THERE ARE MANY FACTORS WHICH A CONTRACTOR HAS LITTLE CONTROL OF… but managing change orders should not be one of them. Over the years, however, I have seen many contractors who have either ignored or let slide the responsibility to stay on top of this process. Contractors who have the most success with managing change orders seem to follow certain "themes" or rules that assist their continued profitability. All of us who are charged with the operations of a business know that attending to priorities will in the end result be the gauge of our success. We are often guilty of "stomping ants" while the elephants run wild. This is definitely the case as it relates to change orders. The negotiations and the paper work essential to getting paid for the change orders and avoiding litigation is often not given the attention necessary.
A gentleman by the name of James C. Constance who is a senior consultant for FMI has listed ten commandments that relate to change orders. Mr. Constance made the following two guarantees:
Guarantee #1: Following these themes is guaranteed to increase profitability
and simplify your life.
Guarantee #2: Not following these commandments is guaranteed to give full employment to our Nation's attorneys.
The ten commandments of change orders:
- KNOW THY CONTRACT. You cannot identify a change unless you know from what it is changed. The rules are in the contract.
- CONCEDE NOT THY LEVERAGE. If you give the owner what he wants without receiving what you deserve, you have lost your leverage.
- THOU SHALL NOT EVER, AT ANY TIME, ANYHOW, FOR ANY REASON UNDER ANY CIRCUMSTANCES, PERFORM CHANGE WORK WITHOUT A WRITTEN, SIGNED AND AUTHORIZED CHANGE ORDER. You will not have wasted hundreds of hours getting someone to approve dozens of after-the-fact change orders for the rest of the project. Your life will be simpler and your profitability improved.
- DEPEND NOT ON THY ATTORNEYS TO BAIL THEE OUT. Use attorney's advice. Fight your own battles.
- IF THOU ASKEST NOT, THOU RECEIVETH NOT. If you don't request full compensation, you won't receive full compensation.
- THY TIME IS MONEY. Read the rules. You get money and time for changes.
- SURPRISE NOT THY OWNER. The more advance notice an owner or general contractor has regarding potential cost increases, the easier it will be for them work out solutions with you that will minimize additional costs.
- PERSIST. Persistence gets results.
- THY BARGAINING POWER EQUALETH THAT OF OTHERS. The bargaining power you have is equal to the owner or the general contractor, unless (a) you don't know the rules or (b) you throw away your leverage or (c) you choose not to use your leverage.
- THY JOB IS NOT FINISHED UNTIL THY MONEY IS COLLECTED. No additional comment needed.
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MOST OF US ARE NOT LARGE ENOUGH FOR A HUMAN RESOURCE DEPARTMENT… so as an additional service to my Bond Newsletter readers, I will untangle some of the lingo that all Human Resource experts know as follows:
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IN THE LAST HUNDRED YEARS… the five most prevalent causes of death have changed drastically as follows:
| 1900 | 2000 |
| Pneumonia, Influenza | Heart disease |
| Tuberculosis | Cancer |
| Heart disease | Stroke |
| Diarrhea, Enteritis | Lung disease |
| Stroke | Accidents |
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BECAUSE OF THE CHANGES IN THE SURETY MARKETPLACE… this would be an ideal time to allow us the opportunity to review your current bonding program. As the largest surety producing agency in the State of Florida, we can set up a line of credit for your company with either a primary or back-up basis that will meet your company's need for surety capacity. Please give us a call and we'll be happy to sit down and talk about what we can do to improve your current bonding line of credit.
"Men are valued, not for what they are, but for what they seem to be." - E.G. Bulwer-Lytton
William Shakespeare said: "This above all: to thine own self be true, and it must follow, as the night the day, thou canst not then be faulted to any man."
As a parting shot, Benjamin Franklin said: "It is a grand mistake to think of being great without goodness; and I pronounce it as a certain that there was never yet a truly great man that was not at the same time truly virtuous." (My friends in the Democratic Party would say that Ben Franklin would never have said that if only he had known Bill Clinton).
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Charles J. Nielson
