How to Factor in Change Orders Without Wrecking Your Construction Budget

Change orders are an inevitable part of construction projects. Whether they arise from client requests, unforeseen site conditions, or design revisions, they can significantly affect your project’s timeline and budget. If not managed properly, change orders can throw your entire budget off course, leading to costly delays and strained client relationships. Fortunately, there are strategies to help you plan for and handle change orders without derailing the project.

How Change Orders Affect Construction Budgets

Change orders can introduce unexpected costs, disrupt the project schedule, and require additional labor or materials. If you don’t plan for these changes in advance, they can easily push your budget beyond its limits. For example:

• Material Costs: A client requests a higher-end material mid-project, driving up the cost.
• Labor: Additional work means more hours or overtime, increasing labor expenses.
• Project Delays: Change orders can alter the timeline, resulting in additional costs for both labor and equipment rentals.

Without a clear system in place, these costs can spiral out of control and impact the overall profitability of your project.

Planning for Change Orders in Your Budget

While it’s impossible to foresee every change order, you can plan for the likelihood of changes during the initial budgeting phase. Here are a few ways to prepare:

1. Include a Contingency Fund
   Always set aside a portion of your budget, typically 5-10%, to cover potential change orders. This fund acts as a financial buffer, absorbing the additional costs without affecting the core project budget.
2. Communicate with Clients Early and Often
   Set clear expectations with your clients from the beginning about the potential for changes and their associated costs. Ensure they understand that change orders will impact the budget and timeline. This will help avoid surprises later on and reduce pushback when the need for a change arises.
3. Detailed Contracts and Clear Documentation
   Your contract should outline how change orders will be handled, including the approval process, cost implications, and how they’ll affect the project’s schedule. A solid contract ensures that both parties are aligned, reducing disputes when changes occur.

Handling Change Orders Without Disrupting Your Budget

Once a change order is requested, it’s important to process it efficiently while keeping the budget in check. Here’s how you can manage change orders to prevent budget chaos:

1. Evaluate the Impact on Cost and Timeline
   Before approving a change order, conduct a thorough assessment of how it will affect the project financially and logistically. Factor in the cost of materials, additional labor, potential delays, and any subcontractor adjustments that may be required.
2. Get Client Approval in Writing
   Never proceed with a change order without written approval from the client. This protects both parties and ensures that there is no confusion about the additional costs and time required for the change.
3. Update the Budget in Real-Time
   Immediately update your budget and project management system once a change order is approved. Using construction budgeting software allows you to track these changes instantly, so you can see how the overall budget is affected and adjust accordingly.
4. Minimize the Ripple Effect
   Some change orders can have a cascading effect on other parts of the project. For example, changing one design element may require revisiting plumbing, electrical, or structural plans. By carefully analyzing the change’s full impact, you can prevent multiple areas of the project from spiraling out of control.

Conclusion: Manage Change Orders Efficiently with JobTread

Dealing with change orders doesn’t have to mean blowing your budget. With JobTread’s tools for budgeting and change order management, contractors can easily manage changes, update budgets in real time, and keep projects on track without the usual financial strain. JobTread simplifies the process of tracking, approving, and adjusting change orders, ensuring you stay profitable while keeping clients satisfied.

Want to take control of your change orders? Schedule a demo today and see how JobTread can make change management a breeze!

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