Dec. 14, 2021

Ep#9 The one about Change Orders

Ep#9 The one about Change Orders

Change Orders represent as much as 20% of the revenue on a job. They are a natural element of succesful flooring jobs.  So why do they often cause stress and conflict. We show you how to think about change orders as a way to develop customers for...


Construction projects are complex. The flooring contractor has to adapt to challenges as they evolve.  Change is inevitable. Change orders then are a natural part of the business.

So why do many flooring people fear change orders?

After all, consider these stats taken from our commercial flooring database:

  • 15-20% of your revenue comes in the form of change orders
  • Effective co management can increase delivered job profitability by 3-10 gross margin points

Change orders can be the source of confrontation or the path to delivering exceptional customer satisfaction

 

Key challenges:

  1. Not having change orders approved and in writing
  2. Your customer does not keep track of the change orders and fails to accrue funds or get approval of funds from the owner causing a big issue at project end
  3. You lose sight of all the change orders
  4. Change orders are incorrectly costed (usually to the detriment of the flooring contractor)
  5. Change order reconciliation is often left to the end of the job when tensions are high
  6. Change orders become an adversarial weapon in the closeout phase

 

Most construction contracts require that all changes or authorizations for extras be put in writing, generally before the work is performed. In real life, though, the pace of work out in the field is often so fast and furious that, in the interest of completing the project, change orders are approved verbally, with the understanding that someone will put them in writing when time permits.

 

One reason for contention is that unforeseen difficulties, improvements on the plans or even scheduling hassles can send a project in a new direction. In addition, plans and/or specifications are notorious for leaving the details up to the subcontractor. What looks to the subcontractor like a deviation from or addition to the scope of the work, to the owner or general contractor may appear to be a case of the tradesman failing to read the plans.

 

Let’s consider each of these and ways to navigate:

  1. Get it in writing!

 

A verbal agreement with the super (who is under immense pressure) is insufficient, no matter how good your relationship is

Get them to send you an email.  Take pictures.  Seek approval as fast as you can

 

  1. Customer loses track of change orders

 

It’s only natural.  The gc super will be dealing with multiple subs and maybe hundreds of change orders.  He will forget—even if you have it approved in writing!

Make him a winner

Every month, sit down with him and review your change orders.  Make sure he knows what the dollar amount is so he can include that in his budget and secure the funds.  Don’t embarass him at the end with a big bill!

 

  1. You lose sight of the change orders

 

We see this all the time.  You get approval of the change order but is is hidden in a nested email or a post it note on your desk.  You get busy.  We get it.

You must have a change order log.  Either use an industry tool or create a change order spreadsheet.  If you don’t have one we van give you ours

 

  1. Incorrect costing

 

Look.  Once the job starts, the contract is done.  There is no competition.  It’s just you so don’t go soft.  Make sure you charge correctly.  Don’t just punt an average cost.  To make that change you had to:

  • Make an extra trip to review it
  • Identify a material source for the replacement perhaps
  • Expedite the material so extra freight costs
  • Your time to manage the paperwork and coordinate

Include all these costs and your overhead in your change order. You are not a charity

Get it out of your head by trying to “nice” or curry favor.  You will get dinged on something else so don’t conceded on clear cut change orders

 

  1. Change orders left to the end of the project when tensions are high

 

The project is nearly finished.  The gc is looking to get certificate of occupancy.  As the last trade in with floors, you are between them and their close.  Tensions are high.  Careers are on the line. This is not a time to throw all your change orders at your customer.  It wont end well

 

Sit with your customer and review the cos on a weekly/monthly basis—even more frequently if there are bigger ones.  No surprises and don’t be late or apologetic with communication

 

  1. Change orders are a negotiation

 

If you get to this point you have not dome your job properly.

Change orders are a contract. Terms have been set and agreed in the bid phase.  No negotiation. 

If you feel you have to give something to get the next job you are on the wrong foot.

Professional, responsive and continued communication of change orders throughout the project is the way you delight the customer