Change Orders Are Managed Before They Are Priced

A change order does not start when someone opens a spreadsheet.

It starts when the project moves away from what was originally sold.

Strong change-order management starts with recognizing that movement early, understanding the original basis, documenting what changed, determining ownership, tracking the field impact, and building the record while the work is happening.

By the time you start pricing, most of the important work should already be underway.

A Simple Field Example

A pipe crew is installing water main.

During excavation, they encounter an unknown sanitary line crossing directly through the proposed water-main alignment.

The sanitary line cannot be relocated.

The water main has to be offset around it.

At first glance, the change seems simple:

We need four additional fittings, some extra pipe, and some additional labor and equipment time.

So the PM starts calculating:

• four fittings

• additional pipe

• excavation

• stone or backfill

• labor

• equipment

Those are real costs.

But they may not be the actual cost of the change.

Now Look at What Really Happened

The crew cannot simply redesign the water main in the field.

The offset needs to be reviewed and approved.

A sketch gets prepared.

Questions go back and forth.

Additional information is requested.

Elevations need to be verified.

Maybe another meeting is required.

The approval finally comes back one week later.

Now the question changes.

It is no longer:

How much do the four fittings and additional pipe cost?

The better question is:

What did this change actually do to the operation?

During that week, the contractor may have incurred:

• crew downtime

• equipment downtime

• additional supervision

• survey and layout

• potholing or additional investigation

• extra excavation

• additional pipe

• four additional fittings

• additional stone or backfill

• material rehandling

• temporary restoration

• remobilization

• crew reassignment

• resequencing

• reduced production

• schedule impact

And there is another question that is easy to miss:

What productive work did the crew lose because the planned sequence was interrupted?

That is the difference between pricing a change order and managing a change.

The Weak Version

A weak change-order process looks back later and says:

We installed additional pipe and four fittings. Here is the extra labor and material.

That may recover the most visible cost.

It may also leave a significant amount of the actual impact sitting on the contractor.

The problem is not necessarily the price.

The problem is that nobody managed the event while it was happening.

The Stronger Version

A stronger PM breaks the situation apart.

Original Basis

The water main was planned and priced along a defined alignment.

Changed Condition

An unknown sanitary line conflicted with that alignment.

Constraint

The sanitary line could not be relocated.

Required Change

The water main had to be offset.

Direction Required

The contractor needed approval before proceeding with the revised alignment.

Approval Impact

The approval process took approximately one week.

Direct Cost

The physical change may include:

• four fittings

• additional pipe

• excavation

• backfill

• labor

• equipment

Operational Impact

The event may also have created:

• downtime

• additional survey

• additional supervision

• remobilization

• crew movement

• resequencing

• lost production

• material handling

• temporary work

Time Impact

Then the PM has to determine whether the event affected:

• the duration of that operation

• follow-on activities

• the planned crew sequence

• project milestones

• the overall schedule

Now the change order tells the whole supported story, not just the quantity difference.

Recognize the Change Before You Know the Price

The PM does not need the final dollar amount on the first day.

They need to recognize:

Something just moved away from our original basis.

That recognition should trigger the process.

Change recognized

→ document the original condition

→ photograph the conflict

→ identify the original plan or requirement

→ provide required notice

→ request direction

→ begin labor and equipment tracking

→ identify schedule and sequence exposure

→ track approval time

→ preserve added quantities

→ evaluate the complete impact

→ price once enough information exists

Waiting until the approved sketch arrives and then saying, “Now let’s price the extra pipe,” is already too late to capture some of the most important information.

Separate the Types of Impact

A useful change-management review should evaluate at least three different areas.

1. Direct Cost

This is the physical work created by the change.

For the water-main offset:

• four fittings

• additional pipe

• excavation

• backfill

• labor

• equipment

These costs are usually the easiest to see.

2. Operational Impact

This is what happened to the planned operation because of the change.

That could include:

• downtime

• additional survey

• crew reassignment

• remobilization

• resequencing

• lost production

• additional supervision

• rehandling materials

These costs are easier to miss because they may not show up on a revised drawing.

3. Time Impact

This is where judgment becomes important.

If approval took one week, that does not automatically mean the contractor is entitled to a one-week project extension.

The PM still needs to understand:

• Was the affected operation controlling other work?

• Could the crew reasonably perform productive work elsewhere?

• Did moving the crew reduce or eliminate some of the delay?

• Did the change extend the affected activity?

• Did follow-on work move?

• Was a project milestone affected?

• Was the critical path affected?

• What notice and recovery requirements apply?

The operating rule is:

Track the impact first. Determine entitlement with the facts.

Do not ignore a real impact simply because the final contractual position has not yet been determined.

Build the Record While the Change Is Alive

Imagine trying to reconstruct the same event six weeks later.

The superintendent remembers that the crew stopped.

The foreman remembers moving somewhere else.

The PM remembers waiting for approval.

Accounting sees four extra fittings and additional pipe.

The equipment report shows an excavator working somewhere on the project.

But now nobody can confidently answer:

• What day was the conflict discovered?

• What condition was encountered?

• When was direction requested?

• What information was requested?

• When was approval received?

• Which employees were affected?

• What equipment was affected?

• How long did the crew wait?

• Where did the crew move?

• What production was lost?

• What work had to be repeated?

• What additional material was required?

• What downstream work was affected?

The cost still happened.

The ability to prove it may be disappearing.

That is why documentation is part of change management—not something added at the end.

A Change Order Is More Than a Spreadsheet

A good change-order package should make it easy for someone who was not standing in the trench to understand what happened.

It should answer:

What was originally required?

What changed?

Why did it change?

What direction was required?

What work resulted from the change?

What operational impacts followed?

What cost was incurred?

What time impact, if any, can be supported?

The spreadsheet supports the number.

The documentation explains why the number exists.

The Change-Management Process

A practical change-management system can follow this sequence:

Step

Question

Recognize

Did something move away from the original basis?

Establish Basis

What did we originally price and plan?

Define the Change

What are we now being required to do differently?

Determine Ownership

Who owns the condition or changed requirement?

Get Direction

What clarification or written direction is required?

Track the Work

What labor, equipment, material, survey and subcontract impacts are occurring?

Evaluate Operations

Did the change create downtime, movement, resequencing or production loss?

Evaluate Time

Did it actually affect activity or project duration?

Price

What complete, supported cost resulted?

Submit

Can someone unfamiliar with the event understand the story and the price?

Follow Through

Is the change approved, disputed, developing or partially resolved?

Close

Have cost, time and remaining issues actually been resolved?

The Field Lesson

A weak change-order process asks:

How much extra material did we install?

A stronger process asks:

What changed from our original basis, why did it change, what did we have to do because of it, what happened to the operation, and what can we support?

The visible work is often only the first layer.

If you only price what changed on the drawing, you can miss what changed in the field.

Manage the change first. Price it second.

Strong Leaders. Disciplined Systems. Better Results.