Have you ever had a project that seemed to flow so smoothly that you opened up to the possibility of taking on passion projects?
Then, the client requested new windows.
Your team stumbled on some structural issues somebody should have caught earlier on.
The house needs a new electrical panel and wiring that was mentioned before but somehow got missed along the way.
A massive storm damaged the kitchen and bathroom tiles in transit and you don’t have a backup supplier.
One after another, the hits just keep on coming until the project is behind and your profit margin is dwindling.
While you may not have prevented all of these issues, better organization would have gone a long way. From tracking materials to monitoring request and specs, your project could have been easier on you and your team.
Leveraging your knowledge and contacts with the right construction management tools means you can find a way through this mess. Navigating the minefield of construction change orders doesn’t have to be a negative experience if you’re prepared for the inevitable.
Client Change Orders: The Good, The Bad, and The Ugly
Even the best-laid plans can go off track. It’s not hard for a small mistake or accident to trigger a costly chain of events that knock a project off course. Understanding all potential outcomes is key to good construction project management.
The Bad
What was your initial reaction to so many change orders? If you balked at your dwindling profits, you aren’t alone. The truth is that construction change orders and rework cost $177 billion per year in the United States.
Even though you can’t plan for an act of nature, you can prepare for potential roadblocks. Consider how to handle the two immediate threats change orders bring to a project:
- Schedule Delays: Often stem from poorly managed change order processes. A short discussion during the planning stages could reduce the impact on productivity, even in the event of a natural disaster.
- Bursting Budget: Inadequate change order cost tracking can derail a budget, around 10-15% on average. Establishing a clear, reliable system from the outset creates transparency and wiggle room when facing client change orders.
In both cases, organization can be the difference between losses and gains. Don’t worry if organization isn’t your strong suit because the right tools can track and streamline everything for you.
The Ugly
You managed the initial fallout. Now, the long-term effects move to the front of your mind. What will the client think of me? How will I pay my subcontractors now?
The ugly side of construction change orders refers to the long-term impact that can have a significant ripple effect. These issues can even affect future projects:
- Strained Client Relations: Typically stem from change order disputes and miscommunication throughout the process. Face it, things get lost in translation and clients become just as frustrated with delays and budget concerns.
- Stifled Cash Flow: Delayed change order approvals and payments can create ripple effects if you aren’t prepared for them. Cash flow disruptions from delays typically cost contractors 1.5% of project value per month in additional financing costs.
Stressing about the negative impacts is unproductive, especially when you have options for clear, timely communication.
Interestingly, a 2018 research paper found that improving communication on construction projects is key to offsetting adversity. Establishing effective communication early in the process could reduce the chance of conflict down the line.
The Good
Don’t get bogged down by the negatives! Construction change orders are inevitable, and with the right support, you can turn them into a positive outcome.
- Potential Profit Boost: Some changes can benefit a project, like swapping a cheaper material when another is unavailable. Of course, all parties need to agree on the change, but it can be mutually beneficial.
- Reputation Boost: Handling adversity, like the fallout from a freak storm, can leave a positive impression on a client. If your team handles change orders efficiently, you’ll establish yourself as a reliable and adaptable partner.
Juggling too many balls and using different platforms to manage your workflow makes it easy to miss critical elements. Streamlining your processes and financial interests in a user-friendly platform can be a game-changer.
Establishing a Strong Change Order Process in Construction
One of the most valuable lessons to learn in construction project management is that you can continually improve your processes.
Being flexible enough to adapt your approach to meet each project’s needs helps you adjust to change orders. It also gives your clients the feeling that you’re delivering extra attention through a customized plan.
Establish a Standardized Change Order Process
Addressing construction change orders as part of your negotiations can prevent delays. It should be a part of the project’s scope, so make it as clear as possible for all parties involved.
Setting parameters at the beginning ensures that everyone is on the same page at every stage. Your process should always include:
- Who will initiate a change order, and how will they do it?
- A comprehensive list of what authorizations are required to complete a change order.
- Who will perform and pay for the work, and how will payments be handled?
Choosing a platform that streamlines the creation and tracking of change orders makes your life easier as you take on additional work. It also means you can look back at previous jobs for inspiration when managing change orders on a new, similar project.
Add Notification Requirements
Addressing change order parameters in the contract can make for a smoother process.
Most contracts require change notifications within five to ten days. Failure to comply with the established timeline can result in denied payments, even if you complete the work.
Clarify Cost Types
Since every change order falls under one of three cost types, it helps to track these costs separately so you have a clearer picture.
- Direct costs cover materials and labor.
- Indirect costs are your overhead costs, typically 10-20%.
- Consequential costs cover the extraneous issues, such as productivity losses and delays.
By tracking these costs separately, you can see where there’s need for improvement. It’s easier to refine your processes and make better informed decisions to get a project back on track.
Strategies for Accurate Construction Change Order Cost Estimation
Part of preparing for change order fallout stems from proper cost estimation, including the potential impact on your timeline. Having a deep understanding of your project at the outset might require a little extra research and preparation.
- Asking the right questions can help you identify potential issues before they develop. You want to understand the project’s full scope and your client’s expectations.
- Assess the project’s complexity. For example, an older home is likely to have hidden problems, such as asbestos or faulty wiring, that could impact renovation.
- Research contingencies for common issues with the type of project you’re estimating. Be sure to consider potential subcontractors you may require, the impact on the timeline, and additional costs.
