Construction is a constantly changing field, making change management an important part of keeping your business profitable. From subfloor damage to unsuspected renovations, staying on top of changes is vital for success and profitability.
But how should you handle these issues as they arise? In this post, we’ll answer the following questions.
- What is construction change management?
- What types of changes typically occur?
- What causes change orders?
- How do you identify necessary changes in a project?
- What are the best practices for change management?
What is Construction Change Management?
Construction change management facilitates coordinating and controlling the transition from the original to the updated design. It often occurs in the design process, as the client discovers an issue that will not work for them. But it also frequently happens in real-world construction.
Change orders occur when something is changed in the construction process that impacts the scope of the work being accomplished. Types of change orders can include:
- Lump Sum Change Orders: When a specific change is made, and the cost can be easily quantified, a lump sum change order is created. This typically can increase or decrease the total project cost.
- Zero Cost Change Orders: This type of change doesn’t change the project’s cost, only a specific aspect of it. For example, moving a doorway in a wall that has not been installed doesn’t impact the cost.
- Time and Material Change Orders: When the full extent of the cost can’t be calculated, a time and material change is used to make sure the repairs can be completed regardless of cost.
- Unitary Cost Change Orders: This change includes work that is counted by a specific unit, such as cubic yards of concrete or squares of roof decking.
But what is the cost of change in a construction project? According to a study by Navigant Construction, the median construction change order is about 4.03% of the entire project. 4% may seem small, but on a multi-million dollar project, change orders can protect your business against these issues. However, if not done properly, they might just cost of your relationship with the client.
What Causes Changes in a Construction Project?
- Schedule Delays: From bad weather to poor coordination between subcontractors, schedule delays can have serious consequences that are beyond your control. Using schedule analytics like SmartPM make it easier to analyze schedule-based change risk.
- Project overruns: From sudden market changes to shifts in supply chain prices, project overruns sometimes grow beyond your expectations and buffer. Effective change management can protect your bottom line from these issues.
- Contract errors and issues: Let’s say you accidentally specified the wrong completion date or material quantity in your contract. Without a change order, you may be held to these difficult requirements.
- Regulatory changes: When a regulation changes, it can have a sudden impact a project already underway. This requires a change order so that the completed project is in compliance with the change.
- Labor turnover: The labor market is always difficult in construction, and labor shortages make it even worse. A change order allows you to adapt to these unexpected changes so that the project continues.
- Internal restructuring: Whether it’s a change with whom you’re working with on the client end or a sudden change in project management due to mismanagement, internal restructuring can have a strong impact on the project.
Change Management Framework
Once you recognize that a change needs to take place on a project, these are some steps you can follow to create and manage that change as part of the process.
- Identify: Noticing that a change must occur is the first step, such as roof decking in poor condition.
- Assess: How extensive is the issue? Take time to determine the extent of the issue so that you can go to the client with a solid solution.
- Approve: Find a solid solution that will benefit the client without raising costs more than necessary.
- Formalize: Create a change order for the client to approve, outlining the problem and solution.
- Execute: See to it that the change order is effectively carried out on the job site, then continue the project.
6 Best Practices for Construction Change Management
To stay on top of construction change management, there are six best practices to keep in mind. These follow the six phases of the project lifecycle:
- Business Planning Phase: The business begins to assess the project’s scope, including its needs, budget, and timeline.
- Project Planning Phase: In the project planning phase, agreements should be drawn up to cover scope, budget, and time so everyone understands these factors.
- Project Scope Definition Phase: Check that the further details of the scope still meets the project and business needs, and ensure experienced, knowledgeable personnel are involved.
- Detailed Design Phase: This is where most changes take place, and benchmarks should be in place. Make sure everyone understands the construction change management process.
- Construction Phase: The owner should understand that the scope and benchmarks will be frozen during this time and that changes require a change order and may impact the budget and schedule.
- Startup Phase: Confirm that turnover responsibilities are understood and that the client is aware of market changes that may require scope changes.
Construction change management is a difficult process but can be managed by handling potential issues as they arise. As a top cause of changes in construction, scheduling issues are especially problematic but can be handled by identifying risk through analytics.
