A change order template will streamline your change management process and help you run a consistent and efficient workflow. By templatizing key information, you can easily replicate the form project over project, ultimately streamlining the way you process approvals.
Why Use a Change Order Form
One of the biggest risks in processing change orders is the risk of delayed approvals. With delayed approvals comes delayed schedules, reducing your chances of delivering a quality project and establishing long lasting trust with your client in effectively responding to project changes. Plus, the longer a change order is delayed, the more exposed you are financially by risking unrecovered costs, especially if the change order is released to the field prematurely in an effort to reduce schedule impacts..
Creating a template to standardize your change order process helps reduce delays in the following ways:
- With a proper template, key stakeholders know exactly what information is required to submit and approve each change order, reducing back and forth communication and speeding up the process.
- With required fields, you are easily able to reduce the risk of missing important details, which causes miscommunication and the possibility of delayed approval.
By standardizing the change management process using templates, you are able to mitigate the financial and schedule risks to the project by providing clarity for faster approvals.
👉🏻 Read more about Risk Management in Construction.
How to Use This Change Order Form
To create more of a paper trail in your jobs, you should consider generating a standard form for each stage in the change management process. You can do this by submitting potential change orders (PCO’s) to the client to get information documented and trackable early. It allows for project visibility into potential scope and cost changes for all stakeholders and indicates that a formal change order is in the works. This can be tracked in a PCO log along with a formal document with initial key information regarding the project impacts. A PCO can then be elevated into a formal change order (CO) for approval as an official request for additional work or modifications of the contract. Both documents will house similar information, but the CO is the final formalized document composed of all approved PCO’s that acts as an official modification to the contract and is legally bound.
Each section of these forms is aimed at providing you with an outline to keep your project stakeholders accountable and provide absolute clarity into the information about the change order and its impacts to the project. The more detailed, direct, and clear the information you provide is, the easier and quicker these change orders will be approved.
Your change order format should include the following:
1. Project and Change Order Details – Include information like project name, project number, client/ contractor information and a number to identify the change order. The idea here is setting up an organized tracking system to quickly associate what project the change order applies to and prevent miscommunication. Assigning a number to each change order will make it easy to reference going forward and relate to future changes or discussions. Tip: create a uniform numbering system that includes more information than just the change order number, for example: CO [Project #]-[Change Order #].[Revision #]
2. Key dates and Deadlines – Tracking and identifying key dates will keep your project team accountable. You want to track dates like “created date”, “date reviewed”, “due date” and “invoiced date”. These fields will paint a picture as to where the change order is in its lifecycle and indicate which party is responsible for its next step. Dates are also important for aligning to payment schedules, project timelines, or contractual agreements to aid in financial and resource planning, as well as complying with legal obligations to submit changes in a certain timeframe – all helping to reduce your overall risk on a project. Lastly – once date tracking is standardized- you are able to gain a better understanding of your business by understanding when and why changes generally occur and better plan for future resource allocation on new projects.
3. Description of Scope – When documenting the description of changes, be as specific as possible to avoid any confusion or misunderstanding. This should be detailed enough to determine the cause of the change order and specifically what scopes of work will be modified. Each stakeholder should be able to tell what the implications are for project timelines, resources, and tasks and easily recognize what aspects of the change order will incur cost. If disputes arise, the description of the scope of work will provide a key reference point for what was agreed upon.
4. Line Items and Markups – Include a cost breakdown for each scope of work affected by the change order. Best practice here is to use a uniform list of cost codes to track scopes of work across projects. This will standardize reporting across your company so you can understand where and why your changes are happening. Each line item should include a brief description of the cost (e.g. “project manager supervision time”). Ensure that you are including overhead costs and markups to increase your profit margins (most of the time this is a flat percentage applied to the cost of work)
5. Contract Information – Include a summary of not only the original contract amount, but the cost of the change order and the revised contract amount upon approval as well. This clearly outlines to your clients how the contract values are changing over time to prevent surprises during your invoicing process.
6. Approval Signatures – Getting a change order executed is key to finalizing the document. These signatures are used as a confirmation of approval and serve as a legally bound document that is now included in the contractual agreement. When disputes and possible litigation occur, this protects you in ensuring the full cost of the change order is covered.
Implementing a standard change management process is critical to maintaining project profitability. The whole idea is to mitigate risks effectively by being able to respond to changes as they occur on site, and assess the impacts of those changes to project timelines and budget. By formalizing the documentation associated with change orders, you protect yourself from those risks with strong backup to justify cost changes accordingly, allowing you to gain approvals faster and move through projects quicker. Once standardized and implemented project over project, you will achieve an overall increase in transparency with clients leading to stronger relationships and potentially repeat work, as well as increased profit margins as changes are documented and organized more effectively.
Further Reading: 7 Steps to Implementing an Effective Change Order Process
The CrewCost Team consists of men and women who have worked in the construction industry as project managers, general contractors, sub contractors and more. They share their decades of experience on our blog as a way to help other contractors grow healthier and more profitable businesses.