Advice for controlling change order costs

[Mr. Bill]

I've been noticing a trend lately in the change orders during a project. When I ask for documentation or itemized costs to verify the Owner is not being over charged it seems the Contractors are still managing to over charge by over itemizing the bills. Instead of a price for 920' of 3/4" EMT I see:
Item_________________QTY__Price__U_Total Mat.__Total Hours
3/4" EMT_____________920___$X.xx_C_$X.xx_______46.00
3/4" EMT STL SS CON__64____$X.xx_C_$X.xx________6.40
3/4" EMT STL SS CPLG_105____$X.xx_C_$X.xx_______2.63
3/4" EMT SUPPORT____131____$X.xx_C_$X.xx_______19.65

I look at this and see 74.68 hours to install 920' of 3/4" EMT. Averaging 48.7 minutes per 10' section of EMT. I understand there's some time involved in ordering and setting up but this looks ridiculous. Even if you send someone to a big box store to purchase everything I can't see this work taking someone almost 2 weeks to perform. I've never worked in the field but this looks high to me. Plus another 15% OH&P tacked onto it. So I feel the number as a whole is too large but I can't point to any one item on the list and say 'take 5 minutes off of this per item and 1.3 minutes off of this item.'

The Contractor just sticks to their number saying they won't work for a loss. The CM is no help since their fee goes up as a percentage of the cost. I know hiring a second Contractor is almost never done but I'm getting tempted to seriously suggest this when I see numbers like this.

Looking for any suggestions on how to control this cost on the Owner's behalf. Or am I just too comfortable at my desk and these numbers are completely reasonable?

 

[don_resqcapt19]

I expect that they are right out of the labor units book that the contractor uses. Probably on the high end of the labor units, but change orders disrupt the job flow and actually do cost a lot more than what the scheduled work costs.

 

[Davis9]

Depending on site conditions that could be high or low.

Tom

 

[Rockyd]

Besides the disruption of contract work, let's make sure we throw in all the variables.

1. Admin. for whatever the new work is.

2. Mobilize material to site.

3. When material hits the job, where does it have to go? Ground level, or fifty stories up?

4. What level of work is it? Easy, normal, difficult?

5.Can you put a qualified person on it? Will it be the same person the whole package, or will it be a PITA that gets stretched across the life of the project?

Hours maybe, or may seem high, but wonder if you have a low baller, who is making up the bid loss on change orders? Lots of reason why things may not be as they seem they should be - hope it is spelled out in your documents somewhere.

 

[muckusmc]

"I've never worked in the field but this looks high to me."

I just love engineers that sit behind their desk - try getting out and getting your hands dirty - see if there are any obstacles or other problems involved.
I strongly believe that all electrical engineers should spend at least 2 years in the field working WITH the tools before they are licenced.

 

[jdsmith]

I work as a project engineer and field construction coordinator and I can put up 10 ft of 3/4" EMT and average under 48 minutes per 10 ft. I am assuming this is under 15 ft high, no maze of pipes or obstacles to navigate through, minimal floor obstructions, not tripping over other workers, and all of the material is on site, organized, and ready to go.

It really depends on how big of a job it is. On large jobs with much more organization, planning, and structure it represents a significant disruption as Don pointed out. On a small job if this change order represents 5% of the total job scope, elaborate schedules and careful planning don't exist anyway, so you're really not throwing them off too much. I would like to see supervisor time charged on the change order as a separate man-hours line - I know how long it would take me to order the material, receive it on site, instruct an electrician on the changed scope, and handle the paperwork. I would expect to see a reasonable number of hours of supervisor time along with the additional materials and additional installation labor. Structuring it this way can remove that 15% OH&P, which makes things more transparent.

The other factor where some slop can hide is where the contractor chooses to charge overhead and sundry hardware in their estimating process, assuming the numbers in the change order come out of the estimating program.
- Is a truck per so many men added in the estimating program or is it built into an hourly rate?
- How are larger power tools, lifts, electric benders, etc estimated?
- When estimating EMT is 1/4 of a strap per ft included with the EMT cost? How about box connectors and couplings? My estimating spreadsheet includes all of this in EMT cost and the bill you're getting may include it in EMT cost as well, but they also added those misc items separately.
- Are they allowed to mark up material and add 15% OH&P?

