Change orders

[Greenboy]

Do we all agree that we don't make money on change orders? Yet we get these youngsters PMs from college, beating you up on pricing for every single Change order request submitted(Throughout the entire project). It is a daunting task.Constantly asking to breakout pricing. Even when you breakout pricing (labor and materials), they want you to breakout line item by line item.


I want to see what kind of approaches taken, when submitting change order request, to keep GC's questions to a minimum. What are they actually looking for???

 

[MAC702]

Who is "we?"

I don't do paperwork for free.

If it's part of the contract, it's part of the bid. If it wasn't part of the agreement, they don't get it.

 

[Strathead]

Most of us have estimating programs nowadays. When I do a change order, I always do it in the estimating program. There are many ways to get around ridiculous requirements like 10% profit and overhead. Extra length on conduit, upping the price of material before it gets to the extension, etc. Make sure you charge for things like bond, equipment rental, warehouseman, and especially every minute you spend, talking about, laying out and pricing the change order. However, always keep something in your pocket, for example the Foreman's truck or a tool that had to be delivered. If you get grilled by the GC, tell him flat out that you will review the change but unless there is a blatant mistake every minute you spend will be charged to the change order, so even if you skim $10 off of it, it may cost them $20 in your time to do it. Given that you always hold something back the best answer you can give when they question is, "Thank you for making me go back, while I corrected the item you identified, I realized I hadn't charged for the tapconns so your price actually went up. Thank you again." If they try to argue about Project manager time, get a copy of the NECA manual of Labor Units or just reference it. It CLEARLY states that the labor units included do not cover supervision. I, as a project manager, am not assigned to only one project so, no change orders, no time sent. change orders, additional time spent. Period.

I will say that I RARELY have a problem with change orders. I share the estimating data right up front most of the time and if not, when they ask for it I give it to them 10 minutes later so they know I didn't have to make it up.

 

[Strathead]

Oh yes, I agree with you that no matter how much you can charge for change orders. I job is more fruitful if there are not any.

 

[infinity]

My company makes huge profits on change orders and extras.

 

[jumper]

My company makes huge profits on change orders and extras.

When I worked for a commercial EC so did we. Boss lived for add ons and such.

 

[infinity]

When I worked for a commercial EC so did we. Boss lived for add ons and such.

We have an age old saying for jobs that have very small or no profit margins, "we'll make it up on the extras".

 

[Greenboy]

Then there is the game I play with project extensions, requesting for additional days, or work OT to keep with schedule.


And if you perform work at OT rate, there are multipliers after so many labor hours that are impacted by crews production. Burning your crews out. This is something that you need to educate your customer though. It is usually hard to grasp the concept, but the dollars are real.

Additional Hidden costs are often forgotten about- Permit, parking, Small tools, Job trailers, the lists goes on and on. Through the number of years, I created a spreadsheet that capture these costs, that I can share with my customers.


There is also information regarding lack of efficiency if you have more than 10% of change orders compared to the contract amount.

I do all of the tactical approach. I know the game. It is just ridiculous to have to explain sometimes I guess.

 

[Strathead]

Then there is the game I play with project extensions, requesting for additional days, or work OT to keep with schedule.


And if you perform work at OT rate, there are multipliers after so many labor hours that are impacted by crews production. Burning your crews out. This is something that you need to educate your customer though. It is usually hard to grasp the concept, but the dollars are real.

Additional Hidden costs are often forgotten about- Permit, parking, Small tools, Job trailers, the lists goes on and on. Through the number of years, I created a spreadsheet that capture these costs, that I can share with my customers.


There is also information regarding lack of efficiency if you have more than 10% of change orders compared to the contract amount.

I do all of the tactical approach. I know the game. It is just ridiculous to have to explain sometimes I guess.

Absolutely. Anyone who doesn't do this, have a standard line in your change order form. Every change order you write put, "Time extension required to complete the work" Don't go overboard figure with say, 50% of you crew size how long. So 8 men, a 40 hour change order, put down 10 days. It is extremely rare that anyone will challenge it. When you get later in the job and they say, you are behind you have to work overtime, tell them they have to pay for it. When they say no, you say that you have however many additional days to complete the project on straight time. If they do challenge the extension of time, then you tell them flat out they can either pay you time and a half to do the work or they can get someone else to do it.

I just don't run in to that much trouble explaining. Most GC's will prefer that you hide most of the costs and as long as the change doesn't "smell bad" they let you get away with it. For the pesky ones you are talking about. It is your responsibility to educate them that they are better off going with the flow. Every time the question you increase the cost of the change order, they will get the hint.

 

[kwired]

Absolutely. Anyone who doesn't do this, have a standard line in your change order form. Every change order you write put, "Time extension required to complete the work" Don't go overboard figure with say, 50% of you crew size how long. So 8 men, a 40 hour change order, put down 10 days. It is extremely rare that anyone will challenge it. When you get later in the job and they say, you are behind you have to work overtime, tell them they have to pay for it. When they say no, you say that you have however many additional days to complete the project on straight time. If they do challenge the extension of time, then you tell them flat out they can either pay you time and a half to do the work or they can get someone else to do it.

