• Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
  • ENGINEERS
  • RADIANT & HYDRONICS
  • INSIGHTS
  • MEDIA
  • RESOURCES
  • EMAGAZINE
  • SIGN UP!
cart
facebook instagram twitter linkedin youtube
  • CONTRACTORS
  • BATH & KITCHEN PRO
  • BUSINESS MANAGEMENT
  • HIGH EFFICIENCY HOMES
  • TECHNOLOGY
  • WATER TREATMENT
  • PMC COLUMNS
  • PMC COLUMNS
  • Dave Yates: Contractor’s Corner
  • John Siegenthaler: Hydronics Workshop
  • Kenny Chapman: The Blue Collar Coach
  • Matt Michel: Service Plumbing Pros
  • Scott Secor: Heating Perceptions
  • ENGINEERS
  • CONTINUING EDUCATION
  • DECARBONIZATION | ELECTRIFICATION
  • FIRE PROTECTION
  • GEOTHERMAL | SOLAR THERMAL
  • PIPING | PLUMBING | PVF
  • PME COLUMNS
  • PME COLUMNS
  • Christoph Lohr: Strategic Plumbing Insights
  • David Dexter: Plumbing Talking Points
  • James Dipping: Engineer Viewpoints
  • John Seigenthaler: Renewable Heating Design
  • Lowell Manalo: Plumbing Essentials
  • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
  • RADIANT COMFORT REPORT
  • THE GLITCH & THE FIX
  • INSIGHTS
  • CODES
  • GREEN PLUMBING & MECHANICAL
  • PROJECT PROFILES
  • COLUMNS
  • SPONSOR INSIGHTS
  • COLUMNS
  • Codes Corner
  • Natalie Forster: Editorial Opinion
  • Guest Editorial
  • MEDIA
  • PODCASTS
  • VIDEOS
  • WEBINARS
  • RESOURCES
  • INDUSTRY CALENDAR
  • DIRECTORIES
  • EBOOKS
  • PM BOOKSTORE
  • CE CENTER
  • MARKET RESEARCH
  • CLASSIFIEDS
  • EMAGAZINE
  • EMAGAZINE
  • ARCHIVE ISSUES
  • CONTACT
  • ADVERTISE
  • PME EMAGAZINE ARCHIVES
search
cart
facebook instagram twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
    • BATH & KITCHEN PRO
    • BUSINESS MANAGEMENT
    • HIGH EFFICIENCY HOMES
    • TECHNOLOGY
    • WATER TREATMENT
    • PMC COLUMNS
      • Dave Yates: Contractor’s Corner
      • John Siegenthaler: Hydronics Workshop
      • Kenny Chapman: The Blue Collar Coach
      • Matt Michel: Service Plumbing Pros
      • Scott Secor: Heating Perceptions
  • ENGINEERS
    • CONTINUING EDUCATION
    • DECARBONIZATION | ELECTRIFICATION
    • FIRE PROTECTION
    • GEOTHERMAL | SOLAR THERMAL
    • PIPING | PLUMBING | PVF
    • PME COLUMNS
      • Christoph Lohr: Strategic Plumbing Insights
      • David Dexter: Plumbing Talking Points
      • James Dipping: Engineer Viewpoints
      • John Seigenthaler: Renewable Heating Design
      • Lowell Manalo: Plumbing Essentials
      • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
    • RADIANT COMFORT REPORT
    • THE GLITCH & THE FIX
  • INSIGHTS
    • CODES
    • GREEN PLUMBING & MECHANICAL
    • PROJECT PROFILES
    • COLUMNS
      • Codes Corner
      • Natalie Forster: Editorial Opinion
      • Guest Editorial
    • SPONSOR INSIGHTS
  • MEDIA
    • PODCASTS
    • VIDEOS
    • WEBINARS
  • RESOURCES
    • INDUSTRY CALENDAR
    • DIRECTORIES
    • EBOOKS
    • PM BOOKSTORE
    • CE CENTER
    • MARKET RESEARCH
    • CLASSIFIEDS
  • EMAGAZINE
    • EMAGAZINE
    • ARCHIVE ISSUES
    • CONTACT
    • ADVERTISE
    • PME EMAGAZINE ARCHIVES
  • SIGN UP!

The Change Order Challenge

June 3, 2002
Preserve your profit in the field.

