By Ron Pestone
When the work gets bigger and the plans more complicated numerous change orders occur because very few people see in three dimension and many times what looks good on paper simply will not work. Then you are stuck with the unenviable situation of explaining to the architect or engineer what he had drawn does not work which is kind of similar to telling a woman her baby is ugly. As a general rule Architects and Engineers claim the job was drawn correctly and ways and means are the contractor’s responsibility. When you send in your Request For Information [RFI] they are slow to answer or try to answer in a way that does not indicate they have made a mistake in their plans and specifications. The better Architects and Engineers understand that building is a team effort and will work out a solution that is fair and reasonable to all parties.
However, it is up to you, the contractor to raise the issue and it goes without saying that you should never go after the nickel and dime changes that occur, but if the change is substantial you need to pursue it and you must be paid a fair dollar for the additional time and work.
In Public work there is always a group of individuals in any agency who thinks a contractor who has a million dollar contract is making $999,000.00. They never want to acknowledge a change and when they do they want to pay pennies on the dollar for it. As a contractor you must find the individuals in the agency who understand building and that it is in the agency’s best interests to maintain a decent bidders list of qualified contractors. It insures better numbers for the agency and the timely completion of their projects. Most certainly it is in no ones interest, especially the agency’s to bankrupt contractors because in the end there will be nobody to build their projects and it you work for an agency and want to climb the ladder the only way to do it is with a list of successful projects under your belt.
With change orders the list of variables is almost unlimited in any build. Many contractors pray for a job where there will be no change orders because they can go in knock out the job, collect their money and go to the next job. Chances of that happening is the same as seeing Santa Clause coming down the chimney with a sack of presents every week of the year.
The question now becomes, how you price a change order so it not only doesn’t cost you money but that you actually make some money. You need to start with the understanding that change orders are a lot like your overhead, in general they are a lot more expensive than you think. As a result you need to look at them in that way and price them accordingly. Never forget that unless someone can show you the work in question in the original bidding documents it’s a change and you are not a charitable organization
You need to know the actual current prices for the equipment and material that is involved. The real wage rates for your people including benefits, insurance and taxes and what it costs you every day to open your doors. Now plug in how many hours its going to take to do the actual work. Not how fast you can do it, but the time it will take an average journeyman to do it. Add in the dollars for the trucks and equipment you have tied up in the change. Finally and most important add in the additional days you will be on the project and get paid for it. Now add in your mark up and give it to the owner.
With most Public work you have to perform the additional work whether you have agreed upon the dollars or not. Make sure you have read your documents thoroughly to see if that is the case. If you are stuck because that is the case perform the change order under protest and document every nail, screw and minute used to perform the change order. If you have to go through an audit to get the right price for the change order including extended time you were on the project passed the original contract duration date, your records will prove to be invaluable. Don’t be afraid to ask for the interest on the change order amount you have coming if you have had to wait and unreasonable amount of time.
Don’t Forget – We Build America