I just don't run in to that much trouble explaining. Most GC's will prefer that you hide most of the costs and as long as the change doesn't "smell bad" they let you get away with it. For the pesky ones you are talking about. It is your responsibility to educate them that they are better off going with the flow. Every time the question you increase the cost of the change order, they will get the hint.

One needs to look at why you are behind. If it is because the GC or other's have held up progress, that is not your fault - if it is because you are not where you planned to be at that point, maybe you pulled some/all of the crew to do another job and got behind, and not a problem caused by others involved - then I think you have to eat that overtime.

 

[Strathead]

One needs to look at why you are behind. If it is because the GC or other's have held up progress, that is not your fault - if it is because you are not where you planned to be at that point, maybe you pulled some/all of the crew to do another job and got behind, and not a problem caused by others involved - then I think you have to eat that overtime.

There is no right or wrong here. But if you do a bunch of change orders in the middle of the project and later on, you need additional personnel or weekends, even if it is because you have other obligations and you now need to use those people elsewhere, you have a valid argument to request overtime or a time extension that you already justified and they didn't dispute. All depends on which side of the fence you are on and who is the better debater.

 

[kwired]

There is no right or wrong here. But if you do a bunch of change orders in the middle of the project and later on, you need additional personnel or weekends, even if it is because you have other obligations and you now need to use those people elsewhere, you have a valid argument to request overtime or a time extension that you already justified and they didn't dispute. All depends on which side of the fence you are on and who is the better debater.

All in the details and you are correct that there is no right or wrong or a one answer fits all situations. Possible those change orders in middle of project should have been higher amount to compensate for putting you behind on what you did bid on.

 

[Strathead]

All in the details and you are correct that there is no right or wrong or a one answer fits all situations. Possible those change orders in middle of project should have been higher amount to compensate for putting you behind on what you did bid on.

I tried to imply earlier. You put the extension on EVERY change order. IF the GC comes back and disputes the request for extension then THAT opens to door to discuss a higher rate. if they don't THEN you have paperwork to fight them if they get aggressive on insisting you work overtime later on.

For the record, most GC's I work for, I work with. I still do all my paperwork the same. That way if they get militant, I WILL be the one who comes out on top.

 

[cowboyjwc]

I know contractors that live for change orders. I've always tell people that if the bid is too good to be true it probably isn't a good bid and you'll start getting hit with the, "oh we didn't bid that."

 

[Strathead]

I know contractors that live for change orders. I've always tell people that if the bid is too good to be true it probably isn't a good bid and you'll start getting hit with the, "oh we didn't bid that."

I don't like change orders, however if the people who decide to build it want to send it out to multiple general contractors for competitive bidding, then I have grown out of solving their problems by asking 20 questions during the bid. If the plans say do it, then bid it that way. If it is wrong the change order it is.

 

[zog]

My company makes huge profits on change orders and extras.

Same here

 

[infinity]

View attachment 19124

Same here

Might be my boss's boat.

 

[petersonra]

A lot of contractors of all kinds live off of change orders. Some are very proficient at it.

I ran across an EC that did not run a single spare wire on a project. The whole reason was to get bigger change orders later on. They had trained their crews to do nothing that might negatively impact the chances of a later change order.

I hate that kind of thing but if the people footing the bill allow it out of stupidity or some other reason they pretty much deserve to be stolen from like this.

 

[kwired]

I know contractors that live for change orders. I've always tell people that if the bid is too good to be true it probably isn't a good bid and you'll start getting hit with the, "oh we didn't bid that."

Better bid for it if it was in the specifications is how I see that.

Where I see trouble the most is smaller design build type projects - client don't know what they want other then some of the major items, ask a few guys for a estimate and then pick the lowest one - reality is the lowest one didn't include any options that the owner wants but never thought about. I sometimes might throw in some "potential add-ons" to at least make them think about what they might be getting with each estimate.

 

[JFletcher]

Do we all agree that we don't make money on change orders? Yet we get these youngsters PMs from college, beating you up on pricing for every single Change order request submitted(Throughout the entire project). It is a daunting task.Constantly asking to breakout pricing. Even when you breakout pricing (labor and materials), they want you to breakout line item by line item.


I want to see what kind of approaches taken, when submitting change order request, to keep GC's questions to a minimum. What are they actually looking for???

When I first started doing v/d/v work, mostly for hotel owners, I'd agree whole-heartedly about not making money. After a few projects of endless dickering, non-payment, getting burned, etc., we just specified in our contracts that any and all change orders would have to be paid 100% up front before work was started.

"You want an additional 4 WAPs and 7 additional cameras here, here, and there? Okay, let me get back to you on a price..."
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...
...
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"....that will be $w,xyz. How will you be paying for that?"

We worked for the owner tho not the GC. Owners, in my experience, want a turn-key, complete project price, not a "well, the wiring will cost this much, the cameras that much, unless you get the Super-Duper Acme Upgrade, which are xxx$ more..."