The New Avenue online project management system is reviewing hundreds of projects at any given time. We track all of the change orders submitted by contractors in these projects.
This post highlights the 20 most common change orders. These are changes that may be called “surprises” on your project. Often, they shouldn’t be surprises at all. You should be planning on these changes.
You can review this checklist and check if your project budget includes them. Do this, and you can be prepared to review any bid. You can make sure the full scope of work is included in the price you are quoted.
First, a note on what a change order is.
“Change ordering” is a verb used in the construction industry, and it’s something that many owners are completely unaware of. One of the unfortunate facts of many remodels is blown budgets. One cause of this is that unscrupulous contractors use change orders in a strategic and deceitful way to offer low bids. They then make your project a miserable experience as they introduce additional hidden costs. Some (but certainly not all) contractors make all of their profit off of these change orders. This is true for projects ranging from small $1,000 projects to billion-dollar bridges.
The good news is that many contractors have noble motivations. They became contractors because they want to build beautiful homes, and they want you to be happy. Even a perfect project can have 20+ change orders that you willingly choose to make. In fact, you can have 20 or more change orders and still complete the work on budget. With a well-prepared bid, the changes can be fun ways to add things that you love. Use this list to improve your next remodeling experience.
Here is the list of top 20 change orders. This list is from all of the projects reviewed, not just one. The average of 8% increase from the original construction bid to the final completed project cost is split evenly between discretionary and non-discretionary changes.
Discretionary Change Orders
In our review, 13 of the 20 most expensive change orders were “discretionary.” Discretionary change orders are changes the customer asked for. This was not part of the original bid. It is an add that the customer requested. We consider those good change orders. They often pop up as a project is progressing on budget. If the customer has a little reserve money socked away, they may decide to add something nice.
1) Add a new bay window to the home. Since windows were being added in the addition, it made sense to add a bay window to the existing living room at the same time. Amount: $5,684
2) Upgrade window quality to Marvin windows and Velux skylights. Amount: $4,086
3) Landscaping: Install a fenced-in trash area and stone flatwork in the yard. Amount: $3,393
4) Add a gas line to a backyard cottage to upgrade from electric stove to gas: $3,000
5) Change siding from Hardi board concrete to wood board and batten. Amount: $2,325
6) Add tile to main home entry stoop. Amount: $1,880
7) Add crown molding to living room and kitchen. Amount: $1,761
8) Install a new skylight in a loft. Amount: $1,487
9) Additional tile wainscoting in bathroom and tile nook in shower. Amount: $1,050
10) Change from stained concrete floor to tile floor throughout 610-square-foot space. Amount: $1,050
11) Add false wood beams to living room. Amount: $996
12) Addition of extra lighting fixtures throughout house. Amount: $835
13) Provide and install 8’x4′ fence and lattice made of redwood for trash cans. Amount: $771
Non-Discretionary Change Orders
These change orders (numbers 14 through 20) were “non-discretionary.” These are the unpleasant changes. These changes are difficult to manage because sometimes the cause is beyond the owner’s or builder’s control. A building inspector may exercise their authority and request something that is not in the plan or the budget. In this case, disagreeing with the inspector is an issue of fighting City Hall. From what we have seen, City Hall never loses that battle. Other times, a designer, engineer, or contractor overlooked something. Again, in a complex project this if common and a little leeway is fair. But if this happens too often, it becomes a real question of competence or even integrity. This varies wildly by professional, and most professionals are very fair and honest. However, the bad apples are also very good at figuring out how to get you. It may be that you didn’t read the plans, or it may be that you love custom woodwork . . . or both.
14) Foundation improvement: Excavate an additional two feet for foundation improvements and fill with compacted gravel and additional concrete. Amount: $6,042
15) Fire proofing of laundry room. Amount: $2,151
16) New water line from the street to the main home in order to increase capacity for fire sprinklers. Amount: $5,505
17) Add fire sprinklers due to new building code requirements. Amount: $4,360
18) Replace electrical panel in main home with a new 200-amp service, including a wire from the street, new panel, and all breakers. Amount: $3,272
19) Soils report required for foundation work: Don’t open the Pandora’s Box of getting an engineer’s report. Once you have that, we have to build whatever the engineers tell us. Amount: $4,000 for the engineer and $10,000 or more for the foundation work.
A well-run project will stay within 10% of the bid.
If an invoice is 25%, 50% or even 100% over budget, then you should tell your contractor one of these two things: 1) “I’m paying what was in the bid; I’m sure you can make it up on the rest of the project” or 2) “I’m canceling the contract and going back to bid with different contractors.”
Don’t be caught off-guard by those non-discretionary change orders.
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Hi Kevin. Good article. The feasibility of a successful investment is marginal and can be negatively impacted by the cost overruns and change orders.