Change Order – those dreaded words. Change orders are probably the most misunderstood area of custom home building and definitely one of the most problematic for builders.
First, the definition of a change order. As I define it, a change order is any change, addition or deletion to the contract specifications and allowances. This would include upgrades, color changes, overages (or underages) to allowances, etc.. A change order doesn’t necessarily have to cost more, but most do. Some are actually credits to the contract price.
They can be problematic for builders because they can be requested by owners at any point during the construction process. Many require fast response (drop everything else we’re doing) and careful coordination to make sure the cost is agreed to and that all parties (builder, owner and subcontractor or supplier) are on the same page.
Many times I’m asked, “Why am I getting a “change order” for upgrades to plumbing fixtures (or appliances or lighting, etc.) and paying the extra cost plus a builder’s mark up when it’s roughly the same work to install?”
The answer is that, even though the upgrade may not involve more work, it still requires revised pricing, preparation of the paperwork, coordination of owner, supplier, field staff etc. and more risk for us if something bad happens. (I hate to admit to how many scratched microwaves I’ve replaced over the years.)
The other part of the answer is that if the upgrade were part of the original contract scope, we would have added our margin to that as well.
We can be flexible however. If a change order involves minimal work and risk we will add markup very minimally or not at all. If on the other hand a change order is requested that involves a lot of work and coordination but very little extra cost – we will have to change accordingly.
Nobody should fear change orders. They are part of Custom Home Building. You’ll be thankful that your organized builder or contractor lets you know, as you go, where the changes and costs are. Nobody wants unpleasant surprises and misunderstandings at the end.