Have you ever completed additional work and didn’t get paid for it? Have you ever swallowed extra costs because they weren’t approved before you did the work? Contractors know they are required to get change orders signed and approved prior to doing the work.but why don’t they?
Change Order Excuses:
#1: “I’m too busy to get the signature.”
(But never too busy to go to court!)
#2: “I trust my customer.”
(How many good jobs will you have to do to pay for unpaid change orders?)
#3: “This customer is my friend.”
(Friends sign for change orders, enemies don’t.)
#4: “I don’t want to rock the boat this early in the job.”
(I’ll let them kick me out of the boat later!)
#5: “We’ve got to keep the job moving. I’ll get the signature later.”
(When I have no leverage!)
#6: “We’ll work out all the extras at the end of the job.”
(When the customer is out of money!)
Are You A WIMP?
Out on the jobsite, your customer says to you: “Hey, would you mind extending this wall 4 feet and adding a door?” You say: “No problem, we’ll get started right away and work out the costs later.” You know the contract requires you to get change orders approved in writing, but you don’t want to put pressure on your good customer, so you hope and pray you’ll get the extra work approved and paid for later. A contractor who deals with change orders like this is Winging it, Insecure, Misguided, and Procrastinating. In other words, a WIMP!
Train Your Customers
Wimps don’t get signatures, wimps beg after the fact, and wimps aren’t tough. Wimps are afraid to stand up and demand what’s right. Wimps would rather please other people than take care of themselves. Customers treat these wimpy contractors without respect, walk all over them, pay them slow, and don’t approve their change order requests in full.
Use your contract and project management procedures to train your customers. If you are firm but fair, right from the start, you will get what you want from them. In your pre-job customer meeting held at the beginning of every job, explain exactly how change orders will be handled. If they want extra additional work that’s not in the contract or on the plans, tell them you will require them to put it in writing. No exceptions!
Late Means Never!
Requested changes and constructive changes require different approaches. Requested changes are additional items or work the customer wants not in the original scope of work. Have them submit their requests in writing to your project manager and then you’ll get them a prompt proposal for the additional work requested. Constructive changes occur in the field as unforeseen conflicts or omissions. By contract, you must submit your claim for this required extra work within a specified number of days after the problem becomes apparent. Check your contract. Improper or late notice can result in no payment for additional work performed without prior approval. In other words, late notice or requests means never!
Change Order Tips:
1. Change orders are not “extras.” They are additions, changes, or deletions to the contract scope of work. The contract, plans, or specifications were not accurate or were changed by someone other than the contractor. Someone has to pay for this!
2. Never give it away. You are only responsible for what’s included in your contract. If the plans are incomplete or the specifications don’t match what your customer wanted, it’s not your fault. Your customer must take responsibility for what they signed and agreed to. Giving away additional work to customers avoids confrontations and conflicts, but doesn’t make you rich.
3. Charge the right price the first time. Too often subcontractors present change order requests that are significantly overpriced. When this occurs, customers lose trust and faith in their contractors. This causes re-pricing, delays, unnecessary arguments, and eventually these contractors lose repeat customers. Be fair!
4. Charge the right markup. To avoid future conflicts, always agree to your change order markup with customers before you start the project. Put the approved markup percentage and terms in your contract. This eliminates arguments later when negotiating final prices.
5. Never do additional work without knowing: Is the work extra? How will it be charged? Who pays for it and when? Is there money available to pay for the work? Who is authorized to approve the work?
6. Always include additional time required. Most customers don’t want to approve a time extension until the end of the job, even though they asked for extra work. Additional work requires additional time. Always include on your change order request how many days this will extend the project.
To request and track changes during a project, submit timely field memos documenting each item of extra work before you do the work or within 24 hours after discovering the problem. Outline the additional work, time required, and the terms (lump sum, detailed estimate, or cost plus) to be submitted to your customer per the contract requirements. Then, make sure you get it signed before it’s too late to benefit your bottom-line. Don’t be a WIMP – get it in writing, or forever hold your peace!
ABOUT THE AUTHOR
George Hedley is the best-selling author of “Get Your Business to Work!” As a professional speaker and business coach, he helps entrepreneurs and business owners build profitable companies. E-mail: firstname.lastname@example.org to request your free copy of “Everything Contractors Know About Making A Profit!” or signup for his e-newsletter. To hire George to speak , attend his ‘ Profit-Builder Circle’ academy or find out how he can help your company grow, call 800-851-8553 or visit www.hardhatpresentations.com
George Hedley HARDHAT Presentations
3300 Irvine Avenue #135
Newport Beach, CA 92660
Phone (949) 852-2005 Fax (714)437-1125
email: email@example.com website: www.hardhatpresentations.com
George Hedley owns a $75 million construction and development company and Hardhat Presentations. He speaks to companies on building profitable businesses, leadership, and loyal customers. He holds 3-day in-depth “Profit-Builder Circles” open to construction company owners in an interactive roundtable format every 3 months. His “Profit-Builder System” includes proven tools to always make a profit, build equity, create wealth, win profitable jobs, motivate your people, and enjoy the benefits of owning a profitable company.