---
id:
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title: "Appendix C: Additional Costs of Change Orders"
tags: []
up: "[[neca-mlu]]"
---
# Appendix C: Additional Costs of Change Orders

## Change Orders Cost More

Not all change orders are profitable. Most change orders impact the base contract. All the components involved in a change order, both adds and deducts, must be considered so that proposals are complete, comprehensive, fair, and comply with the contract. Any other approach can result in losing money on change order work. Below is a list of some of the components to be considered.

* **Additional management time.** When project information must be transferred from one person to another, preparation, research, and documentation time is required. Communication between the contractor's team, project management, estimators, and field supervision can be time- consuming. Coupled with the time it takes to confirm the scope of the work with the Construction Management team, usually with the Contractor's most expensive executives.

    This management cost is not included in the original contract, it must be included even for a modest change order. The contractor must recover these costs from the change order, otherwise, they will be absorbing the cost, and the project will experience a profit fade. Change orders take away from focusing on the implementation and execution of the original contract. Management cost is usually covered in the overhead line on a change order proposal. Missing this cost can add up significantly over the term of a contract.

* **Redirecting the workforce.** Change orders are disruptive to the flow of work at the job site. The obvious costs are the extra hours needed for the foreman and lead installers to read the new plans, interpret them, and pass the information along to the field workers. In addition to this, there are additional less obvious costs:

    * Material quantities must be verified, and more materials ordered, received, and stored, if necessary.
    * New or additional tools may be necessary and will have to be procured and distributed.
    * Sections of the workforce may be reassigned. This reassignment is an expensive process, as each worker must stop what they are doing, move their tools and/or equipment and familiarize themselves with new tasks and a new work area before they begin any actual installation.
    * When it is known that changes may be coming in one portion of the project, workers tend to "work around" that area, rather than installing equipment that they have to remove later. This inhibits the streamlining of the workflow and reduces efficiency, sometime substantially.
    * Overtime may be required to complete the additional work.

    All these things are in addition to the "disruption of the work in progress" losses that the contractor will incur because of a change in the work. The difficult or very difficult labor units should be considered to cover these disruptions.

* **Incorrect installation based on untimely information.** In almost every case there is an "approval gap" in the change order process---the time between when the change is requested and when it is finally approved. During this gap, it is quite likely that a good deal of the electrical system will be incorrectly routed. The routing will be correct according to the original plans but incorrect according to the change. This requires field workers to reroute and sometimes deconstruct their previous work. Not only does this take extra time, but also it is demoralizing to many workers, thus harming long-term productivity. The longer the "approval gap" is, the more likely it is that the contractor will encounter excessive losses.