The Importance of Proper Change Order/Validation Estimating

We have been hired to watch over large construction projects multiple times to provide a 3rd party 'validation' or 'comparison' estimate and scope review to the General Contractor's change orders during a project. Essentially this is to ensure that the Owner and architect are not being taken advantage of. It's easy to think "In todays world of almost absolute transparency, how would this still even happen?". It does, all the time. It doesn’t always happen intentionally though, most times it is a simple "oh I thought we had to do this" mistake due to a lack of proper communication between all the teams.

For example, on a recent $20MM plus project, half way through the project the GC was submitting a large multi discipline change order of almost a million dollars. We began the tedious task of going through each line item and comparing everything to the original scope vs what the owner is proposing as a change to the contract. Most of the GC's change order items were okay until we got to the finish carpentry section. We found some odd pricing and quantities that just didn’t make sense based purely on common sense given the type of project. We came up with our own pricing and quantities for the task and challenged the GC on it. He then asked his subcontractor to provide backup, and the subcontractor had to back peddle and change his pricing, dropping his portion of the price by over $60,000. The subcontractor's reason for the over estimating was a lack of communication between him and the GC on the actual scope- he had "guessed at it". He guessed a $60K mistake. Hmm. The GC said he was too busy to review everything in detail and that is why he missed it. Hmm.

This taught us all a couple of things. This taught the GC who was severely overwhelmed that they needed more help on the job and to communicate better with all involved parties, this taught the GC that the Owner is paying attention and this taught everyone that mistakes happen, for whatever reason, and every job cost should be questioned, especially change orders.

To keep this short, validating job cost changes is important. This $60K mistake we caught paid for the owner to do some additional work they wanted to do, but didn’t think they had the budget to do it with. Change orders are a bigger thing than some people realize. Some GC's and Subs use these to make the job profitable. That's not okay. A properly bid and managed job does not need to rely on this shady way of doing business.

Bottom line is this- review all lines in a change order. Apply common sense. Verify all quantities and scope against the base contract. Also, verify all quantities and scope against previous changes to the contract to make sure the 'base line' is correct for your evaluation. The words 'close enough' simply cannot exist in the process. Most times as estimators it is easy for us to say, well it's called an 'estimate' not an 'exact'. Once a project goes to construction and changes start rolling in, we can no longer estimate these, we have to exact them. It all adds up in the end for the owner and that is who is buttering our bread, so we have to keep them protected.