Your Guide to understanding the intricacies of Change Order Inspections and how they can help avoid expenses on the site
What Are Change Orders?
Change Orders are a common occurrence in construction projects arising when the client’s needs evolve, design briefs are altered or due to other unforeseen situations. Such change orders offer flexibility to the clients and design team to address challenges in the project journey. However, changes can also disrupt timelines and skew budgets, thus disrupting the flow of works at the construction site.
When changes happen, however minor or major, proper documentation and managing the effect on project budgets should be a priority.
Why Do Change Orders Need To Be Inspected?
Change Order Inspections in the construction industry are carried out to assess their validity, accuracy, and compliance with the original contract, looking for potential issues like inflated costs, improper documentation, or unnecessary changes.
What Could Go Wrong without Change Orders if Not Inspected Carefully
Managing Change Orders effectively within the framework of the original contract of work cannot be stressed enough. In a particular project the construction contract had been finalized based on the architectural and structural drawings. But a change order was initiated by the structural designer during the execution phase of the project. The Change Order stipulated using a higher grade of concrete than initially planned. While the Change Order was properly documented, the Contractor categorized the change for using higher grader concrete as an ‘Extra Item’ which was not appropriate as per the contract terms
What the Contractor should have done is to prepare a ‘Deviated Item’ in this case as the scope of work (concrete pouring) remains the same, but the specifications (grade of concrete) has changed. Here the Change Order is a deviation from the original contract item and not work or material that is outside the scope of the original contract. Hence the terms and conditions of the original contract (including unit rates, allowances, etc.) remain applicable. This approach maintains consistency with the original contract and ensures fair and consistent pricing.
When it comes to abiding by construction contracts it is imperative that managers understand the fine print and subtle differences. But when they are unable to do so, Change Order Audits carried out by experienced Third Party Agency like CQRA do the all important task of pointing out the repercussions of changes in contracts.
In this case, categorizing the change as an ‘Extra Item’ has considerable repercussions. With an ‘Extra Item’, the contractor is entitled to compensation for the additional work and material, which is not included in the original tender. This may come with different terms and conditions that are negotiated and agreed upon separately. This may also impact the budget of the project considerably.
Why You Need a Third Party Agency to Get Change Orders Inspected
This case study underscores the need to use the right terminology when carrying out Change Order documentation and managing them effectively within the framework of the original contract. Correct categorization led to a three-fold benefit of ensuring Contractual consistency, curtailing unnecessary costs and avoiding disputes over payment terms and pricing. Companies thus need a TPA to carry out thorough Change Order Inspections or Audits to steer clear of such oversights and to deliver a successful project.
When Do Change Order Inspections Necessary?
When you project is experiencing the following issues, it is imperative that you get a TPA to carry out Change Order Inspections or Audits.
- Significant increase in costs due to frequent change orders or budget adjustments
- Marked increase in completion time due to scope creep arising out of client requests
- Major design modifications leading to changes in the project scope of work.
- Discrepancies or missing details in design that need revisions.
- Substitution of material or processes due to unavailability or unforeseen site conditions.
- The organizational requirement to understand the frequency of occurrence and impact
- Disputes between the parties
- Regulatory changes like updated development rules, new laws that affects the construction process.
What Do Change Order Inspections Consist of ?
- Reviewing the justification of the change order and whether it aligns with the original project plans.
- Verifying cost breakdowns to ensure the new pricing is not inflated.
- Change order approvals to ascertain that proper authorization was obtained from all necessary parties before implementation.
- Analyzing change order timing to avoid delays that could result in cost overruns.
- Investigating the need for change order proposed by contractors.
- Assessing the trend of change orders across the projects to improve the project management processes.
Managing Change Orders with a keen eye is the job of experts. Entrusting CQRA for your Change Orders Inspections will most importantly help prevent financial losses in your projects.
Our Inspections will also keep disputes at bay at your construction site, along with ensuring transparency by thoroughly scrutinizing the reasons behind each change order. With CQRA Audits you can be assured that your projects are always on track.
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