Industry Today: Managing Inevitable Project Change in the Construction Industry
In the construction industry, one thing is constant: CHANGE.
Project change includes any change from a project as-bid that is required in order to successfully complete. These changes can be very costly for contractors.
One 1995 survey estimated a total annual cost of construction changes to be over $60 billion…and up to 25% of your annual revenue could easily be at risk due to these unanticipated project changes.
At Olson Construction Law, our goal is to work with you proactively to manage project change, minimizing unexpected project costs, maximizing profits, and limiting liability for under-designed projects.
5 Common Causes of Project Changes:
Most construction project changes stem from one of five causes:
- Lack of Site Access: If a project’s start date is delayed and your team is unable to access the site, the project will inevitably be put on hold. The same goes for unanticipated site obstructions and unusual weather.
- Design Errors or Omissions: Inadequate or inaccurate plans are a major reason for project delays and extra costs. If the engineer has under-designed the project, changes will have to be made throughout to realign the project with the owners expectations.
- Owner-Caused Delay: Often, delays are caused by the owners and engineers themselves. When your construction crew isn’t given adequate information, or if the owner is uncooperative or slow to make decisions, change plans, or make change orders, it becomes impossible for you to move forward with your work. The same is true when subcontractors run behind schedule or fail to deliver materials. Easements not secured by the owner, slow reporting of test results, pre-bid or post-bid survey error and incompetent engineers are all owner-related issues that can cause major delays in a project.
- Changes in Field Conditions: Subsurface conditions and soils that are unusual, unexpected, or different from those shown in the geotech report can delay a project. So can untimely utility relocations. If there are underground structures, obstructions, or utilities that are not shown in the plans, progress may also set the project back.
- Owner Initiated Changes: Sometimes an owner or engineer simply changes his or her mind during a project. When changes like these are made, additional work will inevitably be required, and the project will likely be delayed.
Seven Simple Steps for Managing Project Change
At Olson Construction Law, we want to help you succeed in your project and get paid on time. To do that, it’s important to know how to properly manage inevitable project changes.
Here are the seven steps to well-managed project change:
- Know which changes are “contemplated by the contract,” and which are not. To know this, you have to know your contract. You also need to understand the implied contract duties. These are the terms that are not written in the contract, but are there to legally project each side from unfair treatment.
- If the change is not contemplated by the contract, stop work immediately. Any work that cannot be completed without the change needs to cease as soon as you’ve determined that the change is not contemplated by the contract.
- Give immediate verbal notice about the change. Explain what work stopped and why. Propose alternatives and ask the engineer for his or her input.
- Give written notice about the change as soon as possible. Document the change, the work that stopped, and why it was stopped.
- Wait for a written response to your change request. A verbal response to the change is not good enough.
- Minimize your wait time by telling the engineer they must pay and grant a time extension. Tell the engineers in writing the real costs incurred every day that you have to wait. This includes underutilized or idle labor and equipment costs, as well as costs for remobilizing labor or equipment.
- Document the change costs: Track all cost differences in time and money.
Olson Construction Law is here to help walk you through this process. We know as much about the construction business as you do, and we want to help you to help you maximize your profit and manage your risk.