This week, we’re diving into the often-misunderstood realm of change orders in remodeling projects. There’s a common misconception, fueled by home improvement shows, that every project hits a major surprise in the middle that costs a fortune. While surprises can happen, we’ve found that more often than not, it’s client-driven changes that impact the project’s cost.
Defining Change Orders
Let’s start at the beginning with a simple definition. A change order is any modification from the original scope of work agreed upon in the contract. These can arise from unforeseen issues, structural or mechanical surprises, but more commonly as stated above, they stem from homeowner preferences, design changes or simply expanding the scope of work “during” the project.
Unforeseen Issues
Unforeseen issues are rarer than most might imagine but can include “behind the drywall” issues as simple as an isolated case rotted subfloor in a bathroom near a stool or shower most commonly, or hidden complexities in plumbing/electrical/HVAC systems where something might be in the way of what we are trying to accomplish. The most common example we run into from a mechanicals perspective is when we want to open up a wall or remove it entirely, only to find something in the way that also needs to be moved to accomplish our task. We employ an “X-Ray Vision” line of thinking, which means if we need x-ray vision to know it was in the way before our work began, it falls in the “unforeseen” category. Open communication and transparency help in handling these situations smoothly. Make no mistake… our years of experience lead us to expect certain hurdles and whenever we anticipate a potential problem, we are communicating our expectations to the client to get ahead of the expectation.
Client-Driven Changes
There are certain change orders that get initiated by clients employing the “while you are here” philosophy. That means they add to the scope of the project “while we are there” because they often come to the realization while the work is being done that, they won’t want to do a follow up project soon after being torn up and living through the current project. Thus, they opt to get certain things done during the initial project they didn’t plan to do prior to contract signing. Surprisingly, another common experience is for clients to add back items or elements of the project that were removed during initial budgeting discussions. It is our experience that many of these particular adds to the project scope often find their way back into the project once construction begins.
Handling Change Orders
Communication is key to make the change order process smooth for the client. Regular updates and transparent conversations between our team and clients ensure a smooth process. The extent of documentation for a change order depends on its scope, with larger changes requiring written approval prior to ordering expensive product. It is not uncommon for us to quickly facilitate smaller change orders on the fly if relationships are strong, but we always document and communicate to the client prior to doing the work.
Payment Structure
Change order costs are typically captured at the next progress payment in our structure. This aligns with the common practice in the remodeling world of getting paid ahead for work to avoid potential payment issues. Some companies may require payment in full at the time of change order approval, but that would only be the case for us on an exceptionally large change order with a lot of custom product being ordered where our risk would be significant.
Impact on Project Timeline
Clients must be aware that change orders have the potential to extend project timelines. Mitigating delays and streamlining processes are priorities for us to keep a project moving because we know no matter how much a client loves us, there is a direct correlation between how long we are at the house and how happy they are. Having said that, it’s crucial for clients to understand the impact of additional work on project schedules so there are no surprises.
Preparing for Change Orders
For homeowners, understanding the initial contract, anticipating potential changes, and having open communication with the remodeling partner are key. Detailed contracts and proactive discussions about possible changes can help in managing expectations.
Contingency Budgeting
Contrary to popular belief, large unforeseen change orders are rare. Conversations with your contractor about the areas where they are anticipating potential unforeseen changes can help create contingency budgets and understanding what to expect can provide clarity on potential additional costs. We try to guide our clients as to what we expect to encounter to put their minds at ease.
Building Strong Relationships
Ultimately, the success of managing change orders lies in building strong relationships with clients. Clear communication, trust, and transparency create an environment where surprises are minimized, leading to a positive remodeling experience. The ability to do that well leads to lifelong relationships!