Construction Terms: Change Proposals and Change Orders

Every construction project, no matter how well-planned, is susceptible to changes. From unexpected site conditions to design modifications, various factors necessitate alterations to original plans. These modifications come in the form of construction change proposals (CP) and change orders (CO). Both play pivotal roles in the construction management process. A construction change proposal and a change order are related to alterations in construction plans and associated costs. They can both involve changes in scope, design, methods, or other variables that impact the work. Here’s a basic description of these two terms:

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Best Practices for Reviewing Change Proposals and Change Orders

Project owners, while not expected to be construction experts, play an instrumental role in reviewing and approving changes. It’s crucial to approach this process systematically and thoughtfully.

Here are some best practices:

1. Understand the Changes

Before approving any change, owners must comprehend what the change entails. Understanding the ‘what’, ‘why’, and ‘how’ of the proposed alteration is paramount. This includes gaining insight into what the change involves, why it is needed, and how it will affect the project’s time frame, costs, and resources. If the written documentation isn’t sufficient for understanding, it’s sometimes worthwhile to have a discussion in person or via phone, or onsite.

2. Validate the Change

Validation is a crucial step in the process. Owners should verify the necessity and feasibility of the proposed change. This could mean consulting with architects, engineers, or construction managers who have the technical expertise to understand the implications of the proposed changes. Often, the designated project architect and/or engineer will review the change proposal before it is sent to the owner. In this way, the design team is verifying the necessity and accuracy of the proposal.

3. Conduct a Detailed Review

Details matter in construction. Therefore, CPs should be scrutinized, focusing on cost estimations, time implications, and the impact on the overall project. Estimates should be realistic, and changes shouldn’t unduly disrupt the project’s timeline without justification. These details should be included in the description of the requested change. If they’re not, it’s reasonable to ask the contractor to refine the document so that these items are clear.

Negotiating is about reaching a mutually beneficial agreement that ensures project success.

4. Communicate and Negotiate

It’s possible to negotiate. If the proposed cost increase or timeline extension appears unreasonable, it’s important to communicate and negotiate with the contractor to ensure you’re receiving a fair agreement. Remember, negotiation is not about winning or losing; instead, it’s about reaching a mutually beneficial agreement that ensures project success. At worst, a contractor will have justification for the change to the scope, price or schedule and be able to discuss these items clearly. 

5. Document Everything

One of the golden rules of project management is to document everything. Proper documentation provides a clear record of all decisions, helping to avoid misunderstandings and disputes. This is especially critical in change management, where miscommunication can lead to costly mistakes. Documentation related to CP’s should include associated bids, schedule updates and descriptions of the change, sometimes including design drawings to demonstrate the work.

6. Seek Professional Advice

Complex changes or large-scale projects may necessitate expert advice. Professional construction management consultants or legal advisors with construction experience can offer valuable insights and advice, ensuring that the owner’s interests are protected. This may not be necessary for most CP’s, particularly when working with a reputable contractor with whom you’ve established trust. However, outside discussions may help bring clarity to the documentation so you can be certain what you’re receiving is fair.

7. Stay Proactive

Keeping an open line of communication with the project team is crucial. This proactive approach can help anticipate potential changes, allowing for effective management before issues become problems.

Contract Considerations Related to Change Orders

Change orders can be issued in most types of contractual agreements. The ability to issue a change order is not entirely dependent on the contract type but is more about the terms stipulated within the contract. However, certain types of contracts do more naturally lend themselves to change orders due to their inherent flexibility.

In all cases, the specific terms and conditions of the contract will govern how change orders are handled. Therefore, it is important for all parties to understand the contract thoroughly and seek legal advice if necessary. Remember that the goal should be to have a fair and clear process for managing changes, regardless of the contract type.

Final Thoughts

The complexity of construction projects almost guarantees that changes will occur. It’s not the change itself that’s challenging but rather how it’s managed. Understanding the intricacies of construction change proposals and change orders is crucial. The key lies in meticulous review, open communication, careful negotiation, and proactive management. Following these guidelines can ensure project alterations are beneficial and not detrimental to the overall project goals.