20.2 Initiating Change Orders

PURPOSE

The purpose of this Procedure is to provide a guideline for initiating change orders.  Change orders may be required for a variety of reasons but most often result from changed/unforeseen conditions, errors and omissions, or changes in scope.  These changes may be initiated directly by the Construction Manager or requested by the Designer, Owner, or Contractor. Each change request must be carefully reviewed against the project plans and specifications to verify the necessity of a change to the construction contract.

Once the need for a change has been established, the Construction Manager completes the steps to issue a Change Order Initiation (COIN) Form and distributes the form to all affected members of the Project Delivery Team.

REFERENCES

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RESPONSIBILITIES

• Project Manager (PM):  The PM is responsible for monitoring both the frequency and scope of change orders and their impact on the project’s budget and schedule.  The PM must sign all COIN forms and must obtain authorization from the Program’s Oversight Committee for any proposed change that exceeds the pre-established amount set by the Committee.  The PM must also brief the City Engineer and gain authority from the Board of Public Works for any change that:  is greater than $100,000; when the change exceeds the remaining contingency for the project or; when the cumulative changes exceed 25% of the original contract amount.  Depending on the program, some of the PM responsibilities noted above may be delegated to the CM.  This is particularly true in programs that have dedicated, long established construction management groups or divisions.  In such cases, the PM may focus more on the total project budget and leave responsibility for individual change orders to the CM.
• Construction Manager (CM):  It is the CM’s responsibility to ensure that change orders are initiated in a timely, efficient, and proper manner.  The CM is responsible for identifying and defining the required change, obtaining a cost estimate and preliminary schedule analysis for the change, and completing and distributing the COIN Form (Attachment 20.2-1).  The CM must also maintain a change order log to ensure the changes are tracked correctly and the project’s change order contingency limit is not exceeded.   
• Project Engineer (PE):  The PE may be involved in determining whether or not a change is required and producing the revised contract drawings and/or specifications for the change order.
• Estimator:  The estimator supporting the Construction Management Team is responsible for preparing a cost estimate for the proposed change, reviewing the Contractor’s cost quotation, and assisting the CM in preparing for change order negotiations.
• Scheduler:  The scheduler supporting the Construction Management Team is responsible for conducting a preliminary schedule analysis for the proposed change, reviewing the Contractor’s Time Impact Analysis (TIA), and providing the CM with the proper recommendation regarding possible schedule impact(s).
• Owner’s Representative:  The Owner’s Representative must provide a written request to the PM for any change requested by the Owner.
• Board of Public Works (Board):  The Board must approve any individual change with a cost greater than $100,000, when the change exceeds the remaining contingency for the project, or when the cumulative changes exceed 25% of the original contract amount.  

Note:  Depending on resources available to the project, the CM or the PM may assume the Estimator’s and Scheduler’s responsibilities.

PROCEDURE

During construction, the CM must identify and clearly define the required change to the construction contract prior to initiating a change order. The CM should carefully review all change requests to verify that the proposed change is required and will necessitate a change to the construction contract.  This requires a thorough review of the project plans and specifications, all related Requests for Information (RFIs), submittals, schedule updates and correspondence, as well as good judgment and careful interpretation of the contract documents.

The first step in the change order initiation process is to identify the party requesting the change (i.e., the Contractor, Designer, or Owner) and the reason for the change order.  There are three categories used by the Bureau to track the type of change orders issued by all Bureau Programs:

Change Order Categories

1.  Changed/Unforeseen Conditions
2. Errors and Omissions
3. Changes in Scope

All change orders must fit into one of these three categories.  Examples of types of changes that would fit within a category are provided for guidance. 

Changed/Unforeseen Conditions:  Changed/Unforeseen Conditions:  This type of change is necessitated by discovery of actual job site conditions which are different than those shown on the contract plans or described in the specifications.  Usually, these are conditions a designer could not have reasonably been expected to know or anticipate during the design of the project including: 

• Differing site conditions, such as soil conditions different than shown in the geotechnical report or structural building elements different than shown on the record drawings

• Undocumented presence of substructures, buried utilities or unknown elements within building walls
  Substructures, buried utilities or utilities within building walls found in a different location than shown on the plans 

• Known structures discovered to be materially different than shown on the plans

• Industry-wide strikes (to document time extensions)

• Unusually severe weather (to document time extensions)

• Acts of God including earthquakes and tsunamis (to document time extensions)

• Acts of government subsequent to receipt of bids that affect the project’s cost, but not its physical elements (if physical changes are required, it should probably be categorized as a Change in Scope)

• Regulatory changes implemented during construction resulting in physical modifications to the equipment, process or facility 

