Change Orders, Are They Necessary?
I see a lot of fuss regarding change orders during construction. Usually it isn’t good and hearing that something you want or need done will cause a change order can become one of the most stressful terms you could ever here.
Let’s demystify this process and help you understand why change orders are necessary and sometimes, good.
What is a change order?
Think of a change order as a formal way to make changes to a plan or contract after it’s already been agreed upon. Imagine you’re at a restaurant and you order a pizza, but after placing your order, you decide you want to add some extra toppings. You’d tell the waiter, and they’d update your order to make sure you get exactly what you want.
In the context of construction or a big project, a change order is similar. When you start a building or renovation project, you agree with the contractor on what work will be done, how long it will take, and how much it will cost. This agreement is like your original “order” at the restaurant. But as the work progresses, you might decide you want to change something about the project—maybe you want to use a different material, add a new feature, or you’ve discovered something unexpected that needs fixing.
A change order is a document that describes these changes in detail: what the change is, how it will affect the project’s timeline, and how it will impact the cost. Both you and the contractor need to agree to this change order. It’s a way to make sure everyone is on the same page about what’s changing, why it’s changing, and how it affects the original plan. This helps keep the project organized and avoids misunderstandings about what is expected, ensuring that you end up with the final result that meets your needs and wants.
Good Reasons for a Change Order.
Change orders during construction can initially seem like a nuisance or a sign of project mismanagement, but they often present opportunities for homeowners. Here are five reasons why change orders can be beneficial:
- Improvement of Original Plans: Change orders allow homeowners to make adjustments or improvements to the original plans as the project progresses. These changes can enhance the functionality, aesthetics, or overall satisfaction with the final outcome. For instance, a homeowner may decide to upgrade materials or finishes upon seeing the initial installations, leading to a more desirable and personalized result.
- Correction of Unforeseen Issues: Construction projects can uncover unexpected issues such as structural problems, code violations, or hidden damages that were not visible during the planning phase. Change orders provide a formal process to address these issues promptly, ensuring that the construction meets safety standards and legal requirements, ultimately protecting the homeowner’s investment.
- Adaptation to Changing Needs or Preferences: Over the course of a construction project, homeowners’ needs or preferences might evolve. Change orders allow for flexibility to adapt the project scope to accommodate new requirements, such as adding an extra room, modifying a layout, or incorporating smart home technology to meet current or future needs.
- Cost Management: While change orders are often associated with increased costs, they can also offer opportunities for cost savings or more accurate cost control. Homeowners can use change orders to adjust the scope of work, possibly eliminating unnecessary features or choosing more cost-effective materials and solutions, thus optimizing their budget.
- Enhancing Property Value: Strategic changes made during construction can significantly enhance the property’s value. By upgrading certain aspects of the project or incorporating high-demand features, homeowners can improve the functionality, efficiency, and aesthetic appeal of their property, which can be beneficial in the long term, especially if the property is sold.
While change orders can introduce adjustments to the project timeline and budget, they offer a structured way to adapt the construction process to better meet homeowners’ expectations and requirements, ultimately leading to a more satisfying and tailored final product.
Warning, Not All Change Orders are Equal!
Generally, if my client has not already chosen a builder prior to hiring me to design their home or addition, (Which I prefer they hire me first, but that is a whole other post.), I will share some tips and tricks of hiring a contractor. (See my post on 10 questions to ask you potential builder.) During this interview process, Questions 5 & 6, refer to changes in the field and changes to the design and question 10 refers the their contract and schedule. This is where the concept of watching out for the cheapest guy comes into play.
As you go through the process of bidding this out and speaking with contractors, be careful to avoid the scenario where a contractor comes in significantly less than the others. Compare their bid to the others, ask questions about what is included in their bid.
Often, these preliminary bids are fairly vague, they are trying to get you a decent budget price so you have an educated guess at how much your build may cause.
Some, less than trustworthy contractors, will bid the project low and create a contract for you to sign that will not fully cover the entire cost of the build. They may use extremely low allotments, to bring the price tens of thousands of dollars below others to get your business, but then use change orders to increase the cost to build as each allotment is exceeded.
I cover the concept of allotments in my second book, The Ultimate Custom Home: A guide to Budgeting and Scheduling, which is available on the link below.