Change Order Pitfalls: The Forgotten Expenses That Drain Your Budget

The Importance of Recognizing Change Order Costs

Change orders typically arise from unforeseen circumstances or changes requested by the client. Although they are a standard procedure in the construction industry, they can lead to unanticipated financial consequences. Ignoring what may seem like minor additional costs can lead to significant budget overruns. Each expense should be carefully considered and factored in when negotiating change orders to keep the project on track.

To assist with tracking these costs, the Change Order Excel Template from Construction Logs' store can be an invaluable tool. This template helps project managers streamline their workflow and ensure all change order-related expenses are captured, leading to fewer surprises down the line.

Overview of Commonly Missed Costs

While every construction project is unique, certain costs frequently fly under the radar. Below is an itemized list of 10 commonly missed expenses that can wreak havoc on your project budget:

1. Site Office Costs

• The temporary site office is often overlooked. This includes the cost of renting or purchasing mobile offices, furniture, and equipment to facilitate communication and coordination on-site. It's essential to factor these into your budget when preparing for a project.




2. Utilities Expenses

• Increased utility usage for water, power, and gas can become significant when considering change orders. These costs are not always included in the original budget, so it’s vital to estimate total utility expenses accurately, especially for extended projects.




3. Portable Toilets

• The cost of renting portable toilets for workers can quickly add up. This aspect of site management is often ignored but is critical for maintaining workforce morale and compliance with health and safety regulations.




4. Raised Labor Rates

• Labor costs might increase on projects due to a variety of factors, including market demand and the requirement for specialized skills. When change orders affect the duration or scope of the project, these rate changes must be factored into the overall cost structure.




5. Rework Expenses

• Change orders can lead to rework if the modifications are not clearly communicated or defined. This results in wasted resources and time, directly impacting labor and material costs. Project managers need to prepare for potential rework scenarios when accepting change orders.




6. Material Price Increases

• Fluctuations in material costs can significantly impact budget levels. Waiting for additional materials due to change orders may cause delays, driving up overall project expenditures. It’s crucial to consider potential market changes when signing change orders.




7. Increased Project Duration

• Change orders often prolong project timelines, which can lead to unforeseen costs. The longer a project takes, the more expenses accrue as daily charges for equipment rentals, labor, and site management increase. Estimating these extended durations is essential when planning for change orders.




8. Site Management Adjustments

• Modifications in project scope often require adjustments in site management processes, including increased site supervision and additional safety measures. The cost for more management resources must also be included in the overall construction budget.




9. Insurance and Bonding Costs

• When project scope increases, so do the liabilities. This can lead to higher insurance and bonding costs that project managers fail to consider. Make sure to review policy requirements and understand how changes affect your coverage needs.

10. Miscellaneous General Conditions

- Many other miscellaneous costs can come into play. From general conditions, including security services to additional waste disposal requirements, all these need to be carefully tracked throughout the project.

Construction site office displaying essential tools and plans

Best Practices for Managing Change Orders

Recognizing potential costs is only half of the solution. Effectively managing change orders is paramount for maintaining your project's budget. Here are some best practices to consider:

Develop a Clear Change Order Process

Establish a well-defined change order process from the outset. This should include how change orders are requested, reviewed, and approved. Ensuring that all team members are familiar with this process will help minimize miscommunication and the resulting costs.

Use Technology to Track Costs

Utilize tools like the Change Order Excel Template from Construction Logs' store to better monitor related expenses. These templates enable project managers to capture changes efficiently while providing a clear overview of ongoing costs.

Communicate Regularly with Owners

Keeping owners informed about change orders and potential costs fosters transparency. Regular updates will help everyone remain aware of possible impacts on scope, timing, and budget.

Create Contingency Funds

Establishing a contingency fund within the project budget can provide a safety net for unforeseen change order expenses. Make sure to keep a portion of your budget earmarked for unexpected costs, allowing flexibility when changes inevitably arise.

Contractor assessing materials on-site to ensure viability

Implementing Lessons Learned

As projects wrap up, it’s essential to evaluate change order performance and costs. Conduct a review to identify missed expenses and inefficiencies. This combination of analysis and documentation can inform future projects and help avoid similar oversights.

Feedback Loop with Your Teams

Involve various team members in assessing change order impacts, from project engineers to field staff. Their insights can uncover additional expenses that may not have been previously identified.

Document Everything

Maintain thorough records of all change orders, including justifications, financial impacts, and outcomes. This practice not only aids in tracking costs but serves as a reference for tackling similar issues in future projects.

Neatly organized materials and tools at a construction site for optimal workflow

Final Thoughts on Change Order Awareness

Navigating change orders is a complex but necessary aspect of construction management. By understanding the commonly missed expenses associated with them, project managers can take proactive measures to mitigate financial risks. Utilizing a comprehensive tool such as the Change Order Excel Template from Construction Logs' store can significantly enhance your management processes.

Recognizing change order pitfalls and acting on identified costs can save your project from budgetary strains and help you maintain profitability. Always prioritize clear communication, effective practices, and meticulous tracking to ensure your projects remain successful and financially sound. Remember that every detail matters when it comes to maintaining control over your budget; taking the time to consider what may seem like minor expenses can yield significant outcomes in the long run.