Illustrated by: Jim Hunt
Overall, the job went pretty well — fast-paced and harried (as usual) — but no major problems. There were a few changes by the owner and architect during the work, plus a few more your own guys flushed out, but nothing that couldn't be absorbed, you thought at the time.

But now, here you are, hunched over your final job-cost report and something's wrong. The profit line item on the report seems much smaller than you thought it would be. You suspect (and hope for) clerical error, and timidly begin examining the report in more minute detail. Sure enough, the rows and numbers add up.

Accepting your fate, you force your mind to reflect back on the job, straining to recall any singular or remarkable examples of waste or miscarriage that would explain this profit shortfall.

No immediate, ready answers spring to mind, but there is something, however, that's starkly clear: the job’s over. It's been more than a month and there's no going back to ask for more money now!

You didn't even know the job was a loser until five minutes ago! How could you have? Final billings were still arriving from vendors and subs up until the day before yesterday. And now it's too late. Now, all you can do is clean up the mess and search for solutions.

Discovery

You eventually piece together what went wrong. Those seemingly minor (remember?) changes and alterations to your work during the course of the project weren't quite as minor as you had been led to believe.

In fact, when added up, they turned out to be quite costly. A little labor here, some additional material there, then there was that trim detail that was changed on the fly, and so on. You grit your teeth and do the math. You figure you coughed-up almost $4,200 in extras.

Your original profit line item was only $10,000, but, coupled with other overages suffered in general conditions, you end up unceremoniously saddled with a mere half of your original profit estimate.

Basically, you're stuck. Once again you’ve been burnt, and once again you vow that "from here on out, everything's gonna' be in writing! We'll stop the damn job if we have to!"

So, how do you get a handle on out-of-control changes in the field?

The Change Order

In today's construction world, it is truly rare that any building project is completed without extras.

Extras are changes that happen after the original base contracts for construction are let. Though they could offer the owner a credit (through, perhaps, an item of work that was deleted), for the most part, these extras almost always involve additional charges to the owner.

Items such as the unanticipated upgrade of electrical service, alteration or rerouting of site utilities, or unforseen subterranean encumbrances (i.e. an old building that was buried on site that no one knew about) are common fodder for these types of extras.

These extras, if agreed to and accepted by the owner and architect, eventually become modifications to the base contract or (more generically known as) change orders. A change order is simply written evidence that an owner has requested the contractor to perform additional labor and/or provide additional materials for improvements which weren't delineated in the original plans and specifications.

Causes for such changes include:

  • The owner or architect having a change of heart over a detail after the project has begun.

  • The owner not understanding the architect's original intent/detail as set forth in the original plans/specs.

  • Alteration due to code, covenant, ordinance or other governing body interpretation.

  • Actual errors on the architectural plans/specifications and/or poorly defined details.

  • Unanticipated, unforeseen or unknown (often subterranean) site circumstances.

Of course, there may be other reasons for legitimate changes. The key ingredient is that the change in question was unanticipated by all of the parties. A contractor who simply "blows his bid" by missing something in the plans and specifications that was clearly defined as being in his scope of work generally does not have justification to ask for additional compensation.

Get It In Writing

But, let's assume it's not your fault. As much as you want to get along with everyone — owners and design professionals alike — situations like those listed above are normally not your fault.

Generally (unless there's very strict language in the specifications or your contract to the contrary), you are well within your rights to request additional remuneration should one of these circumstances arise. And for some people, this simple exercise of asking for additional compensation comes quite hard. There's a natural tendency for these sorts of people to refrain from rocking the boat.

But business is business. And like it or not, we're all in a field that is growing more global and homogenized (and therefore intrinsically colder in spirit) everyday. The small-town relationships of old are fading from view and the sentimental vision of two business people simply trusting one another is unfortunately and sadly growing endangered.

But perhaps we shouldn't be surprised. All sides — the contractor, architect and owner — take a business risk when they enter into a construction project, and all become equally susceptible to potentially large losses should changes spiral out of control.

And so, the change order becomes important. The change order is transformed into a clinical, executable and isolated business negotiation that demands the same level of importance and attention to detail as the original base contract.

Also, in our litigation-conscious world, the change order becomes a document that may have potential legal ramifications should the parties disagree later on down the road.

We don't work in Wonderland. Projects vary, and so do the personalities of owners and architects. Some jobs genuinely include a true spirit of cooperation and partnering that make the change order process relatively fair and smooth. But some projects don't. It can sometimes be quite difficult (if not impossible) to get anyone to sign anything, let alone a change order.

