CHANGE ORDER PROTOCOL

Transcription

1 CHANGE ORDER PROTOCOL ELECTRI International Prof. Matt Syal, Ph.D., LEED AP Construction Management School of Planning, Design and Construction Michigan State University January M. Syal _2010

2 PARTS OF THE PRESENTATION 1. Introduction 2. Justification 3. Goals and Objectives 4. Work Plan 5. Output and Dissemination

3 Introduction Change orders are an essential part of every construction project One of the main area of disagreement and, even litigation, is their costing and pricing. All types of change orders can have these disagreements but the unwritten change orders with non-agreed upon price are particularly prone to these 3

4 Costs associated with a Change Order Total Cost Direct Costs Indirect Costs Labor Material Equipment Field Overhead Profit Supervisory Costs and Project Fees Consequential Costs Home Office Costs Prep. Costs Labor Disruptions and Inefficiencies Project Delay and/or Acceleration Field Conditions and Others

5 Potential Consequential Cost Factors I. Labor Related Disruptions II. Project Delay and/or III. Field Condition and Others and Inefficiencies Acceleration Interferences and disruptions Acceleration Season and weather change Strikes Project delay costs: capacity Working in finished areas issues Stacking of trades Project delay costs: lost Suspension of work opportunity costs Morale and attitude Project delay costs: cash flow Havoc in purchasing materials interruption Reassignment of manpower Project delay costs: retainage Increased contract administration release Crew size inefficiency Altered anticipated sequences or Increased job cost accounting conditions Errors, omission and mistakes Canceled contracts Extra manpower requirements Fatigue Lost profit Congested drawings Overtime Ripple effect Negotiation cost Aggravation and stress Others Adverse impacts caused by others Others Coordination time Logistics Others

6 Justification The single most area of dispute in the change order process is the cost Majority of these disagreements are due to: o o o Lack of standardized process for overall costing and pricing of change orders what costs to include as the direct costs and what to include as the overhead costs what are the consequential/impact costs and how to quantify them in the change order pricing 6

7 Justification (cont.) Recently, the NECA chapter of Greater Toronto, jointly with other Canadian subcontractors associations, took the lead in developing a Change Order Protocol document. I understand that the Toronto documents is pretty successful in streamlining the change order process for NECA and other subcontractor groups in Canada Many feel that a similar and expanded effort in the U.S. will be beneficial for the industry Giovanni Marcelli and I jointly presented a seminar at recent NECA Convention on the overall change order topic and introduced the Canadian document to the participants. It led to a strong request by the participants to undertake this effort for the U.S. 7

8 Participants Evaluation of the Seminar

9 Justification (cont.) Below is an received from a NECA member and it is representative of several similar inquiries. Dear Dr. Syal and Mr. Marcelli: I had the opportunity to attend the talk on change order protocol given by you at the recent NECA convention. Your presentation painted a hopeful road map for resolving many of the problems facing our industry concerning change orders. I was wondering, after downloading and reading the document "Change Order Protocol" if there were any plans for releasing a "U.S." version (vs. the "Canadian" version) of that document. I would very much like to use such a document as the basis for starting discussions with our local architects, and the document would carry much more weight with them if the document referenced the corresponding AIA General Conditions, U.S. legislated labor burdens (FICA, Federal Unemployment Insurance), etc. Please let me know there are any plans for moving forward with developing one. Thank You. Chris J. 9

10 Change Order Protocol - Toronto 10

11 Goals The goal is to provide a standardized and fair process for the costing and pricing of change orders The document will be similar to the one by NECA - Toronto but additional details about the U.S. requirements of various contractual documents (such as, AIA, Consensus, and EJCDC) and various labor burden costs, will be incorporated 11

12 Work Plan Analyze the NECA - Toronto document and its development challenges and lessons learned Analyze change order related requirements in various contractual documents as well as various labor burden costs Compile similar initiatives / data published by other major subcontractor groups and invite them to participate* * ASA and New Horizons Foundation (SMACNA) are considering collaboration 12

13 Matt, January 14, 2013 We will participate and believe that deliverable would be benefit if broadened to include mechanical and HVAC, especially if the objective is to establish an industry standard/protocol. We have a significant number of companies that are active in both areas. Dennis Dennis Bradshaw, Executive Director New Horizons Foundation Sheet Metal and Air Conditioning Contractors National Association

14 Work Plan Analyze the NECA - Toronto document and its development challenges and lessons learned Analyze change order related requirements in various contractual documents as well as various labor burden costs Compile similar initiatives / data published by other major subcontractor groups and invite them to participate* * ASA and New Horizons Foundation (SMACNA) are considering collaboration Survey NECA members to compile various consequential costs and a process to quantify their impact Develop and finalize the change order protocol with the help of Industry Task Force Develop a MEI seminar presentation package** ** MEI has already stated interest in a seminar package based on this project 14

15 PROS PROS and CONS A standard document compiled by an independent entity such as MSU, with participation from more than one subcontractors group, will provide uniformity and credibility Will give industry members a stronger basis to state their case Will help to bring the impact of consequential costs to the forefront Can benefit from the work already done by NECA-Toronto CONS Difficulty in bringing and finding common ground among various subcontractors groups Time and efforts needed for disseminating and gaining acceptance of the document 15

16 16 Output and Dissemination The outcome of this project will be: o a protocol document o a Seminar Package The output will also be shared with various industry groups affiliated with GC s/cm s, owners and major subcontractors Presentations will be made at various industry meetings and articles will be published in industry magazines In addition, we will work with MEI s and NECA s PR staff to publicize the protocol and the seminars

17 THANK YOU. Prof. Matt Syal Michigan State University 17

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19 Comments at NECA Convention Seminar Recommendations/comments on how to improve seminar: - Open- Ended Response Bring in other trades.. More time for this subject matter. The mentioned paperwork to review the subject matter was not available for the class. Too short time frame for information Excellent! Too short would like the seminar to be longer. More time to present. Handouts should be available during presentations. This is not an area that could or should be standardized. Education of contractors on cost behavior is the best outcome from this course/project but the presenters should steer away from trying to standardize the process. Very important topic -> very popular seminar->bigger room please. Little dry mono tone Longer seminar for more in depth conversation. M. Syal _2010

20 Classification of Costs Direct Costs Labor Material costs Site supervision Handling, carrying and shipping costs Restocking and/or cancellation costs Performance and payment bond premiums Temporary protection Temporary heat, light and power Safety equipment staging, scaffolding and lights Items directly related to the changes All applicable taxes Material escalation Labor escalation Clean-up and disposal Estimating/Engineering As-built drawing and schedules CPM revisions and updating Cost analysis Purchasing and Expediting Timekeepers Mobilize and demobilize Contract Administration Audit cost contingency Travel, room and board expenses Permits and licenses fees Small tools Equipment and tool rental Job-related insurance, warranty and interest Job site office and storage rental Job site equipment, furniture and supplies Salaries and benefits for job site management and clerical staff Overhead Costs Home office overhead Off-site supervision Change order preparation, negotiation and associated travel Time delays Guaranty and warranty durations Additional performance and payment bond premiums Property taxes, business licenses, auto insurance Dues and subscriptions Postage and courier (non-job related) Advertising and telephone Legal and accounting fees Sales and marketing President's salary and benefits Sales force salaries and benefits Support Staff salaries and benefits Dispatcher's salary and benefits Support staff salaries and benefits Purchasing salaries and benefits (estimating only) Estimators salaries and benefits (except for change orders) 20 M. Syal _2010