Because each construction project is unique and completed with time and money limitations, change orders are inevitable. Faulty plans, a change in the owner’s preferences, or unforeseen circumstances can all force the implementation of those changes. If a change order is similar to the originally contracted work, the contractor is legally bound to perform it. If the change order defines work that is dramatically different from the rest of the project, the contractor has a right to refuse it. Contractors and owners often disagree on the pricing of change orders. Contractors claim that change orders have a cumulative impact on labor and productivity. The more change is requested, the greater the impact on the efficiency of the total project—changed and unchanged work alike.
Cumulative impact claims
The U.S. judicial system and owners agree that contractors have a right to fair adjustments in contract price for owner-initiated changes, but there’s no consensus on the cumulative impact of the changes. Court cases have both acknowledged and rejected contractors’ claims of impact. In cases where cumulative impact is acknowledged, the contractor typically has an abundance of evidence supporting the claim. When a contractor fails to collect substantial productivity data over the course of a project, the court typically sides with the owner or grants the contractor only a fraction of the argued sum.
Quantification of cumulative impact
To address this ongoing disagreement over the effect of change orders, the Electrical Contracting Foundation (ECF), the Construction Industry Institute (CII), and the Mechanical Contracting Foundation (MCF) jointly commissioned research that I conducted. The research resulted in a method of quantifying the cumulative impact of change orders on labor productivity. This new approach to calculating how change orders impact an entire project benefits both the contractor and the owner. It fosters a better understanding—for both parties—of how labor hours are utilized and helps to prevent labor inefficiencies before they occur.
Sources of impact
Using quantitative statistical methods and qualitative input from contractors, I was able to identify significant sources of change-order impact that have a cumulative or “ripple” effect on construction projects. Sources of cumulative impact that affect both changed and unchanged work are listed below. It must be noted that it is the contractor’s responsibility to document the sources of the cumulative impact during the course of a job.
• The dilution of supervision,
• Out-of-sequence work,
• Piecemeal work,
• Mobilization and demobilization,
• Loss of learning,
• Stacking of trades,
• Change order/request for information processing time,
• Material lead-time,
• Rework, and
Dilution of supervision occurs when supervisors are asked to complete additional work. They must manage both the unchanged work and the changed work, which results in their ineffectiveness in two separate areas, instead of being productive in the one, originally assigned area. Piecemeal work arises when small portions of separate tasks are done instead of completing a task from start to finish. With piecemeal work, there is no rhythm or flow to the work, which slows down labor. When work is done in a piecemeal fashion, crews must constantly demobilize and remobilize as they move from task to task, thus slowing them down. Crews also experience a loss of learning, or a reduction of the speed at which a task can be performed. As a worker repeatedly does a certain task, such as hammering a nail or installing wire, he or she gets better and faster at performing that task. An abundance of change orders hinders this repetitive learning process and reduces the overall efficiency of labor on the entire project.
When a change is eminent, requests for information and change orders must be processed before a contractor can proceed on the work. The processing time directly affects the contractor. While waiting for a response, the contractor is forced to relocate a crew to keep them working, which then results in piecemeal work, remobilization/demobilization, and loss of learning. Other factors, such as material lead-time, rework, and additional cleanup, further contribute to the negative impact of change orders on productivity.
With justification of the existence of cumulative impacts, this research formulated two equations. One equation identifies if a project has been impacted as a result of cumulative changes. The other calculates the probable magnitude of the cumulative impact due to the change. This knowledge, which can now be the basis for negotiations, validates contractors’ claims to owners and the legal system that change orders have an impact on labor productivity on both changed and unchanged work. EC
HANNA is a professor of Civil Engineering at the University of Wisconsin-Madison. He can be reached at (608) 263-8903 or firstname.lastname@example.org.