New Discipline

But the effort must be made and, like any skill that's worth learning, it takes a committed, focused and disciplined effort to master the change order process. You basically need three elements:

    1. The courage and conviction to demand compensation when legitimate changes arise;

    2. The ability to price, negotiate and execute these changes quickly and efficiently; and

    3. The ability to enact changes with as little disruption as possible to the project schedule.

Your people in the field need to follow this new discipline, too. Part of mastering the change order skill is the proper instruction and motivation of your job foremen and managers.

Simply scheduling one meeting and demanding the field people obey your words won't do it. A sound program will invariably include periodic, repeated and consistent reinforcement by you and those doing your administration work.

Here are some other thoughts to keep in mind when creating your change order program:

  • Pricing the changes punctually and getting those prices to the decision-makers is vital. Most changes are relatively small in scope and should be costed the very same day if possible.

  • Without quelling enthusiasm, try to make your workers cognizant of not creating changes themselves, often through what they perceive as "a better way to build it."

  • All decision-makers in the office and the field should be aware that changes must always require full and proper documentation of some kind. The decision on whether to go with a priced or unpriced version will depend solely on the situation and individual.

  • Make sure all your field people (who apply) have the necessary forms and documents at their ready disposal when changes occur. It would be a shame to loose profit simply because the paper wasn't available.

  • Sometimes, especially when there simply isn't time to price the changes as fast as they're occurring, try to structure the changes around a time and material, or hourly, fee. Then be forthright and fair when it comes time to bill. This sort of honesty and fair play can often win repeat customers.

  • Create a program that involves as little as possible your field workers' time. You want your project managers and superintendents performing the actual work of construction, not pricing and negotiating change orders.

  • Back at the office, you need to track change orders individually by job, classifying each with some sort of cost code and type (whatever works with your accounting system), and break out your actual costs into (generally) labor, material, subcontract and equipment. Do it as they come in. Don't wait until the job is completed or it may snowball on you.

A complete change order program, like any program that stands a sincere and genuine chance of becoming successful, is something obtained only through a dedicated, attentive and involved effort on the part of everyone in an organization.

The ability to ask for more money does not come easy to a lot of people, but it is a necessary skill that is vital in maintaining your company’s financial health. By implementing some or all of the items in this piece, you'll be well on your way to launching your own profitable change-order program.

Share This Story

Looking for a reprint of this article?
From high-res PDFs to custom plaques, order your copy today!

Recommended Content

JOIN TODAY
to unlock your recommendations.

Already have an account? Sign In

  • Worker using the Milwaukee Tool SWITCH PACK drain cleaner

    Pipeline profits: Drain cleaning, pipe inspection create opportunities

    Drain cleaning and inspection services offer lucrative...
    Plumbing News
    By: Nicole Krawcke
  • Uponor employee, Arturo Moreno

    The reinvestment in American manufacturing and training

    Plumbing & Mechanical Chief Editor Nicole Krawcke and...
    Plumbing News
    By: Nicole Krawcke and Natalie Forster
  • March 2024 Women in Plumbing hero image of woman engineer overlayed by circle of hexagon shapes with numbers from 1 to 10

    Celebrating 10 Influential Women in the Plumbing Industry

    Celebrating Women's History Month and Women in...
    Plumbing News
    By: Nicole Krawcke
Subscribe For Free!
  • eNewsletters
  • Online Registration
  • Subscription Customer Service
  • eMagazine
  • Manage My Preferences

AI can boost efficiency and profitability for plumbing, HVAC contractors

AI can boost efficiency and profitability for plumbing, HVAC contractors

Bell & Gossett Illustrates Path to Net-zero at AHR Expo

Bell & Gossett Illustrates Path to Net-zero at AHR Expo

IPEX celebrates grand opening of new Florida distribution center

IPEX celebrates grand opening of new Florida distribution center

NIBCO Press Solutions

NIBCO Press Solutions

More Videos

Sponsored Content

Sponsored Content is a special paid section where industry companies provide high quality, objective, non-commercial content around topics of interest to the Plumbing & Mechanical audience. All Sponsored Content is supplied by the advertising company and any opinions expressed in this article are those of the author and not necessarily reflect the views of Plumbing & Mechanical or its parent company, BNP Media. Interested in participating in our Sponsored Content section? Contact your local rep!

close
  • J.J. Keller CMV vehicles on road
    Sponsored byJ. J. Keller & Associates, Inc.

