24% of time change orders represent more than 10% of total project costs. See the graph below to see the percentage of total project costs attributable to change orders. An exchange order is a technical term for a change to a construction contract. An exchange order is a bilateral agreement between two parties; usually one party is the owner and Procore software review the other party can be a general contractor, subcontractor or project provider. The exchange order represents the mutual agreement between the parties regarding the change in the scope of the work, the price or any other term of the contract. Each party’s signature on an exchange order is proof of an agreement with the changes identified.
Since materials are needed in bulk, a sudden price increase can cause the project to exceed its original budget. The customer’s shareholders will complain and the project team is likely to be blamed for not predicting such a situation. The worst part is that they can legally go against you for breach of contract. And to save your business from damage, you have the opportunity to sacrifice your profit.
In addition, the order costs even more if the team has already done the next job and depends on the item in question. In the latter scenario, the change requires the element that has already installed the equipment to be reworked, creating a chain reaction of additional costs. While many of the plans for a project solidify during the initial offering and contract, homeowners may need to change plans during construction for a variety of reasons. Exchange orders play a critical role in construction by ensuring that customers are satisfied with the completed project and that contractors receive appropriate compensation for their work. BuildBook has a free build order for Excel and Google Sheets that you can download. If you want to experience how building change order management works as part of an integrated software platform, BuildBook offers you an easy way to document and approve changes.
Since these two types of changes that can affect the scope in a project occur, they must be monitored and managed. Record the details of the requested change, how much it will cost and the time involved so that all parties can make the decision to continue or not. No stone plan is made, especially construction projects that are complex efforts. Project managers can prepare for the risk, but it is impossible to anticipate something that can happen. Exchange orders are often part of a process that starts with a request for information, a document that answers questions that may arise during the execution of a construction project.
For changes requested by the customer, an exchange order can be really advantageous. While a change order request submitted by a customer may extend the project completion date, it may also generate new work and additional revenue for the team. These requests are billable and allow project managers to correctly adjust their schedules and costs. In summary, an exchange order is a change to the original contract for a construction project. This document allows contractors and their customers to agree on changes in the scope, duration and price of a project.
They can also help you solve the small problems that inevitably arise with every job. If contractors have the right to increase the contract price for additional work, they should also be required to lower the contract price for items removed from the job size. The exact amount of the refund or deduction depends on the contractor’s policy and the details of the change. You may or may not receive the full cost of the refunded work, including any overhead and profit surcharge. Sometimes during a project, the work included in the original fixed price offer is eliminated.
Trimble Construction One acts as a centralized center for all your construction management needs and integrates your exchange process with other important workflows such as materials management, creditors and more. By doing this, you can minimize change commands until you can refine your processes and eliminate errors. Full coordination between customer and project team is the main ingredient in a smooth construction.
If the contract does not specify a specific change order form to use, the contractor may choose to write one himself, provided that all important information is included. In addition, time can have a dramatic impact on the cost of an exchange order. For example, if you request a change order early in the construction process, it will not cost you as much as requesting a change after a team has started or completed the task.
Specialized software to connect equipment from unrelated parts and promote collaboration during the design and construction process. The application of such software facilitates better communication in all areas. If a change occurs, all team members are warned and can participate in the discussion, avoiding erroneous communication or lost information that could lead to further project delays. You should also be clear about their work so that the workflow is not interrupted. Otherwise, errors may occur or the customer may not be satisfied with the output, leading to the order change. Some scope agreements are too ambiguous to activate change orders as well.