Managing Change Orders with Integrated Software

By Brad Mathews

Last month we discussed how to improve the process of creating timely, accurate cost-to-complete estimates and the impact this can have on managing job-related expenses. This month we’ll turn to the revenue side of the equation as we consider change orders and the process to control their documentation and approval. Any contractor might ask the following questions:

• How large is our exposure on changes where work is in-process yet they remain unapproved? In other words, what is our exposure to the “Trust me, you’ll get paid” scenario?
• Have we ever had to give up pursuit of a change order because of poor ocumentation?
• Have we ever reviewed the project files near the end of a job, and realized that we
  have passed up potentially dozens of change orders worth many thousands of dollars?

While it is nice to think that all project managers are created equal when it comes to documentation and risk management, this is simply not the case. Having an ntegrated document control system and process that is clearly documented and verifiable will ensure more consistency and better results.

A company without such a system usually has a variety of standalone spreadsheets and databases to track change-related documents. Individual project managers often maintain a log in a spreadsheet to track each potential change and its status. The sheer number of individual spreadsheets can be daunting. For example, 10 project managers with about five jobs apiece means there are 50 separate spreadsheets being maintained. Consider the process of reviewing all 50 spreadsheets just to have a clear picture of the status of contracts on open jobs. It’s a scary thought!

Centralized System

Integrated construction management software can provide a centralized system for creating and/or logging all critical project documents. This is an especially powerful tool when combined with document imaging capability that allows for the inclusion (via scanning or attaching files) of every project document. Daily logs, RFI’s, submittals, transmittals and change requests are just some of the documents that can be controlled using an integrated system.Each document is created or logged in the system, it is entered only once and can’t be lost or misfiled. Documents such as RFI’s or submittals that may create a cost impact can be attached directly to a change request. Even a photo or drawing can be attached as part of the initial document and linked to the change request.There is never a need to re-enter a document and no detail can be lost.

As change requests are reviewed and approved by the customer, they can be attached to the customer’s change order. With this process, multiple change requests may be linked to a single customer’s change order number.

Result

The result is an unbroken chain of events and documentation from the originating item to the change order all the way to the invoice when the change is ultimately billed. Because all data and documentation are managed by a single integrated program and stored within a single database, there is consistency to every step in the process.

Another benefit is access to all information. Within the constraints of established security, documents and information are readily available to those who need them. If the company president needs to see the backup for a change beginning with a jobsite photo attached to an RFI, it’s all available in one place within the company’s construction management software.

Finally…

Well-designed and implemented construction management software can simplify tasks for everyone and provide greater information for coordination and management. The three topics covered in this series (electronic invoice processing, costto-complete estimates and managing change orders) provide clear examples of how to streamline workflow, provide better information and improve overall results. In the end, an integrated system will foster teamwork across the company while improving profitability.

Brad Mathews is vice president of sales and marketing for Seattle-based Dexter + Chaney, developer of Spectrum™ Construction Software. For information, go to www.dexterchaney.com, info@dexterchaney.com, 206-364-1400.