When it comes to change orders, you may already be doing the work — why not get paid for it! A poor change order process is one of the biggest sources of lost profits for contractors and can also be a source of misunderstanding and resentment on the part of customers.
To clients, moving a window 3 inches to the left or choosing a different tile color after the tile has been ordered doesn’t seem like a big deal. But these kinds of changes can wreak havoc on your job schedule and can cost significant time.
Form Is Function
Have a change order policy clearly written in the contract and go over that section orally with your customers before they sign. Include in your sales documentation a sample change order form. Preparing clients for the possibility (and probability) of change orders goes a long way toward getting approval for increases in the contract price as well as maintaining satisfied clients.
Watch the field employee-customer relationship. Perhaps the crew does small favors without proper authorization or notification. These favors may not produce additional materials costs but can easily put you over your budgeted hours. Make it clear to the crew that they work for the company, not for the customer. Provide production workers with the scope of work and an hours’ budget so they can distinguish between tasks that are and aren’t included in the contract price.
Create an easy-to-use additional work authorization (AWA) form that your crew can use in the field. It should include the date and name of the job, information such as a description of the situation and possible solution, and a place for employee and client signatures.
The form need not include pricing; that can be done in the office. Make copies for client, field, and office. Be sure to include a sentence that says something like “An additional work authorization can and usually does increase the time and cost for the contract.”
—Leslie Shiner, owner and principal of The Shiner Group , has more than 20 years experience as a financial and management consultant. Melanie Hodgdon, owner of Business Systems Management, works with clients to generate realistic solutions that reflect the resources and style of their companies. They co-authored A Simple Guide to Turning a Profit as a Contractor.
Change Order King: A system for handling changes to the scope of work
Orderly Change: Managing change orders so you don’t lose money
Change Is In Order: Change order calculations done in the field vs. in the office