When it hasn't created an issue of one contractor tripping over another, I have given additional scope to another contractor instead of asking the first contractor for a change order. This is a lot easier to do if your project management ability allows you to plan ahead enough to ask for the price before you have them do the work:smile:

 

[cleveland]

a little long..........

a little long..........

Man dealing with CCD's was going to be the end of me.......but not now ...... I most often agree with the contractor's numbers.......... and I am part of the Owner's group. Gag. My answer to your question regarding how to control their costs is: You really can't. You can try; you can question some things, you can wince so they see your pain, and you can ask that they take another look here and there......... but in the end, unless you are going to offer to go to court or something, you won't control the cost. I do do the things aforementioned though. One thing we have discussed trying to explain things to our "consulting" engineers; who are a good bunch but can't stand to admit to an error or omission; is that we got the absolute best price for the project when we bid the job with the documents on hand. Contractors used those documents and then started taking risks to lower their price so they could get the job. ALL risk was on the contractors at that point. After the project starts and we begin making changes there is no risk for the contractor. He doesn't have to reduce a man hour for anything, and really he shouldn't. With today's competitive market the low bids are that, LOW bids. What no one ever cares to do in our office is this: Build the structure according to the plans; stop changing things......... but they don't and they moan and groan about the high costs..... well then; don't accept them and move on. I remember one time it appeared that the EC was sort of inflating everything a bit; as the Owner's EE I girded my loins and called him up;this fellow has a reputation of getting a little loud about any questioning of costs, we chatted and he said he would take another look. He called me back and said that he would not charge us for the demolition required for the work.... and he lowered his price........ Now he did this to help us feel better about this change and the way he did it allowed him to not have to start manipulating hours & material; he just zeroed the demolition. But then our consulting engineers STILL moaned and groaned and tried to get the EC to lower his price more. The EC was ticked and so was I. I'm sure there are thousands of stories like that...... but in the final analysis that I shared with our project architect: All we state is the allowable O.H. & Profit for a CCD. And the way we do that is not real clear. The contractor often has to cover things like supervision in some other manner. Some of the AIA documents are less than clear to me. Beyond that even we are helpless though. A thing to consider is getting unit prices during the bidding stage. You can ask for a unit price to install 10 ft. of X" EMT above a lay-in ceiling. Then you can know ahead of time what it should cost. But believe me unit prices are not the end all of CCD control techniques. There are always issues............. I've rambled more than a bit......sorry

 

[cadpoint]

....

Instead of a price for 920' of 3/4" EMT I see:

Item_________________QTY__Price__U_Total Mat.__Total Hours
3/4" EMT_____________920___$X.xx_C_$X.xx_______46.00
3/4" EMT STL SS CON__64____$X.xx_C_$X.xx________6.40
3/4" EMT STL SS CPLG_105____$X.xx_C_$X.xx_______2.63
3/4" EMT SUPPORT____131____$X.xx_C_$X.xx_______19.65

I look at this and see 74.68 hours to install 920' of 3/4" EMT.

Well let's crunch the numbers given above:

They didn't charge you for any boxes but they had 64 connectors, based on that it leads to other thoughts of applying that run.

If they did install 920' that approximate 7.02 straps per lineal run, now put a few boxes and not counting final terminations we'll use 30 box (almost half of 64 connectors) well they will need an additional support within 3' of a box (per Code) so they shorted themselves 60 additional support straps: sum of 30 boxes x 2/per. 1 per side with-in three feet. Your coupling seemed right if a straight run of conduit!

It seemed they loaded the price of the conduit with all the various costs to me!

I'll also assume that you chopped that pricing list up : 1. for presentation here and understandable but how can they charge a man hour based on material used! What are they basing that man/hour on? I know that's a cost I just won't present my bill as they did, ever!
Besides there was a movie with Tom Cruise as a lawyer and improper billing practices!

