Defining Change
Nov 1, 2010 12:00 PM, By Keegan Jackson and Ed Carlson
Understanding and managing change orders are keys to a successful education construction project.
Little Blue Elementary, Raytown, Mo., has a tremendous amount of daylight filling the media center and entry foyer at the building’s center.
Managing an education institution’s budget (including a construction contract and subsequent change orders) is paramount to cost control, regardless of a project’s size and complexity. When an overall budget is established, it must include a contingency line item to cover the costs of anticipated change orders that are needed to complete the project.
In recent years, the term "change order" frequently has been misunderstood; many who are not familiar with the construction process view change orders as a negative.
Part of the process
It helps to understand why change orders are a normal step within the construction process. An education institution, as well as the design and construction teams, needs to have a thorough understanding of the contract terms before any project begins. A change order is the only legal means by which an owner and contractor can amend the construction contract after a project is bid and the contract is executed. A change order may increase or decrease the contract amount, or it may modify the contract time. Because of the perceived negative context, it is important that all parties carefully review and understand the circumstances that lead to change orders.
Changes in construction law philosophy and other trends in recent years have created issues that are not always easily understood. Unlike many science professions, building construction is not considered an exact science. A building designed for a client generally is constructed only once. All construction projects require good communication and planning so that construction progresses smoothly. Construction documents, which ultimately become the contract documents, are only as accurate as the information known during the time they were prepared.
Once the design team completes the construction documents, they are "put out to bid" to construction teams, which take the documents and interpret them in order to prepare their bids. Once a contractor is selected, all the individual trades take these same documents and interpret them from their points of reference. Shop drawings are prepared and submitted to the design team for one final review, and then the material orders are placed and crews brought onboard to perform the task of completing the building.
During the construction process, mutual understanding and communication among the institution and the design and construction teams are critical to ensure the documents are executed properly, and that questions are answered promptly and accurately. The shop drawing process and ordering of materials often can lead to a change order because of change in material selection or availability.
Defining terms
Contractor methods of delivery:
•General contractor (GC). Using a GC is the traditional "design, bid, build" process, where one contractor holds the contract with an owner, and a contractor in turn holds contracts with individual sub-contractors.
•Construction management agency (CMA). This contract method requires multiple contracts because the owner holds a separate contract with each contractor as well as the construction manager, who coordinates the work of each contractor and coordinates with the owner and design professionals.
•Construction management at risk (CMR). The CMR holds all the individual contracts with the sub-contractors, has a prime contract with the owner and provides a guaranteed maximum price to an owner that can be modified only by using change orders. The CMR coordinates the work of each subcontractor, as well as coordinating with the owner and design professionals.
Change is inevitable
Reasons for change orders:
•Allowances. Allowances are specific dollar amounts included in the construction contract to cover work expected that is not able to be detailed prior to a contract being signed between the owner and contractor. An allowance amount may be established for such things as miscellaneous steel, touchup painting or repair to paving sub-bases. A change order provides the final accounting of how much of an allowance is used and how many dollars are to be deducted from the construction contract.
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