Errors & Omissions:  This type of change is necessitated by a mistake or oversight (an error or omission) in the original contract documents and is required to correct the plans and/or specifications.  Typically, these are things that the designer should have known about and dealt with successfully during the design of the project including:

• Interference with existing or new construction

• Ambiguities or inconsistencies in the contract documents which are typically resolved in response to the Contractor’s RFI

• Conflicts between the contract plans and specifications

• Plans or specifications that are impossible or impractical to construct or perform

• Incomplete design documents

• General project or design optimization  

Changes in Scope:  This type of change results from additions, deletions or revisions to the physical work including:

• Expansion of the scope of work
• Reduction of the scope of work
• Unit price quantity adjustments, (if the discrepancy is very large, the change should be categorized as an Errors & Omissions)
• Fixed cash allowance item adjustments (additions or deletions)
• Change in the nature of the work or design intent, such as replacing an area originally shown to be paved with landscaping
• Owner initiated changes (if the request is a result of the designer not having consulted with the Owner during the design phase, the change should be categorized as an Errors & Omissions)
• Material or equipment substitutions requested by the Contractor (these are typically at no extra cost to the City)
• Construction incentive proposals requested by the Contractor (these are typically at a shared savings to the City and Contractor)

After identifying the specific reason for the proposed change, the CM must clearly define the extent of the proposed change, including required changes to the work and the contract documents.  

Next, the CM must review the cost of the proposed change.  The CM should either perform or delegate the preparation of an initial cost estimate that fully accounts for all costs dictated by the scope of the proposed change.  Typically, this cost analysis is presented as a Rough Order of Magnitude (ROM) cost estimate.  However, if it appears that the cost of the change will exceed either:  $100,000; the project’s remaining contingency; or 25% of the original contract amount, then a more detailed estimate should be prepared.

Authority

Based upon the ROM cost estimate amount, the CM must determine if the Bureau has adequate authority to issue the change order.  As of March 30, 2001, the Board of Public Works has authorized the City Engineer to issue additive and deductive change orders up to $100,000, or up to the contingency limit established for the project (Attachment 20.2-2).  When the cumulative value of change orders exceeds 25% of the original contract amount, Board approval and a Supplemental Agreement Change Order is required.  Therefore, for any change order that:  (1) requires a Supplemental Agreement; (2) exceeds the remaining contingency limit; or (3) has an estimated cost greater than $100,000, the PM should notify the City Engineer by e-mail, obtain the Program Manager’s approval, notify the Oversight Committee in accordance with its established procedures, prepare a Board Report, and present the proposed change to the Board to request its approval. 

Board Emergency Change Authorization:  When the cost of a change order is estimated to be equal to or greater than $100,000 and the work needs to begin immediately, the PM must notify the Program Manager.  If the Program Manager agrees to proceed with the change, the PM calls BOE’s Board Commissioner to obtain his/her authorization.  The PM should explain the details of the proposed change order to the Commissioner, including cost and time impacts.  If approval to proceed with the change is granted, the PM must promptly follow-up with a confirming e-mail to the Commissioner (cc: the Program Manager and City Engineer).  Within 30 days of receiving approval from the Commissioner, the PM should obtain the City Engineer's signature on a Board Report for the change order. The Board Report should include the following transmittals:  (1) copy of the confirming e-mail, and (2) a copy of preliminary change order or final change order if work has been completed (Attachment 20.2-3).

Next, the CM must identify the schedule impacts of the proposed change and verify whether or not the change is time critical.  The CM should conduct (or delegate) a preliminary analysis of the current construction schedule to identify the impact of the proposed change on other activities and on the total float in order to estimate how critical the change will be to the construction schedule.  This determination will influence the type of preliminary change order document that will be issued by the CM (see Procedure 20.3 – Processing Preliminary Change Orders). 

After identifying and clearly defining the scope of the change and its associated cost and schedule impact, the CM should complete and sign the Change Order Initiation (COIN) form.  All available documentation, including associated RFIs, sketches, and revised plan and specification sheets, should be attached to the form to provide a clear understanding of the change in scope.  The PM and their Senior Engineer, Division Manager, or Group Manager,  should approve all changes by signing the COIN form. The COIN form is essentially an in-house document and is to be retained in the project file and distributed to the PM and PE, who use the completed information to monitor and track proposed change orders and their impact on the project’s budget and schedule.  

Note:  For projects using BOE’S Construction Management software (e2020), the CM attaches and/or links the supporting documentation to the built-in COIN form and distributes the COIN form using e2020.  (For detailed instructions on the use of e2020, refer to the “HELP” module in the following link:  www.LABOEProjects.com).
 

RELATED PROCEDURES

• Procedure 20.1 – Introduction

• Procedure 20.3 – Processing Preliminary Change Orders

LINKS / ATTACHMENTS

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Attachments