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Contractors Benefit from Change Order Guidelines; Study Finds

Jan 06, 2015

ELECTRI International – The Foundation for Electrical Construction Inc. has released a new study, Change Order Guidelines for Electrical and Low Voltage Contractors. The research team included Construction Management faculty Matt Syal, Joseph Diffendal and Daniel Duah from the School of Planning, Design and Construction at Michigan State University.

Leaders of ELECTRI recognize that change orders authorizing modifications to the scope of the work, the contract sum and the contract time are an essential part of every construction project, and these orders are issued to accommodate changes to the construction contract.

Electrical and low voltage contractors, routinely asked to prepare change order proposals on construction projects, find that the single most common area of dispute in the change order process is its cost with items related to recoverable direct cost, overhead-profit percentages and impact factors resulting in consequential costs constituting the vast majority of the disagreements. 

The two obvious cost categories of a change order include direct costs and overhead-profit costs. Direct costs are easily identifiable and quantifiable. Overhead-profit costs are generally quantified as a percentage of the direct cost or of the total change order amount. In addition, there is a third category of costs, known as consequential costs due to impact factors. These are difficult to identify and quantify and, therefore, are a source of conflict and controversy when included in a change order. 

The main purpose of this ELECTRI project was to develop guidelines and templates that would provide a systematic, standardized and fair process for the pricing of change orders for electrical and low voltage contractors. This study has identified various costs categories and items, investigated overhead-profit practices and identified various impact factors and methods used to calculate associated consequential costs. 

The full report and its companion Quick Reference Guide are available in the NECA store. 

Download or Purchase F3405a

Free Webinar

A webinar will be held on Thursday, January 29 at 2 p.m. to discuss the findings of the report with the lead investigator, Matt Syal of Michigan State University.

There is no cost to attend, but registration is required for this event.

Attendees will utilize audio broadcasting services through their computer speakers. A toll free number will be provided for those unable to utilize this service.

Register for Change Order Guidelines Webinar