When it comes to construction projects, you should always have an incredibly clear scope of work. But first, let’s discuss preconstruction checklists, change orders, and what can go wrong.
Scope of Work
Before starting a project of any size, both the property owner and contractor need to be on the same page regarding the larger scope of work and every little detail that goes into the big picture.
First, when meeting with your prospective contractor(s), you should hand them a written checklist that generally describes your goals and what picture you see in your head. This applies whether you are simply remodeling a kitchen, fixing up a rehab house in order to flip it, doing an addition, or building a brand-new home.
This will also allow you to compare apples to apples when getting multiple bids from competing general contractors (GC). It’s really difficult to compare bids when the contractors are talking about and bidding on completely different concepts or products.
Once you choose a GC for your project, it is very useful to have what I used to call a project checklist. A good GC will ask you to fill out something similar. But a lot of them won’t, so you may need to take charge and start this process yourself.
Include everything—there is no time like now to make sure there are no misunderstandings and confusion when you’re halfway into the job that will cost you time, money, and sometimes hard feelings between you and the contractor.
Even if you’re running your own project, I suggest having a document similar to this. It will just save you time and money, and that’s never a bad idea.
Again, be very detailed. Over four decades of doing this work, most of the issues I had when running remodels or new builds were with the expectation from the customer that I deliver a finished product about which I really knew nothing because they had been so unclear as to their desires or had just forgotten to mention some very important pieces of the puzzle.
For example, if you are planning on ordering a special antique cabinet from Italy that I will be installing as part of the kitchen cabinets, let me know so we can get it here in time, and you won’t blame me for your project not finishing on our projected schedule. Make everything excruciatingly clear, and you will be thankful later.
Here’s an illustration as to why it is so important to have not only a detailed scope of work but also why change orders are so valuable.
I once had a customer on a really large project. It was actually a complete to-the-studs remodel with a couple of additions involved as well—a $500,000 job.
As the customer and I sat down for our weekly meeting that I required of every customer, I just asked as small talk, “So, are you happy with the project”? I fully expected a 100% “yes” answer since my company and I were known for our attention to detail and extremely high-end work. I was a bit taken aback when he responded with, “Well, of course, your quality is excellent, but I am disappointed in the schedule running long like it has.”
What? This was a customer who, as nice as he was, could not stick to the plan and was constantly amending and modifying it. In my large 3” job binder, we had over 40 change orders at that time.
I answered, “You know, we have had over 40 change orders to this point, right”? He looked right at me and said, “What are you talking about? I haven’t changed anything.”
So what is a change order, and why is it so critical? And why do many customers and contractors not use them?
When you start a project, you will sign a contract that should lay out, at least in good detail, everything that is expected to happen during this project—what is being done, how much it will cost, when the different phases are expected to be complete, etc. Anything that happens after this that is not in that original document must be addressed in this change order document.
The change order, often referred to simply as the CO, should be on the contractor’s letterhead, have a date, the original contract price, a description of the change, the cost of the change, the additional time that the change will take, and a new contract price. Then it is signed by both the contractor and the owner of the property (or their legal agent). This becomes part of the contract and is usually paid in full at the time of signing. (Note that it is not paid after the CO work is completed but as soon as it is signed).
But now that we’ve discussed change orders, let’s never use them, or at least use them as little as possible. Why? Although to you, the customer, they may seem like a small detail, to the contractor, they represent a huge deal: stop work, send the crews home, do the paperwork, order the new parts or materials, etc.
We all know that there will be changes in any project, whether it’s something unknown that is discovered during demo—like an undersized header—or simply an indecisive customer making changes constantly because they can’t decide (or don’t know) what they want. It is this last type of client that can kill a job and turn a happy job site into a miserable one. So, to the best of your ability, try not to change anything.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.