If there's one thing that's true about construction, it's that it's a constantly changing field, and that makes construction change management an important part of keeping your business profitable. Whether you've got a kitchen renovation that suddenly reveals subfloor damage that must be fixed before continuing or a multi-million hospital project that must be updated to meet new healthcare standards, staying on top of changes in your project is vital to that project's success and profitability.
But how should you handle these issues as they arise? In this post, we'll look at what construction change management is, including the different types of construction change that typically occur, as well as causes of change orders in construction, a basic framework for identifying needed changes in a project and best practices for change management.
What is Construction Change Management?
Let's start by defining what construction change management actually is in the industry. Construction change management is a set of specific activities that are facilitated to coordinate and control the transition from the original design to the updated design. It often takes place in the design process, as the client discovers an issue in the design that will not work for them, but it also happens in real-world construction frequently, such as when a client changes their mind after seeing something that won't work once it's already underway, which can be much more expensive than making a simple design change.
As an example, a homeowner may like a specific cabinet layout in their kitchen design, only to realize that the new oven door protrudes too much to allow a drawer to fully extend once it's installed. Given the drastic transformation taking place in the construction industry through digitization, some of these issues can be resolved in the design process, such as offering a virtual reality walkthrough of the completed project, but other issues will still continue to happen during construction, such as a client realizing that a semi-gloss paint won't work as they had thought it would, due to glare from a west-facing window when they're preparing meals in the evening.
- Lump Sum Change Orders: When a specific change is made and the cost of the change can be easily quantified and calculated, a lump sum change order is created. This typically can increase or decrease the total project cost.
- Zero Cost Change Orders: This type of change doesn't change the cost of the project, but only changes a specific aspect of it. This can include moving a doorway in a wall that has not yet been installed or similar change that doesn't impact cost.
- Time and Material Change Orders: When the full extent of the cost of the change can't be calculated, such as discovering bad subflooring and being uncertain how far the damage goes, a time and material change is used to make sure the repairs can be completed regardless of cost.
- Unitary Cost Change Orders: This change includes work that is counted by a specific unit, such as cubic yards of concrete, squares of roof decking, square feet of flooring or similar material measurements.
But what is the cost of change in a construction project? According to a study by Navigant Construction, the median construction change order is about 4.03% of the entire project. Change orders can protect your business against these issues, but may happen at the cost of your relationship with the client.
What Causes Changes in a Construction Project
- Schedule Delays: From bad weather to poor coordination between subcontractors, schedule delays can have serious consequences that are beyond your control. Using schedule analytics like SmartPM makes it easier for you to analyze schedule-based change risk.
- Project overruns: Whether it's caused by sudden market changes or a supplier changing their prices dramatically, project overruns sometimes grow beyond your expectations and buffer, so these changes protect your bottom line.
- Contract errors and issues: You realize after starting the project that the wrong completion date or material quantity was specified in the contract. Without a change order, you may be held to these difficult requirements.
- Regulatory changes: When a regulation changes, it can have a sudden impact on your project that is already underway. This requires a change order so that the completed project is in compliance with the change.
- Labor turnover: The labor market is always difficult in construction, and labor shortages or shifts make it even worse. A change order can allow you to adapt to these unexpected changes so that the project continues.
- Internal restructuring: Whether it's a change in whom you're working with on the client end or a sudden change in project management due to mismanagement, internal restructuring can have a strong impact on the project.
Change Management Framework
Once you recognize that a change needs to take place on a project, these are some steps you can follow to create and manage that change as part of the process.
- Identify: Noticing that a change needs to take place is the first step, such as roof decking in poor condition.
- Assess: How extensive is the issue? Take time to determine the extent of the issue so that you can go to the client with a solid solution.
- Approve: Find a solid solution that will benefit the client without raising costs more than necessary.
- Formalize: Create a change order for the client to approve outlining the problem and solution.
- Execute: See to it that the change order is effectively carried out on the job site, then continue the project.
6 Best Practices for Construction Change Management
To stay on top of construction change management, there are six best practices to keep in mind. These follow the six phases of the project lifecycle:
- Business Planning Phase: As the business begins to assess the project's scope, which should include its needs, budget and timeline.
- Project Planning Phase: In the project planning phase, agreements should be drawn up to cover scope, budget and time, so everyone understands these factors.
- Project Scope Definition Phase: Check that the further details of the scope still meet the project and business needs, and ensure experienced, knowledgeable personnel are involved.
- Detailed Design Phase: This is where most changes take place, and benchmarks should be in place. Make sure everyone understands the construction change management process.
- Construction Phase: The owner should understand that the scope and benchmarks will be frozen during this time and that changes require a change order and may impact budget and schedule.
- Startup Phase: Confirm that turnover responsibilities are understood and that the client is aware of market changes that may require scope changes.
Construction change management is a difficult process, but can be managed by handling potential issues as they arise. As a top cause of changes in construction, scheduling issues are especially problematic, but can be handled by identifying risk through analytics such as SmartPM.
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