Change Order Profit Improvement

A 10% improvement in change order pricing for a $50M per year contractor will add $500K to their bottom line.

D. Brown Management Profile Picture
Share

The average construction project has about 10% changes, so improvements of just a few percentage points in pricing can make a huge difference to contractors. 

Change Management: Changes - How Much Profit Improvement?

This is not about simply marking up the change more, but rather, including the many costs that are typically missed or undervalued:

  • Accurate labor burden costs, including premium pay. 

  • Indirect labor costs, including safety equipment, consumables, small tools, etc.

  • Company owned equipment rates and operating costs.

  • Commodity materials that are often missed during pricing of changes. 

  • Field supervision and project management time.

  • The right labor production units based on the conditions of the change, including impacts to other work.

  • Productivity impacts for shift work, congested work areas, or overtime. 
     
  • Extended general conditions on the project if the change delays the schedule.

Beyond knowing how to include these costs into the change, it is important for the whole project team to master the art of effective negotiations to not only improve pricing, but also speed and customer satisfaction. 

How much could your change management processes be improved? How much is that worth? 


Change Orders
Change orders are a fact of life in construction. Improve profitability, cash flow and customer satisfaction by effectively managing changes. Build a foundation for success with 12 steps to improve pricing and 11 negotiating strategies for the whole project team....

Related Training
Change Orders
Change orders are a fact of life in construction. Improve profitability, cash flow and customer satisfaction by effectively managing changes. Build a foundation for success with 12 steps to improve pricing and 11 negotiating strategies for the whole project team....

Change Management Dashboards
Summarize your detailed change tracking logs with concise dashboards that give you critical information in a format that allows you to see the big picture while still having enough information to be actionable.
Diffusion of Innovations Curve - Leading Change
The contractors that dominate tomorrow’s market will be those that have built strong capabilities for identifying opportunities or problems and then rapidly making lasting changes throughout the organization.
Impacted Productivity - Disrupted Workflow (No Schedule "Flow")
One of the biggest impacts to productivity in construction is when tasks cannot be completed as planned. When this happens frequently, it starts to impact every aspect of the contractor’s scoreboard in a negative way starting with customer satisfaction.