Masonry Magazine August 2001 Page. 36
Stor's Profit Line Item
Changes in scope of work occur on virtually every construction project and effective handling and administration of these changes is critical to maintaining a profitable job. The trouble is, change orders can show many different faces and can knick you in many different ways. It can be a truly daunting task to address their every aspect. Of what aspects do I speak? Well, here are just a handful of ways that we allow the change order process to suck profit from our projects:
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We ignore small changes. You know, the "not-so-big-at-the-time" items that get added for no cost simply because they just seemed too small to generate paperwork over at the time: like running the base molding further than detailed or digging a little deeper than spelled out on the plans. Of course, the trouble with small changes is that over the course of a prolonged construction schedule - there can be a whole lot of 'em-adding up to significant (and unaccounted for) dollars by the end of the project.
We give-in to our public relation's side. Here is always the temptation (and I'm recurringly guilty of this one) to "throw-in" a change for an owner whom you wish to impress or win-over for future work or just because you like them. Though I could probably make a case for such gestures being periodically appropriate, the important thing to remember is not to get carried away with your generosity. Construction contracting is a business and most owners (often business people themselves) understand perfectly the concept of charging for your product or service. If you feel you're having a weak moment, call up IBM and ask them if they'd throw in a free modem for your computer at no charge." Their response should get you in the right frame of mind!
We proceed with verbal changes, only to be rebutted completely when it comes time to collect. See #5!
We proceed with changes without getting an adjustment in the construction schedule. Sure, there are some changes that truly don't affect the schedule, but there are many more that legitimately require extension. Asking for the extra cost of the change is often deemed enough by the contractor, but what about the liquidated damages that linger at the end of the job? The owner won't be shy about demanding his penalty, so don't be shy about demanding your rightful extension to the schedule.
We proceed with the changes before the item has been costed or before the cost is agreed to by all the parties. On most construction projects, there is constant pressure to maintain schedule, even in lieu of the owner and architect making changes that were none of your doing. And again, in the spirit of cooperation, you often proceed. But keep in mind that from a business standpoint-once you perform that extra work, your negotiating position greatly weakens, and you may, at the end of the job, eventually be forced by the owner and architect (who is holding the money) to accept whatever remuneration they deem appropriate - an amount that can range from reasonable to laughable.
We fail to charge adequately for the additional office and administrative time that goes into administering
36 MASONRY AUGUST, 2001