Although careful planning helps mitigate changes during construction, unforeseen circumstances may still occur, affecting your project’s scope and timeline. These unexpected events translate into costly change orders if they’re not accounted for in advance.
In this guide, we’ll go through the most asked questions about change orders, including what they are, how to communicate them, how to distinguish between what’s optional and mandatory work, how your project’s schedule can be impacted, when’s the best time to negotiate, and how your warranty can be voided.
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What are change orders?
Change orders are additional jobs that modify your project’s scope of work and budget. There are 3 categories of changes orders: site condition, client request, error/omission. Change orders can also be a reduction of the scope of work, which should result in a credit in the project cost.
Site condition (unforeseen condition)
These changes arise due to unexpected events, such as hidden defects or non-conformity being discovered during construction either behind the walls, in the foundation, or in plumbing, electrical, and structural elements of the building.
This type of change order occur when a homeowner requests changes to their project after the contract has already been signed. For example, a homeowner may end up preferring a smaller type of ceramic, which requires more work, or want to add modifications that have higher material costs, such as floating stairs instead of a standard staircase.
Error and omission
This type of change occur when there is an error or an omission in the project plans or scope of work that will not allow the project to meet its requirements or objectives.
When should I communicate change orders?
At the beginning of your project, it must be clearly stated that any change order needs to be presented to both you and your project manager before construction work is carried out on these changes. To make sure that every change order is communicated, you should receive a description of what the change entails as well as its related costs. The exception to this rule is if there was an emergency, such as a water leak, or an immediate safety risk to the building.
How do I distinguish between an optional and a mandatory change order?
There are two categories of change orders: an option or an official request.
- The optional change order is left to the discretion of the homeowner as to whether it should be carried out or not.
- On the other hand, a request is mandatory when the work is legally required. Those changes will usually come as contractor’s suggestions and their goal is to increase the value of the project.
For example, if upon opening a gypse wall, the structural supports are damaged or don’t meet code standards, the contractor is legally required to repair them. Same can be said for plumbing or electrical hidden defects. To account for these unforeseen issues, you should set aside contingency funds — especially if your home is more than 30 years old or have been renovated in the past. We suggest at least 10% of your renovation costs, whichever amount is higher.
Average costs of change orders can vary from 5-10% depending on the existing conditions of your construction site and complexity of your project. Additionally, if your project scope isn’t clearly defined or detailed, there’s a larger risk that unforeseen events and additional costs occur. For more complex projects where there are a lot of unknowns, the construction contingency can go up to 20% and more, due to the fact that we are not able to build the scope precisely combined with the fact that we can’t see what is behind the walls and floors (example of projects: renovation due to water leak, foundation work and structural work).
How do change orders impact my project’s schedule?
Adding more work to a project’s scope may affect its schedule — the bigger the job to be done, the more time will be required to complete. A schedule can also be impacted by external factors, such as delays for materials, like doors and windows or roof trusses. Discussing with your contractor can help you mitigate these risks and plan ahead for how long changer orders may be.
When is the best time to negotiate pricing?
If there are changes to the scope of work during the bidding phase, we recommend making all your changes before signing the contract with your contractor. Once the project starts, you’ll have less leverage to negotiate the price of a change order. Once a project begins, there is not enough place for negotiations since you’ll need to approve or decline change orders rapidly not to affect the project schedule (and the general contractor’s costs), however, you can ask your general contractor to suggest alternative options that may help you manage your budget. When submitting a change orders, the general contractors need to act in a good faith and provide a fair price.
How can my warranty be voided?
Your warranty can be nullified if someone other than the general contractor gets involved within the original scope of work. If you decide to take on some of the additional construction work yourself. It’s important that the general contractor remains solely responsible for the work that he’s performing, so that he can legally provide you with a warranty on that work.
For example, if your contractor performs some electrical work that was started by another electrician, he shouldn’t be responsible for the other electrician’s previous work. In this case, it’s important to either have a clear sign-off where a full inspection is done during the transfer of work, or to provide a document that clearly indicates the beginning and end of each professional’s contributions. Another option is to come to an agreement where the general contractor and the electrician agree to work together as part of their contract for the entire project.
Change orders are a normal part of every project! In fact, we rarely see a project completed without change orders because information before construction starts is never perfect. This is why we always recommend reserving at least a 10% contingency for every project. If you ever need support, remember that your Billdr project manager is always available to help.
Read our Understanding the completion of your project guide for more advice on how to prepare for your renovations.