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....

Early Identification as a Trainable Skill
The ability to identify potential changes early is a skill that can be tested, trained, and managed just like a craft skill.
ABC Daily Planning
Effective planning processes are the foundation for great production. The planning process can be seen as a series of tighter and tighter concentric circles with the bullseye being the daily plan. Daily feedback improves performance and mitigates risk.
Lean Principle - Pulling vs. Pushing and the Four Most Powerful Words for Improving Productivity
“What do you need?” are the four most powerful words for improving productivity, developing a team, and building engagement. "Pull-Planning" can be used way beyond building a project. The principle is the foundation for many aspects of life and business.