Change Order Request Process

My notes from NASCC 2018: Change Order Request Process [P4]
(PDH# 88411) Date: 04/11/2018

Bill Zanow, Senior PM for Steel Fab Inc.
Intended Audience:  Engineers, Fabricators, Erectors, Detailers, Architects
Session video link.

Session Description:

Throughout the life of a project, there are opportunities to request compensation for changes or revisions to the scope of work that the fabricator is responsible for providing. When these changes occur, the decision needs to be made, if warranted, to increase/decrease the contract amount. The process utilized is to ensure that the person reviewing the change order request fully understands the integrity of the scope revision, and what the extra cost being justified is representing. Once the person who is reviewing, acknowledges the change order, the fabricator project manager must ensure that the reimbursement is made in a reasonable amount of time for billing purposes.

Introduction

Learning Objective 1: Explain the legal definition & parameters of a change order.

Learning Objective 2: Summary of  documentation, processes, and calculations necessary to breakdown the CO.

Learning Objective 3: How to explain & defend any extensions or delays created by the impacting change order.

Learning Objective 4: Contractually, how to prepare and submit a change order while utilizing the contract stipulations in order to gain reimbursement.

Change Order Definition

A change order is a legal change to the contract terms to modify the price, scope, schedule or other attributes to the original contract. There is typically consideration given by one party to the other for the change. However, there can also be $0 change orders to include new clauses into the contract.

The change order process is typically defined in the general contract or subcontract.

A change order can be implemented by any entity that has fiduciary responsibilities to manage the contract between one company and another.

Packaging the Change Order Request

  • Provide full information.
    • It may be difficult to remember how and why you priced a change order. Often change orders are reviewed several months after the COR is submitted.
  • Describe scope
  • Provide specifics
    • When possible it is nice to have a dedicated person for quoting change orders.
  • Provide schedule impact
    • Lead time on material
    • Tons
    • Man hours to fabricate
    • Man hours/days to detail
    • Submittal response time
    • Time to install
    • Trucking
    • It is hard to measure inefficiencies, make sure to include in your proposal.
  • Provide exclusion list of what is not included or was picked up elsewhere.
  • Provide full breakdown of costs so that there should not be any question as to what is being quoted.
    • Breakdown individual components as much as possible.
    • Bolts, paint, galvanizing, etc.
  • Track revisions of the change request without creating a new CO.
  • Subcontract or specifications will typically stipulate the amount of markup allowed on self-performed and sub-contractors.
  • Include back up from vendors/subcontractors.

Schedule Impact
Protect your entitled extension to project schedule.

  • Engineering time (including submittal review time)
  • Drafting time
  • Fabrication time
  • Installation time
  • Overall impact to your scope
  • Once it is in writing, it is part of the contract.
  • Contractor typically wants to include “zero time”
    • Better to not have schedule addressed when change order is written rather than “zero time extension”

Change Order Request Log

  • Suggested minimum information
    • Date submitted
    • Description
    • Dollars
    • Status
  • Advance uses of COR Log
    • Track the life of the change order
      • Change request log updated when there are any changes to requests
        • Issued date
        • Revised date
        • Date change order received
      • Keep up with variables that are included in change requests
        • Dollars
        • Schedule
        • Subcontractor pricing
        • Added production time
        • Added tonnage
      • Use to track change orders to vendors/subcontractors
        • Vendor reference number included
        • Has change order been issued to subcontractor?
      • Reconcile change order once it has been written to match dollars.

Reference 32 minute mark in video to review Bill’s excel log.

Proceeding with the Change Order
When should you proceed?

  • What does the contract state?
  • Price & Proceed
  • What is the impact to the project with/without proceeding?
  • What is relationship with contractor?

Reimbursement and How to Get Paid
Being persistent pays off.

  • Did you submit in the time period required by contract?
  • Follow up with contractor
  • What does contract state about collecting and remedies for not being paid?
    • Negotiation – discussion to work out a dispute
    • Liens
      • Claim on bond
    • Mediation – 3rd party makes decision to settle dispute
    • Arbitration – parties agree that another party can make decision about dispute
      • Use evidence and arguments – similar to court
      • More formal than mediation
    • Litigation – taking legal action
      • Someone is getting sued
    • Pay if paid / pay when paid
      • The contractor shall have no obligation to pay the subcontractor…until the contract has received payment

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