Late last year, Vince Butler, of Butler Brothers Corp., Clifton, Va., began putting together the final billing on a job. He imagined the last invoice would be about $1,000. Once unpaid change orders were totaled, it exceeded $20,000.
About 20% of the company's approximately $1.5 million volume comes from change orders. On several large projects for repeat clients, subs often made changes with little documentation. "They were looking to satisfy the customer most of the time, but in too loose and freewheeling a way."
Butler was fortunate not to lock horns with clients over the extra work billed. Still, without documentation, "you have to spend an enormous amount of time to find that work, justify it, bill for it, and collect it," he says. "I'm sure we didn't get it all, and we could've had a job go south on us."
Beginning this year, Butler inserted a clause in subcontractor agreements stipulating that the company would only pay for work pre-authorized on the work order, unless the invoice was accompanied by documentation signed off on by a project manager.
"The bottom line is, if [the subs] deviate from the specifications, they need to have it approved."
Butler says he sat down with each of the company's subcontractors at the end of December and explained the policy. Many welcomed it, because "they were getting a lot of calls from me," he says.
Since then, Butler has seen a 75% reduction in unauthorized change orders.