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How to Manage Scope of Work Changes in Your Contracting Business

As a service contractor, you have probably seen this a thousand times!

  • You have done all your diligence in setting up a great cost based estimate!
  • The client was happy with the scope of work and accepted with your pricing!
  • On paper your cash flow and profit margin both look good on this project!!!

Now you have been at the job site for a couple of days and the client likes the professionalism of your team and would like to add some additional work. What is your process when the client starts asking for changes to the scope of work?

Do you agree to those changes verbally, not put any additional detail into the project document, and without any thought to how the additional scope of work will impact the schedule for this project or for those projects you have planned for the upcoming weeks?

There is a better way!

Managing project changes is critical so you get paid properly for the work agreed on. It is also crucial to get the additional work documented properly for the work order and for invoicing. It is also needed so you can properly reflect the work needed and the employees or subcontractors can be managed accordingly.

Not only is it critical to manage the schedule but it is also important to manage the financial side of those scope changes. Contractors that use the proper change order procedures see 10-20% increase in project size by getting paid for work that was not in the original scope of work for the project.

How can change order management be best handled:

  • Have consistent standard operating procedures
  • Train employee on the change order process
  • Review work logs
  • Follow changes over time
  • Tailor the contract documents

With the client you are going to identify, document and review the need. You are going to create and present a change order to the originally accepted proposal, an add-on. By using Change Orders you avoid negotiating an entire new contract and simply document and price the new work and present it to the client to sign off on.

But also implementing those changes will be critical; how will it affect the current schedule and how will I communicate those changes with the crews or subcontractors. It will also affect your bottom line profit when you are being paid for all the requested changes in addition to your original contract.

Software tools like Estimate Rocket not only allow for the initial proposal and acceptance but also allow for you to track scope changes, get client sign off on change orders and allow you to see updated progress based on the new project budget. Managing change orders in addition to the scheduling tools and crew notifications give you the peace of mind to know your business will be protected with Estimate Rocket.

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