IF that's what they charged as posted yes you sure should be alarmed.

Production man hours is just that, one runs a conduit it's strapped supported and has a coupling, And there is an near exact price. An empty conduit is just that does this price include a circuit in or not, well thats not clear either. Granted I'm not concerned with mobilization, management, etc., etc. I understand and would charge the cost /ratio of putting manpower and charge for all the correct applicable applications to a bill.

Yes indeed that's high for a piece of con-do... but hey I've never had to fill-in any numbers for my time in electrical.

Your case history (old records) is really your answer here! (period)

 

[benaround]

Mr Bill,

I have an idea, make a list of the tasks you perform for the owner, itemize them into

a daily list with billable hours or fraction thereof. At the end of the job, or week, or month

divide these hours by what you got paid, now, compare this to the EC's bill !!!

 

[nakulak]

as others have stated above, the keys to reducing change order costs are planning:

1) adequate preparation is done on the original documents (assumption: the owners are willing to hire decent architect and engineering to provide adequate documents), this will alleviate many cost overruns that are the result of poor or inadequate planning

2) the owners management team (or gc/const manager) takes steps to mitigate the potential costs
a unit prices, labor rates established in contract
b changes which occur due to unforseen circumstances are well though out and if necessary negotiated thoroughly before orders to proceed (just do it and give me daily tickets = chaching)

3) if step 1 is followed, step 2 doesn't even have to come into play. what happens when step 2 costs get out of hand ? Well, this is where the owner tries to beat the prices down by refusing to pay, and this is when jobs go south and end up in court. even when we have had owners sign change orders for every change, when the costs get out of hand they want to negotiate after the work is done and pay less. There is no substitute for good planning (the law of the Seven P's is Real, and there should be a license that every construction manager has to take and that should be the one and only question on the test)


jmshio

 

[hardworkingstiff]

I go to the Doctor's office (he does not bring it to me) for a visit. I figure his overhead and profit is about $500/hour. I spend ten minutes with him and get charged $125. Let's see, $500/hour divided by 10-minutes = $83.33.

I hate T&M and fighting for change orders. I'd tell you to go ahead and find someone else (and charge you for delays).

 

[hardworkingstiff]

When I ask for documentation or itemized costs to verify the Owner is not being over charged ......

I am curious though Mr. Bill, what in your opinion constitues being over charged and what is fair to the contractor? Do you ever think the contractor undercharges?

How do you make allowances for the disruption of the flow of work for the contractor dealing with change orders? Does the change order cause delays in the contracted work? Can the contractor backcharge the owner for the delays?

Are you being one-sided? (I am, lol).

 

[weressl]

I've been noticing a trend lately in the change orders during a project. When I ask for documentation or itemized costs to verify the Owner is not being over charged it seems the Contractors are still managing to over charge by over itemizing the bills. Instead of a price for 920' of 3/4" EMT I see:
Item_________________QTY__Price__U_Total Mat.__Total Hours
3/4" EMT_____________920___$X.xx_C_$X.xx_______46.00
3/4" EMT STL SS CON__64____$X.xx_C_$X.xx________6.40
3/4" EMT STL SS CPLG_105____$X.xx_C_$X.xx_______2.63
3/4" EMT SUPPORT____131____$X.xx_C_$X.xx_______19.65

I look at this and see 74.68 hours to install 920' of 3/4" EMT. Averaging 48.7 minutes per 10' section of EMT. I understand there's some time involved in ordering and setting up but this looks ridiculous. Even if you send someone to a big box store to purchase everything I can't see this work taking someone almost 2 weeks to perform. I've never worked in the field but this looks high to me. Plus another 15% OH&P tacked onto it. So I feel the number as a whole is too large but I can't point to any one item on the list and say 'take 5 minutes off of this per item and 1.3 minutes off of this item.'

The Contractor just sticks to their number saying they won't work for a loss. The CM is no help since their fee goes up as a percentage of the cost. I know hiring a second Contractor is almost never done but I'm getting tempted to seriously suggest this when I see numbers like this.