    The dash cam game-changer for small business safety

Popular Stories

Underfloor heating installation with drain sewer hole in bathroom close up on water floor heating.

Using hydronics to leverage time-of-use electrical rates

Watts Nexa mobile image

Behind the Wall: Where smart plumbing gets smarter

Six tankless water heaters that feed the nutraceutical manufacturer’s operations.

How to deliver large volumes of hot water quickly and intermittently

PMCE Home-X April 29 Free Webinar: From Legacy to Leadership: Preparing Your Home Services Business for the Next Generation

Events

November 13, 2024

Future Proofing MEP: Navigating the 2026 High Efficiency Water Heating Standards

Join our deep dive into DOE’s new standards so you can future-proof your MEP practice.

EARN: 0.1 ASPE CEU; 1 AIA LU/HSW; 0.1 IACET CEU*; 1 PDH

View All Submit An Event

Poll

Will business be up or down in 2025?

Do you anticipate business in 2025 to be up or down in comparison to 2024?
View Results Poll Archive

Products

The Water Came To A Stop

The Water Came To A Stop

See More Products

Download the FREE Water Conservation, Quality & Safety eBook: Plumbing Trends Increasing Safe Water Availability

Related Articles

  • Rhyme and reason

    Truck of the Month: Order A Plumber, Hauppauge, N.Y.

    See More
  • Law & Order

    See More
  • You Can't Change Home Centers, But You Can Change Your Own Company

    See More
×

Keep your content unclogged with our newsletters!

Stay in the know on the latest plumbing & piping industry trends.

JOIN TODAY!
  • RESOURCES
    • Advertise
    • Contact Us
    • Directories
    • Store
    • Want More
    • Supply House Times
  • SIGN UP TODAY
    • Create Account
    • eMagazine
    • eNewsletter
    • Customer Service
    • Manage Preferences
  • SERVICES
    • Marketing Services
    • Reprints
    • Market Research
    • List Rental
    • Survey/Respondent Access
  • STAY CONNECTED
    • LinkedIn
    • Facebook
    • Instagram
    • YouTube
    • X (Twitter)
  • PRIVACY
    • PRIVACY POLICY
    • TERMS & CONDITIONS
    • DO NOT SELL MY PERSONAL INFORMATION
    • PRIVACY REQUEST
    • ACCESSIBILITY

Copyright ©2025. All Rights Reserved BNP Media.

Design, CMS, Hosting & Web Development :: ePublishing

search
cart
facebook instagram twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
    • BATH & KITCHEN PRO
    • BUSINESS MANAGEMENT
    • HIGH EFFICIENCY HOMES
    • TECHNOLOGY
    • WATER TREATMENT
    • PMC COLUMNS
      • Dave Yates: Contractor’s Corner
      • John Siegenthaler: Hydronics Workshop
      • Kenny Chapman: The Blue Collar Coach
      • Matt Michel: Service Plumbing Pros
      • Scott Secor: Heating Perceptions
  • ENGINEERS
    • CONTINUING EDUCATION
    • DECARBONIZATION | ELECTRIFICATION
    • FIRE PROTECTION
    • GEOTHERMAL | SOLAR THERMAL
    • PIPING | PLUMBING | PVF
    • PME COLUMNS
      • Christoph Lohr: Strategic Plumbing Insights
      • David Dexter: Plumbing Talking Points
      • James Dipping: Engineer Viewpoints
      • John Seigenthaler: Renewable Heating Design
      • Lowell Manalo: Plumbing Essentials
      • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
    • RADIANT COMFORT REPORT
    • THE GLITCH & THE FIX
  • INSIGHTS
    • CODES
    • GREEN PLUMBING & MECHANICAL
    • PROJECT PROFILES
    • COLUMNS
      • Codes Corner
      • Natalie Forster: Editorial Opinion
      • Guest Editorial
    • SPONSOR INSIGHTS
  • MEDIA
    • PODCASTS
    • VIDEOS
    • WEBINARS
  • RESOURCES
    • INDUSTRY CALENDAR
    • DIRECTORIES
    • EBOOKS
    • PM BOOKSTORE
    • CE CENTER
    • MARKET RESEARCH
    • CLASSIFIEDS
  • EMAGAZINE
    • EMAGAZINE
    • ARCHIVE ISSUES
    • CONTACT
    • ADVERTISE
    • PME EMAGAZINE ARCHIVES
  • SIGN UP!