initial designs or require adjustments to the capital project scope.
  
  
• Unforeseen Site Conditions: Unexpected issues, such as subsurface obstacles or environmental hazards, can emerge, necessitating changes to the original plan.
  
  
• Material Availability: Certain materials may be required if unavailable or delayed, in which case substitutions may be allowable.
  
  
• Regulatory Changes: A change in the building codes or regulations will necessitate reworking support of a building.
  
  
• Errors or Omissions in Original Plans: Errors or oversights in design by someone in cost or technical estimating can require corrections.

Types of Change Orders in Construction

Understanding the different categories of change orders is vital for effective management. There are two types of construction change management details shared below:

Types of change order	Definition	Impact
Additive Change Orders	Additive change orders require different features, such as modifying design aspects, increasing the labor force, and implementing new materials.	These changes typically increase the project’s scope, timeline, and budget.
Deductive Change Orders	Removing or reducing elements in the original project plan under deductive change orders leads to decreased cost and project scope.	These changes reduce the project’s budget and may also shorten the timeline.
Time Extension Change Orders	An unpredictable situation requires extending the project duration.	It affects scheduling and may increase costs due to prolonged resource usage.
Substitution Change Orders	Extend the project timeline due to unforeseen circumstances.	It affects scheduling and may increase costs due to prolonged resource usage.
Construction Change Directives (CCDs)	Urgent directives without upfront cost agreement are used in emergencies.	This can lead to disputes if not properly documented and agreed upon post-execution.

Things to Include in a Construction Change Order

The following elements should be included in a well-structured change order.

• Project and Contact Information: Give details of the project name, place of implementation, and the contact details of the involved parties.
  
  
• Dates: Specify when the change order was issued and the dates for implementing the changes.
  
  
• Detailed Description of Work: An extensive description of the construction change order, with the relevant specifications. 
  
  
• Cost Estimates: Provide the edge on the money needed, such as labor, materials, and any extra cost.
  
  
• Schedule Adjustments: Specify any changes to the project timeline, including new milestones or completion dates.
  
  
• Authorization Signatures: Obtain the approval and signature of all parties to signify agreement and acceptance of the construction change orders. 

What is the Process for Creating a Change Order

The process for creating a construction change order typically involves the following steps:

• Identification: Recognize the need for a change due to new information or circumstances.
  
  
• Documentation: A full report about the proposed change should include complete information about the scope, cost, and projected timing.
  
  
• Submission: After documenting everything, submit the change order in the capital project initial plan to the client or project owner for review.
  
  
• Review and Negotiation: The proposed modifications receive review during discussions where parties negotiate essential adjustments before making necessary revisions.
  
  
• Approval: Approval involves securing formal consent signatures from all participating parties, including date stamps on construction change order documents.
  
  
• Implementation: The project plan receives the implemented changes together with their communication to all stakeholders.

Best Practices for Managing Change Orders Efficiently

Minimize disruptions along with cost control through the strategies which are given below:

• Clear Contract Terms: The original contract must contain specific details regarding the construction change orders, their handling process, authorization methods, and protocols. 
  
  
• Detailed Documentation: A complete documentation system should track every communication agreement and modification of change orders.
  
  
• Communication with Stakeholders: Ensure transparent and continuous dialogue among all parties to prevent misunderstandings and foster better collaboration.
  
  
• Change Order Tracking Systems: Real-time change order status updates become possible by implementing software tools that enhance system accountability.
  
  
• Cost Estimation and Risk Mitigation: Project decisions demand proper cost analysis and risk assessment before making changes by approving orders.

Conclusion

Construction change orders are essential in the capital project’s initial plan and modification management. However, these construction change orders are done keeping in mind the overall cost of a capital project, contract integrity, and project completion scheduled timeline. Through clear documentation, proactive communication approaches, and efficient tracking systems, stakeholders can reduce delays and stop budget overruns while making managing change order procedures more straightforward.

The OnIndus team understands all the challenges that capital project owners, government agencies, or the public sector face when handling construction change orders. Our team, with extensive years of expertise, helps you deliver customized solutions that resolve the distinctive problems present in capital projects. We help you with innovative project management technology to streamline change order procedures. Our specialized expertise helps keep projects fast-moving, compliant, and efficient even during sudden changes. Contact OnIndus to simplify the construction change order process. 

FAQs

What is a change order clause in a construction contract?

A construction change order clause defines the process for modifying the original contract terms, including scope, cost, or timeline adjustments. It outlines approval procedures, documentation requirements, and conditions under which changes can be made, ensuring transparency and preventing disputes between project stakeholders.

Can a contractor refuse a change order?

Yes, a contractor can refuse a construction change order if it falls outside the contract’s agreed-upon terms, lacks proper authorization, or significantly impacts project feasibility. To avoid conflicts, contracts should clearly outline change order procedures, including compensation, timeline adjustments, and dispute resolution mechanisms.

How can contractors avoid excessive change orders?

Contractors can minimize construction change orders by ensuring detailed project planning, accurate cost estimation, clear communication, and thorough contract documentation. Conducting pre-construction assessments, involving stakeholders early, and using construction project management software help identify potential issues in advance, reducing the need for frequent contract modifications.

What is the difference between a PO and a change order?

A purchase order (PO) authorizes the procurement of materials or services at agreed prices, while a construction change order modifies the original contract by adjusting scope, costs, or deadlines. A PO initiates purchases, whereas a change order ensures contract compliance when project conditions require modifications.