Looking for any suggestions on how to control this cost on the Owner's behalf. Or am I just too comfortable at my desk and these numbers are completely reasonable?

The best way I found to avoid this is unit pricing for additions and deletion to/from the basic Contract. I usually have the bids itemized to avoid major misses either on the Contractor's or my part, and to identify the biders who are trying to buy the job and make up the difference with change orders.

I preface my bid meetings: I hate change orders, because it means I did not do my job.

 

[Mr. Bill]

I'll also assume that you chopped that pricing list up : 1. for presentation here and understandable but how can they charge a man hour based on material used! What are they basing that man/hour on? I know that's a cost I just won't present my bill as they did, ever!

Yes, I did chop up the pricing. There was a total of 30 line items and I just wanted to give an example that most people could relate too. There was a separate item for #12 THHN wire that averaged to 42 minutes per 100'. There were 4 line items to cover junction boxes (box, cover, support, ground screw) that totaled 26 minutes per box. And some more for the termination at each end.

I think arguing with the EC like this never get's anywhere (he lowered his cost by about 5%). Since we've been asking on the bid form for the EC to submit their hourly rate I can add a couple other items like:
- time for 100' of 3/4" EMT with 20 supports, 10 couplings, and 2 JB.
- time for 100' of #12 THHN wire pulled 3-5 wires in a conduit.
Just so everyone agrees up front how long this type of work takes.

 

[JAMAN]

Based from the estimating material i use, it should take 24 minutes to install 10' of 3/4 emt. This does not include sales tax, delivery etc as others have mentioned. But I don't think doubling the hours is justifiable.

 

[K8MHZ]

I don't think I have ever seen a change order that was not the result of an error on the part of someone making more money than the people having to do the work.

Also, how many changes were made that the EC didn't charge for?

There is one way to control the cost of change orders.

Get it right the first time!!!

 

[Nick]

The EMT and connectors are exactly NECA Col 1 labor. The couplings are something less than Col 1. Looks to me like you are getting a deal as change orders should be charged at Col 2 or 3.

 

[nakulak]

The best way I found to avoid this is unit pricing for additions and deletion to/from the basic Contract. I usually have the bids itemized to avoid major misses either on the Contractor's or my part, and to identify the biders who are trying to buy the job and make up the difference with change orders.

I preface my bid meetings: I hate change orders, because it means I did not do my job.

you are in the minority. most jobs we work on have so many hands in the till, from professionals like you down to yuppie chic designer's that don't know a wirenut from a walnut, that by the time the change order is requested it needs to be done post haste by any means available, creating havoc and iunnecessary overcharges for the poor owner. And, yes, , many EC's try to take every advantage of this in order to assure profitability (for various reasons, not the least of which is the current trend by owners/gc's/gc owners to renegotiate prices after the work is done

 

[iMuse97]

Based from the estimating material i use, it should take 24 minutes to install 10' of 3/4 emt. This does not include sales tax, delivery etc as others have mentioned. But I don't think doubling the hours is justifiable.

Depends--see post 4. Also, consider whether these runs are to be cored through walls, floors, etc.; also consider how close to finished the rest of the building is: if I have to install rough materials in an area where the finished coatings and materials are already installed, I've got a whole new ballgame.

 

[weressl]

you are in the minority. most jobs we work on have so many hands in the till, from professionals like you down to yuppie chic designer's that don't know a wirenut from a walnut, that by the time the change order is requested it needs to be done post haste by any means available, creating havoc and iunnecessary overcharges for the poor owner. And, yes, , many EC's try to take every advantage of this in order to assure profitability (for various reasons, not the least of which is the current trend by owners/gc's/gc owners to renegotiate prices after the work is done

Well, nothing prevents you from submitting your unit pricing for additions/deletions, prior and after construction start. That will also provide some protection against 're-negotiations' as any changes can be accomodated. If changes are asked outside of unit pricing, just make sure you submit daily T/M sheets and have it sign it off before proceeding to the next day.