The more insight you can gain at the outset, the better you can prepare your estimates to provide a proper cushion for change orders.
How To Improve Communication With All Stakeholders
Communication is possibly the most critical aspect of construction project management. It can become complicated with so many people involved, but it doesn’t have to be a roadblock.
Streamlining everything from status checks to approvals can reduce delays and improve transparency among stakeholders.
When everyone involved is aware of what’s happening at every stage, it’s easier to overcome potential pitfalls associated with change orders.
Think about how much easier it would be to obtain approvals on a change if everyone had access to the same information at the same time. It’s easy to create this opportunity with a platform that offers online approvals with digital signatures.
Use Technology
How do you currently handle change orders? Paper can be misplaced and it’s easy to misfile documents if there’s too much going on. Spreadsheets make it possible to track things in one form, but they don’t always update in real-time, which can create problems on work sites.
Given the importance of organization, these options can create logistical nightmares. With so much power at your fingertips, why rely on filing options that fall short?
Embracing the right technology allows teams to streamline processes, including change order documentation and tracking. Leveraging a project management software like Contractor Foreman, which integrates with platforms you already use, brings everything into one place.
Tips for Managing Change Orders
Developing a change order process takes a little effort, but it can save you time and money in the long run. As you shift from one project to another, be sure to adapt to meet your client’s needs. The following tips should help you deliver a truly customized experience.
Track Everything and Get It In Print
This advice may seem simplistic, but it’s surprisingly easy to overlook. Missing or incomplete change orders can lead to costly missteps.
Have you ever committed to verbal changes because you or your client was in a rush? Perhaps you included vague updates in a document because you assumed the meaning was self-evident. One thing’s for sure, it’s far too easy to succumb to misunderstandings if you don’t get the details in writing.
Further, keeping everything in one place makes tracking easier and allows everyone to follow the project’s progress. If you maintain all project change orders in one place, it’s possible to monitor costs and time delays.
Turning Change Orders into Revenue Opportunities
Change orders often present as project obstacles that cost valuable time and money. You don’t have to fall into that trap with a little extra planning and improved forecasting.
- Create a template for your company that includes all required information for a change order. Ensure the form is clear and provides sufficient space for adjustments to suit each project.
- Follow industry standards whenever possible and be transparent with clients so they understand the parameters.
- Understand actual costs of labor, product, and machinery, including any fluctuations that could create disruptions. Knowing the rules, like markup rates, can help you finesse a deal in your favor.
- Communicate with your client about proposed changes before making any moves. Even if you think you can get a good deal on a product, wait for the client to agree.
Keeping a pulse on market trends is only one step in better forecasting. You also benefit from using a comprehensive platform that offers the tools you need to boost your bottom line.
Contractor Foreman offers integrated job costing and real-time financial tracking to ensure you have the best information at your disposal. You can make educated decisions in real-time to reduce delays and perform more accurate cost analyses.
Focus on Client Relationships
In 2025’s litigious construction environment, client relationships can make or break your business. Poor change order communication led to a $40 million lawsuit on the Obama Presidential Center project, proving that relationship management isn’t just about being nice, it’s about survival.
Customer service is currency in today’s world, and that means delivering the best experience for your clients. Being polite or responsive are only two things to keep in mind during change order negotiations.
- Clear communication sets a foundation of respect that’s crucial for avoiding misunderstandings that can create tension. Keeping everything in writing and available to all stakeholders is key.
- Ask questions. You know what information you need to proceed, and that means asking the right questions to gather as much data as possible.
- Listen to your clients. Pay attention to their body language as much as their words to gather as much information as possible.
- Manage and then exceed expectations. Doing the minimum may be enough to get the job done to a satisfactory level. But going the extra mile with a little extra care can impress a client and create a repeat customer.
- Practice conflict resolution. You will inevitably have a client who pushes your buttons. Handling a difficult client with grace and respect can be challenging, but maintaining a calm demeanor will ultimately benefit you.
Taking the time to listen to and understand your clients will help you complete projects more effectively. How you interact with them throughout a project can help you establish trust and credibility.
The 2025 Change Order Landscape
The construction industry is perpetually changing, and the blend of recent economic developments with political policies in the United States have caused a ripple effect. It’s likely that contractors will see more change orders over the coming months.
While more employees are staying on jobs, they are making more money than workers in other industries. You may see an increased retention rate, but you can expect to pay more in wages, which could make mistakes and delays more costly.
Likewise, recent tariffs triggered a rise in material costs that will likely continue. Every change, like adding more windows or replacing a load-bearing wall will cost more going forward.
Make the Most of Construction Change Orders
Change orders are a part of any construction project. There’s no avoiding the inevitable disruption, there’s only planning to handle it as efficiently as possible.
Establishing a change order process in construction can be easy with a little effort on the front end. Researching potential issues, asking the right questions, and creating clear communication lines are crucial.
Indeed, you can handle everything manually using various platforms that may or may not be reliable throughout your project. Maybe you’re doing just fine with your current system. What if you had another option, one that saved you time and effort, allowing you to focus on business growth?
Choosing a platform that streamlines your processes and integrates with your existing systems could make a significant difference. Updating necessary changes in real-time is just the tip of the iceberg. Digital signatures can expedite approvals, and tracking costs can help you keep projects on track.
Start your free trial or book a demo today to see how Contractor Foreman can transform your day-to-day.
