Our 3rd Commandment for Green Building: Change Orders Are Trouble

Fast forward another 10, 20, 50 years to the state of green building and the average builder will be incorporating as many green building design techniques, construction methodologies, products and materials into their homes as the most cutting edge green builders are doing today.  In a short, a massive shift is underway whereby today’s standard construction techniques are fast becoming obsolete.  And I mean fast!

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So when we sit down at a future monthly breakfast meeting of rookie and veteran builders (no, they will not all call themselves green builders) what advice could those a little longer in tooth give those just starting out?  I hope it’s the same advice I myself learned 10 years ago on the eve of our industry’s green building tipping point:  WATCH OUR FOR THOSE CHANGE ORDERS!

Although I know many builders who believe change orders are their friend, I must take the contrarian position.  While change orders have enabled me make back money I lost as a result of a previous estimating or sales error, I believe an absence of change orders in our projects has greater value as a positive indicator of healthy operating systems and procedures.  And this value far outweighs any potential benefit they may pose to make additional profits.  In fact, many change orders are simply an opportunity for a builder to lose money because their processes do not account for the fluid integration of changes once a project is under way..

Why is the client requesting a change to begin with?  Instead of looking at change orders as a way to make “more” money or “make up” money, perhaps they should be viewed as an opportunity to look more closely at your systems and procedures to see what is not working and what needs refinement?  Should the issue at hand not have been uncovered during the interview process, the materials specification and product selections stages or while your design team was working with the client on “needs, wants and wishes”?

Additionally, the proper execution of a change order requires writing up the scope and pricing it out for client approval in advance of any work being done. While rookie builders may fail to write them up and collect a signature first, most veteran builder have learned from previous errors and they have this procedure down pat.  At this stage of writing a change order, proper operating systems would dictate our work has only just begun.  Now this written change order, this legal document affecting our contract, must be linked back to some combination of documents which includes blueprints, accounting, purchase orders, trade partners, the schedule and the selections tracking process!

Anybody who has been in this business more than five years has likely written a change order, priced it out and received client approval in advance, only to see that change order poison the project because it was never linked to the subsequent documents listed above.  In essence, it just sat their all alone on an island, never got passed on to the workers, delayed the project without getting documented in the schedule, was not accounted for when materials or products were ordered etc….

Better client selection, estimating, product and material specifications and design systems will help you reduce the amount of potential change orders.  But when you are building green you will have new ideas come to market in the middle of the project that cannot always be anticipated.  Your processes for handling them have the potential to make or break the job.  Remember:

  1. Put them in writing.   The more detail the better!
  2. Include payment terms in writing in the change order!
  3. Put the schedule delay, if it exists, in writing in the change order!