What Is A Change Order
Change orders are documents that address things that must be added, removed or changed after plans have been finalized and the construction of a project has begun.
Commercial construction projects will inevitably require a change order at some point in the process. Even with substantial planning and a diligent team, it’s still possible that things don’t go as planned and changes will occur. Changes can be frustrating as they often result in increased costs and time. However, there are ways that you can reduce the amount of change orders for a given project.
What Causes Change Orders
For commercial real estate construction projects you can expect between one to five change orders per project on average.
Most change orders result from local governing authorities requesting specific things to be added, changed or removed after construction has already begun. Cities have certain requirements that buildings must adhere to, therefore it is extremely important that plans are drawn up correctly and are void of errors. Plans containing even a minor error can cost a significant amount of time and money.
Another reason for change orders are tenant/owner requests. Tenants/owners may request that adjustments be made after the project has begun. You have to consider whether the cost of keeping your tenant happy is worth it or not. Making changes requested by your tenant could be costly, however, it may ultimately be a more fruitful decision in the long run.
Supply disruptions are very common and can cause change orders. In order to avoid significant delays, some builders will choose to substitute materials, requiring a change order to cover the variation in the building process and timing.
Tips For Avoiding Change Orders
- Superior Communication - Having clear communication between the owner of the property and the builder for the entirety of the project is extremely important when trying to avoid change orders.
- Exhaustive Planning - While it may seem redundant to review plans multiple times over, it will save you time and money. This is important at every stage of the process, but especially before construction gets started.
- Expect the Unexpected - Allocate time and money for unexpected interruptions, such as inclement weather, supply challenges, or changes in regulatory requirements.
Change orders are hard to avoid completely, however, these tips should help reduce the amount of changes affecting your project. If you go into a project knowing the potential pitfalls, you will be better equipped to handle changes along the way.
If you have a commercial construction project in need of financing, CALCAP Lending can help! Check out our resources page to watch a short, helpful video about construction loans.