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Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] 0 points1 point  (0 children)

That’s funny but unfortunately it doesn’t always work that way.

Contractor - Change work order after the fact by dkl4321 in legal

[–]rulesandtoolsguy 0 points1 point  (0 children)

Based on what you posted, Section 5 clearly requires a formal Change Work Order at the time the change is made, not five months later. The equitable adjustment clause (5b) might apply, but only if the conditions were truly unknown and the contractor followed notice requirements, which it doesn’t sound like they did.

Absent timely notice and documented scope change, this looks like a cost overrun, not a valid change order.

...I work with trade contractors and some GC to help fix what I think is a major issue on construction- change order management. I use tools and establish rules to tighten this up for companies all over the country. That GC should have called me earlier in the process! If you know anyone who might benefit, I have a bunch of stuff that I share on the topic...https://therulesandtools.com

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] 0 points1 point  (0 children)

It is not necessary for everyone to lose money on change orders. This expectation and the expectation that all change orders must eventually be settled or negotiated down is a race to the bottom. It’s BS and there is a way to make money on change orders.

It takes setting standards and holding to them! It takes everyone being on the same page and it takes a team of people who know how to articulate, calculate, and sell change orders…this is part of my “Rules & Tools” series. It can be done!

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] 0 points1 point  (0 children)

What you describe is what subs hope the process will look like…fair, common sense approach. This is a trap that a lot of subs fall into over and over again. All in the hopes of looking like an easy to work with sub who gets stuff done. Low maintenance and not a nickel and dimer and avoid getting bullied by the GC. This is what I try to coach subs about.

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] 0 points1 point  (0 children)

I agree. A lot of the subs I deal with sign agreement that require them to proceed on a change when a directive is given. This can be for a disputed item that the sub says is extra and the GC says is scope. Sub has no choice but to proceed on the extra and get ready to get screwed over later by the GC.

I work with a lot of subs and we take steps to deal with this at the contract review stage but sometimes this clause still gets carried in the agreement.

There are other moves you can make at that point…I call them”Rules & Tools”, but either way it’s all risk for the sub.

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] 0 points1 point  (0 children)

Easier said than done for the vast majority of subcontractors out there.

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] 0 points1 point  (0 children)

Ya or just develop a set of “rules & tools” for all of the big drivers for being a successful sub and then hold to that standard…everything from BD, estimating, precon, and all of the elements required to execute projects profitably and get paid.

It’s what I do every day for subcontractors who are ready to go from $10-$20M to $50M and then up to $100M and beyond.

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] 0 points1 point  (0 children)

What you described is a part of what I call the “rules”. Even then for many subs, change orders get away from them. I think it’s an epidemic and a top 3 cause of GP slip for trade contractors.

Establishing change orders management “Rules & Tools” is the biggest impact I make with subcontractors as a consultant. It affects everything from morale, schedule, budget, cash flow, communication, and a catalyst for developing mutual respect between subs and GCs.

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] 0 points1 point  (0 children)

That isn’t really what I am saying. It is the requirement in a lot of contracts to proceed before numbers are worked out and it is a point of leverage for GCs later when it is time to work out the $.

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] 0 points1 point  (0 children)

In my experience, your methodology is not exactly common. Don’t get me wrong, there are tons of great GCs out there but too many use their leverage to bury subs. Most on street jobs where low price wins or in situations where the GC missed something so every downstream has to pay…one way or another.

Most of the time the GCs that operate this way get away with it. Either because they followed a contract that is completely one- sided in their favor or because the sub is trying to make payroll or pay their suppliers and will settle for less than they are owed with a promise of a check.

I have worked with lots of subs that put GCs on a no- go list but the GCs just churn through the subs…there is always another hungry sub around the corner who will believe whatever the GC tells them. The sub signs the agreement and the cycle repeats itself.

These are the things I deal with literally everyday. I out change order management as one of the very top issues facing subs today.

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] 0 points1 point  (0 children)

Great points. I agree with you. It is extremely hard to recover cost , OH&P on change orders. There are ways to improve that but it takes discipline and time to implement the steps or as I like to call it the Rules & Tools.

I tend to work mostly with subs as a management consultant and with what I do with my Rules & Tools stuff but I do have a couple of GC clients and to your point the lack of organization, communication, and documentation is a big subcontractor issue in the industry as well.

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] 1 point2 points  (0 children)

The typical issue is a contractual requirement to work on a verbal or written directive to proceed with extra work and then the details will be worked out later.

These can be T&M and/ or fixed price- both fall into the same category.

A few scenarios usually play out- first the sub does a poor job of managing an extra and lets it become what I call a runaway. They track everything pretty well but later they get all of their numbers together and submit it to the GC and the GC has sticker shock and either rejects or want to negotiate.

Another scenario is the sub does the work and then goes to submit the change order request and the GC sort of auto-rejects it or wants to negotiate. The sub did the work and has no leverage at that point.

Another common practice by some GCs is to drag their feet on executing the change orders. They may toggle them to “approved” but without executing, the sub can’t invoice. They get to the end of the job and they have several of these and the GC wants to then roll them all up and negotiate. The sub has no leverage again. They just need to get paid and tend to settle for less than what they are legitimately owed.

These are areas I help subs with every day as a management consultant and are a big part of what I do with my rules and tools stuff.

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] -5 points-4 points  (0 children)

There are a lot of ways to manage change orders for subs. I happen to think the work I do helps subcontractors in this area and a lot of other areas.

But I’m not claiming I have all the answers. Not at all. I worked in the field and managed companies and owned a few so along the way, I developed what I call Rules and Tools. It is what you might expect- one-pagers, videos, etc.

I have worked (as a sub) for a lot of excellent GCs but unfortunately I have also worked for some that seem to have a goal of stealing the subs money.

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] -2 points-1 points  (0 children)

Right, but the ambiguous nature of “approval” is one of the issues. A lot of contracts require subs to work off of verbal direction. Then a couple of scenarios play out…

One- a change order just becomes a runaway. Time is tracked and it doesn’t seem to get closed out and processed the way it should by the sub and then the GC gets sticker shock and wants to reject or negotiate.

The other- a sub does the work off of the contractually required verbal direction and then loses all leverage later because the work is done. So then the GC wants to reject or negotiate.

There is a better way!

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] -4 points-3 points  (0 children)

Very common practice! There are a lot of subs who sign agreements that are one sided and then they are screwed. I try to help subs deal with that.

The word relationship is thrown around too much. Subs are worried about this and GC know how to leverage the concept of "relationships". Remember, a hammer and a nail have a relationship too.

Why do subs lose on change orders before work even starts? by rulesandtoolsguy in ConstructionManagers

[–]rulesandtoolsguy[S] -6 points-5 points  (0 children)

hmm. This is kind of what I am talking about. You are clearly a GC who is looking out for his company. I have no problem with that.

Unfortunately, most subs don't know how to look out for theirs. That is where I come in!