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Controlling Costs - Reducing Change Orders

Cash is tied up.You can control the bottom line on your project by managing the number and dollar volume of change orders.


Coming in on budget is a key consideration of any project. Homeowners are often concerned about changes to the price after a project starts. The total cost of a project is comprised of the base contract price plus any differential that comes from change orders. For the most part, whether or not there are change orders that add cost to your project, is under your control. However, there are legitimate reasons for change orders during construction, such as work to address concealed obstacles or to document changes due to field conditions. You and your contractor need to partner together to properly manage the quantity of change orders on your project and keep your budget in line with your expectations.



Changes You Can Control:

Seven Tactics You Can Utilize to Avoid or Minimize Change Orders


1. Choose Well

Extra costs can result if contract specifications are inadequate or the project is improperly specified. One way contractors have earned a bad reputation is by giving you a low price for the project, but not including everything you really need - and then putting those things on a change order once work has begun. Often times you end up paying more than you would have if you included everything up front. This approach is dishonest. Avoid these types of contractors at all costs.


Recommendation: Beware of the low bid, take time to understand the differences between them, ensuring that the scope of work includes everything that you need and expect for your project.

2. Know What You’re Getting – Get Detailed Plans and Specifications

Plans and specifications should be all inclusive. They should contain information about every decision you have made regarding your project. Putting off decisions until your project is underway or having allocations are both surefire ways to generate change orders and increase cost.


Decide what you are doing as well as what you are NOT doing. Work with a contractor who is accustomed to figuring out the details up front and make sure that those details are documented; if there are selections to be made after contract signing, make sure that what is included in the contract is clearly specified by make and model.


Recommendation: Avoid surprises by making sure the contract clearly includes material specifications as well as detailed drawings on how it all goes together.


"One way to reduce the likelihood of change orders is to have the work done on a "Design/Build" basis where the person that you hire is responsible for the design as well as construction. You simply tell them “I want a kitchen in this location of this size, with these features.” They take responsibility for both the design and construction. That way you do not get caught between the designer and the contractor." 


3. Are Necessary Upgrades or Corrections to the Existing Conditions Included?

Has the contractor figured out if the existing building components are sufficient? If any upgrades are necessary, has he included them? Some things you can check to make sure he has thought about are: Will you need a new subpanel? Is your HVAC system adequate to handle the needs of the space? Will you need to make any changes to meet current code requirements? Have they been included in the scope of work? Are there foreseeable issues with existing framing or structural support that need to be addressed in advance?


Recommendation: Before you sign a contract, make sure that your contractor has thought through the work that you will be doing and included any necessary upgrades or corrections.


4. Cap Your Thirst for Adding On

Keep your checkbook in your pocket. Sentences that begin with "I might as well" or While you are at it" are easy tickets to change orders and added cost.


Recommendation: Minimize the urge to add to the project once underway. Keep your eye on your budget and focus on the work you have agreed to complete.


5. Don’t Change What You Have Agreed Upon

Remember when you were in school and took a multiple choice exam and went back and changed some of your answer to what turned out to be the wrong answer? This is also true when you keep reconsidering the choices you made in remodeling. Be confident with your initial choices and stick to the plan.


The $200 faucet was nice. But just because you have seen a nice $400 faucet at a friend's house doesn't mean that you need it.


Recommendation: Take the time up front to make sure that you are happy with what you are doing and the choices that you have made. Avoid upgrading your selections after work has begun.


6. Accept That Sometimes It’s Okay to Change Your Mind

Give yourself a break. In a large project with many details, it's possible that you may have overlooked something or want to change your mind about something as you go along.


Sometimes you can't envision things until you get to a certain point and then it makes sense to change something. You are going to have to live with the end result, so even despite your best thoughts and the contractor's best efforts to provide you exactly what you think you want, and our recommendations to "not make a change",  you may want a change. That's ok. Most contractors will recommend that you have a budget in mind to do this.


Note: “While He’s There” Matters

There are some extras which you may choose to do that may actually cost less to do while other work is going on than they would if you just had someone come out to do them. These come under the category of "While He’s There".


Typically carpenters block their time out in half day increments. So if you have a 10 minute job for him to do while he's already set up, it should cost you less than if he needs to make a separate trip unpack all his tools, set up do that small project, and then pack up again.


Recommendation: If you do choose to add something, keep in mind that it will cost your contractor more to do something that he hasn't budgeted for and included in the scope of work. Don't expect him to do it for free. Make sure that any changes are documented. Memories are imperfect!


7. Timing Matters: It Often Costs More to Make Changes Midstream

Oftentimes changes require re-work, ordering of new material, the slowing down of the next phase, bringing back other workers, or having to re-do any of the previous work. All of these translate into legitimate higher costs for your contractor which will in turn be an added cost to you.


Recommendation: Try to make any changes as early as possible to minimize the additional cost of changing things midstream. It will be less costly if you decide sooner rather than later.


Justifiable Changes 

If you have done enough planning and specified the job right, you should be able to minimize the kinds of changes discussed so far.


However, there are three types of  "justifiable changes" that you may encounter on your project. The first result from "hidden factors". These "unforseeable extras" can affect your project's bottom line. The other two factors typically have minimal financial impact - change orders that are created to handle the need for "substitutions" on the job or to document field conditions that are different from what was expected.


1. Hidden Factors - Unforseeable Obstacles

Hidden factors include everything that your contractor can not see prior to the project start. There are some things that are difficult to discover without expensive or invasive demolition that is typically not done in advance of the project's start.

An example would be discovering rotten plywood under old roof shingles. This would not be noticed until the existing roof shingles were removed.

Your contractor will most likely anticipate the possibility of similar types of hidden factors and alert you up front that these potential "extras" may be forthcoming, so that you can budget for them.


There are other unforeseeable obstacles that are a surprise - such as substandard framing uncovered in an old home during the demolition phase.


Some hidden defects need to be corrected, but for others, you have a choice. For example, if you expect to have a recessed medicine cabinet, this requires opening up the wall and framing an opening. If a pipe and wires are discovered in the wall when it is opened up, these can be moved in order to accommodate the cabinet, but this will be a legitimate additional cost. Alternately, you may choose not to spend the money to move the pipe and the wires, and instead, close the wall back up, and have a surface mounted medicine cabinet. In that case a no charge change order would be created, documenting the field conditions that caused a change to the design.


2. Substitutions

Occasionally, changes are necessary when the contractor can't get the specified materials. We had this happen on one of our own projects when the supplier for a mantle unexpectedly went out of business. We had to scramble to find another provider who made something similar. Unfortunately, things like this are happening more often since the global recession of 2009. Costs for changes of this type tend to be insignificant in relation to the project's overall cost.


3. Documenting Field Conditions

When something is different from what was expected, the project supervisor often documents minor changes and decisions that happen along the way. Documenting these things helps everyone down the road, in case there is a question about why something was done a certain way.



You and your contractor need to partner together. You will both need to work to control the dollar impact of changes necessary in the construction and implementation of the project as well as those due to your own particular appetite for add-ons and changes on-the-fly. Keeping the bottom line in mind will help you manage the number and dollar volume of change orders throughout your project.