It began with a client phone call: “You’re nearly 30% over our original budget. What are you going to do about it?” In some companies, a call like that would have set off a string of events, beginning with the client refusing to pay future invoices and possibly leading to the ultimate calamity, a lawsuit. Both sides lose.
What would you do? A company I recently visited with has a solution: the Change Order King. This is not a person, but rather a system for managing the inevitable changes to the scope of work. It works every time it is fully implemented.
The system consists of:
- a scripted conversation during the initial client meeting about change order management. This includes a discussion of the three types of change orders — client modifications to the original scope of work, required code upgrades, and unforeseen circumstances — plus projections (based on historical data) of how change orders might affect the final cost;
- a clear scope of work, and a final estimate with all owner selections made (no allowances);
- a contract that reiterates the definitions for the three types of change orders and spells out exactly how each will be handled;
- a checklist for writing up change orders, securing client signatures (written approvals are required), and accepting payment in advance; and
- contract billings that reflect total changes to the contract by each of the three change order types, as well as a revised contract price (see table).
The company rarely had to fall back on this documentation, but when it did, the system came in handy. In this case, after taking the client’s call, the company owners spent a couple of hours pulling together copies of all the signed change orders and totaling them by type, then personally presented the reconciliation to the client at the end of the same day. After reviewing the documentation and talking with the company owner about her decisions to modify the original scope, the client said, “You’re right, this makes sense. Now I can see where the money has gone. Let’s keep going.”
This is a true story. If it’s not your story, set up the Change Order King and take control of change orders. You’ll be glad you did.
—Judith Miller is a Seattle–based business consultant and trainer.