Change orders, trust, productivity and construction marketing


changeorder boatIf you want to touch a soft spot in the design and construction industry, just utter the words “change order”. The process of revising and resetting construction jobs after they have commenced is probably the biggest source of conflict, litigation, and general mayhem — fuelling litigation, specialized forensic consultants, and disputes, over and over, about costs and scheduling.

Forensic claims consultant Steven Revay Jr. addressed some of these issues at a presentation to the Construction Specifications Canada conference. He showed the classic image with the small dinghy named “original contract” and the large yacht named “Change Order” — an image that, after I sought to research it, has over the years generated more traffic than any single topic to my blog.

Revay set out to debunk the myth that most contractors like, seek and enjoy profit from change orders. Sure, in certain circumstances, when they are rather simple, obvious, and can be incorporated within the project schedule, they can be profitable (and undoubtedly some contractors plan for the necessary change orders when they see documentation flaws — if they know where they are, and can plan around them, these can indeed be profitable.)

The problem occurs when multiple change orders layer one on an other, causing extensive project delays and demoralization among tradespeople, who spend more time standing around or (worse) tearing down the work they had already completed. ?The cumulative cost is really hard to calculate and, even if it can be figured out, owners will often balk at paying the real costs for the budget-overrun inefficiencies caused by change order delays.

Then there are the issues where the paperwork isn’t in order. The superintendent on site is faced with a challenge — should he mobilize the otherwise wasted resources on site and complete the change without the paperwork, or shut down the job, adding even more to the costs and delay. ?Of course, things don’t work out very well, often, when this happens.

Finally, Revay cited the problems that occur when the project actually appears to be moving forward as planned, and the owner has some budget room left near the project end — so requests some “nice to have” changes. ?Sounds good, eh — a little top-up to complete the job. But these last-minute changes often go very wrong, he said, because thee workers are not mobilized correctly and of course the costs go over the top.

The solutions: Probably the most important one is really good communication. ?The more changes can be avoided, and the more necessary changes can be planned, the less likelihood of conflict. ?Sometimes it is important for the contractor to say “no” and often it is vital to have a clear understanding that the work will stop until a change is signed off.

So what does this have to do with marketing? ?Consider the concept of trust which underlies the change order fiascos. ?If trust breaks down — if the owner thinks that the contractor is just gouging to claim unnecessary change order fees, if the architect or engineer feels that they are being called on the carpet for incomplete or inconsistent plans when they simply weren’t given enough time and resources to complete them properly — things break down into tension and hostility. Will the people involved want to work with each other in the future? Will any marketing and business development efforts overcome the angst and tension of ongoing litigation and overhead drain as change order disputes are fought for years after the projects are completed?

Yes, this stuff needs to be taken seriously and indeed it is probably far more important for your marketing than the way your website looks, or the shape of your logo.

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