Managing change orders effectively is a critical part of maintaining trust with clients and keeping home remodeling projects on time and within budget. Exceeding the 10% threshold in change orders can lead to financial strain, strained relationships, and a tarnished reputation for contractors. However, with the right planning, communication, and systems, contractors can minimize unexpected changes and keep projects running smoothly.

Here’s how contractors can avoid exceeding 10% in change orders and deliver successful, stress-free projects.

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What Are Change Orders?

A change order is a written agreement between the contractor and the client to modify the scope of work, budget, or timeline of a project after the initial contract is signed. Change orders are typically issued for:

• Client-requested changes (e.g., upgrading materials or altering designs).
• Unforeseen conditions (e.g., discovering structural issues).
• Errors or omissions in the original plans.

While some change orders are unavoidable, their frequency and cost can often be minimized with proper planning and execution.

Why Exceeding 10% in Change Orders Is a Problem

1. Strained Client Relationships
   Clients may feel blindsided or frustrated by unexpected costs, leading to trust issues.
2. Budget Overruns
   Projects that exceed the agreed-upon budget can impact the contractor’s profit margins.
3. Delays
   Frequent or extensive change orders can disrupt schedules, delaying project completion.
4. Reputation Damage
   Consistently exceeding change order thresholds can harm a contractor’s reputation and reduce future business opportunities.

Strategies to Avoid Exceeding 10% in Change Orders

1. Implement a Robust Preconstruction Process

A thorough preconstruction process helps identify potential challenges and avoid surprises during the project. This includes:

• Site Assessment: Inspect the property to uncover hidden issues, such as outdated wiring, plumbing, or structural concerns.
• Detailed Design Plans: Create comprehensive blueprints and material specifications to minimize mid-project changes.
• Budget Contingencies: Build a contingency fund into the initial estimate to cover unforeseen expenses.

2. Conduct Thorough Client Consultations

Misaligned expectations are a common cause of change orders. Spend time understanding your client’s goals, preferences, and budget during the planning phase.

• Ask Detailed Questions:
  • What are their must-haves and deal-breakers?
  • Are they open to alternative materials or designs if costs exceed their budget?
• Present Options Clearly: Provide clients with a range of choices and explain the cost implications of each.

3. Use a CRM or Project Management Tool

Tools like Builder trend help contractors manage projects efficiently and avoid costly mistakes.

• Benefits:
  • Real-time tracking of budgets and schedules.
  • Automated change order approvals to prevent unauthorized work.
  • Centralized communication to reduce misunderstandings.

4. Include Allowances for Unforeseen Conditions

Unexpected conditions, such as hidden mold or structural damage, are among the top causes of change orders. Including allowances for these scenarios in your initial estimate can prevent exceeding 10% in changes.

• Example:
  For a kitchen remodel, include a contingency for unexpected plumbing upgrades, ensuring the project remains within budget even if issues arise.

5. Educate Clients About Potential Risks

Many clients are unaware of the complexities of remodeling and may not anticipate the potential for unforeseen challenges. Proactively educating clients can help manage their expectations.

• Oregon -Specific Example:
  Homes in Oregon built before 1980 often have asbestos, lead paint, or galvanized plumbing. Informing clients about these risks upfront prepares them for potential additional costs.

6. Regularly Review Plans and Budget

Frequent review and updates of project plans ensure alignment between the contractor and client throughout the project.

• Weekly Check-Ins:
  • Discuss progress, potential issues, and any upcoming changes.
  • Provide real-time updates on budget and timeline impacts.

7. Avoid Overpromising

Some contractors may underestimate costs or timelines to secure a project, only to issue change orders later. Be realistic and transparent about the scope of work from the start.

8. Create Clear Contracts

A well-defined contract minimizes disputes and provides clarity about the process for change orders.

• What to Include:
  • Scope of work, with detailed exclusions to avoid misunderstandings.
  • Clear procedures for handling changes, including client approval requirements.
  • Estimated contingency percentages for potential changes.

Case Study: Avoiding Excessive Change Orders

The Problem

A contractor in Portland took on a bathroom remodel but skipped a detailed site inspection. Once work began, they discovered hidden water damage and outdated plumbing, resulting in $8,000 in change orders—nearly 30% of the original budget.

The Solution

For their next project, the contractor implemented the Portland preconstruction process. They:

1. Conducted a thorough site inspection, identifying potential plumbing and structural issues.
2. Built a 10% contingency fund into the initial budget.
3. Used Buildertrend to track progress and communicate changes.

The Result

The project was completed with only 5% in change orders, well within the contingency, leading to a satisfied client and a stronger reputation for the contractor.

Resources for Oregon Contractors

1. Oregon Bureau of Development Services (BDS)
   Permit Information and Building Codes
2. Buildertrend
   CRM and Project Management Tools
3. Oregon Construction Contractors Board (CCB)
   Verify Licensing and Avoid Disputes

Conclusion: Planning Is the Key to Managing Change Orders

Avoiding excessive change orders is all about preparation, communication, and transparency. By leveraging tools like Builder trend, adopting the Oregon preconstruction process, and setting clear expectations with clients, contractors can stay within the 10% threshold and deliver projects on time and budget. Contact us today to learn how we can help you plan your next remodel with precision and transparency, minimizing the risk of unexpected costs and delays. Let’s build trust and success together!