Poor Collaboration Among Trade Partners Has Consequences
The success of any construction project can be measured by the level of collaboration and communication between parties. If communication between general contractors and subcontractors is dysfunctional or non-existent, problems will arise that ultimately affect working relationships, project schedules and budgets.
It’s time to examine the change order process
One of the biggest causes of communication challenges between general contractors and subcontractors is in the change order process. Technology has modernized most aspects of construction, but how change orders are processed has not changed in decades. It’s hard to fathom, but communicating change orders on today’s construction projects still largely relies on emails, Excel spreadsheets, and paper forms to share documents between contractors, subcontractors and owners.
Most construction companies use their own internal financial systems to keep track of project cost information. These systems functionally don’t support collaboration between owners, general contractors and subcontractors, therefore creating enormous challenges by keeping cost information siloed and delayed.
Lack of transparency leads to disputes
Without a simple way to keep track of change order costs, construction teams are left in the dark when it comes to their real-time financial exposure. Subcontractors must keep track of paper extra work tags, regularly compile change order logs, and submit them to their general contractor hoping they get approved and paid in a timely manner. General contractors are constantly running down updated change order request (COR) logs from their subcontractors, praying they won’t get hit with a bunch of surprise change orders that they weren’t expecting down the road.
This broken process is anti-collaborative and creates risk for all parties. For subcontractors, change orders represent direct costs for work they have done or will perform, and delays in getting change orders approved can present a serious financial burden. While a change order request is being processed and reviewed, a subcontractor has spent real money performing the work and is temporarily financing this part of the project. If subcontractors are not organized in tracking CORs, they can blow through their profits and cause serious financial damage to their company.
For general contractors, change order requests represent risk, which can lead to disputes. General contractors stay up at night worrying they have missed or not accounted for a COR from a subcontractor. A missing COR can turn into a five-figure surprise at the end of a project that leads to an argument with the owner or subcontractor. This explains why general contractors are constantly requesting COR logs from each of their subcontractors.
To overcome this issue, construction teams need a way to track change orders in real time. A good change order communication system should be able to keep track of costs seamlessly and transparently.
Inefficient communication creates budget overruns and delays
The inefficient change order process prevalent in the construction industry can lead to budget and schedule issues, creating a major burden for the owner. Any time a change occurs on a project, the general contractor typically has two weeks to present the cost to the owner. Often it takes significantly longer because the general contractor is tracking down individual subcontractor CORs scattered throughout their email and spreadsheets. Delays in pricing, approving and tallying CORs prevent teams from tracking project costs in real time.
When owners don’t have real-time visibility into project costs, it limits their ability to make timely decisions. Projects slow down when owners cannot make decisions. The financial impacts ripple throughout the project as work gets delayed, subcontractors can’t get paid, and deadlines and schedules get postponed.
This nightmare scenario is common but can be prevented with better change order communication. If costs are tracked in real-time between companies, construction teams could identify cost overruns as they occur and address them proactively before a project becomes irreparably over budget or delayed.
The industry needs a better change order solution
When change orders are effectively communicated in real time between general contractors, subcontractors and owners, it reduces disputes that slow down project completion. Better change order communication also prevents costly delays and improves working relationships.
The construction industry is ready for a transparent, real-time change order communication solution. There are tools available that can be adopted quickly, integrate with existing processes, and empower field and back-office teams to do their best work. Leading specialty and general contractors are changing this important part of their business by addressing change order (mis)management as an opportunity for improvement using a new standard for communication.