Changes - Impacts Beyond the Direct Costs

Contractors don't typically see the full negative impact of changes and, therefore, don’t put the right level of resources into their management.

D. Brown Management Profile Picture
Share

Typically overlooked impacts that must be quantified include:

Change Management: Impacts Beyond the Direct Costs.
  • Dilution of management on the project, which causes overall loss of productivity.

  • Cash flow that incurs financing costs, as well as potentially keeping a contractor from taking early-pay discounts unless they are very well capitalized.
      
  • Risk of not getting paid for completed change orders is typical and a significant cause of margin fade late in the project.
      
  • Lowered customer satisfaction impacting future work can be the biggest cost of all. However, this does not mean avoiding real changes to the project. 

  • Productivity on the project suffers from many factors related to excessive changes, including dilution of management, schedule compression, overtime, additional mobilizations to the work area, and lower crew morale. 
     
  • Extended project overhead - general conditions.

Contractors, project owners, and architects that fully understand these put the resources in at the earliest design stages driven by weekly meetings and continue managing the project with the same discipline.  


Changes - Impacts Beyond the Direct Costs
Change orders are a fact of life in construction. Improve profitability, cash flow and customer satisfaction by effectively managing changes. Build a foundation for success with 12 steps to improve pricing and 11 negotiating strategies for the whole project team....

Related Training
Changes - Impacts Beyond the Direct Costs
Change orders are a fact of life in construction. Improve profitability, cash flow and customer satisfaction by effectively managing changes. Build a foundation for success with 12 steps to improve pricing and 11 negotiating strategies for the whole project team....

Simple Math of Labor Savings
What would it be worth for your company to improve your field productivity? There is an incredible amount of low-hanging fruit to be picked when it comes to improving labor productivity.
Owner Occupied Real Estate for Contractors - Lease or Buy?
There isn't a simple answer to this question. Much of the advice you will get has bias attached. Start your decision making process by building your own models and making general assumptions while looking into the future. Use this Excel model to start.
Changes and Cash Flow Improvement
Construction is a cash-intensive business and change orders are often one of the root causes of poor cash flow. A 30-day improvement to change management workflow can generate over $400K in additional cash flow for a $50M contractor.