Last updated on Jul 9, 2024

You're facing client disputes on change order costs. How can you handle them effectively?

Change orders in construction management can be a tricky affair, especially when costs are disputed by your client. It's a scenario that can lead to tension and, if not handled correctly, can seriously affect the project's progress and your professional relationship. Understanding the best practices for managing these disputes is crucial in maintaining project integrity and client satisfaction.

1 Understand Issues

When a dispute arises, the first step is to fully understand the client's concerns regarding the change order costs. Listen actively to their issues and gather all relevant information. It's important to review the project scope, the reasons for the changes, and the associated costs. This process ensures that you have a solid foundation to discuss the matter and seek resolutions that align with both the project's needs and the client's expectations.

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2 Clear Documentation

Having clear, detailed documentation is your best defense in a dispute over change order costs. Ensure that all agreements, quotes, and approvals are in writing and that they include comprehensive breakdowns of the work to be done and the costs involved. This transparency not only helps to prevent misunderstandings but also provides a clear trail that can be referred to during discussions with the client.

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3 Effective Communication

Effective communication is key in resolving disputes. When discussing the change order costs with your client, be respectful and maintain a professional demeanor. Use clear language to explain the reasoning behind the costs and be open to questions. This approach fosters a collaborative environment where both parties can work towards an amicable solution.

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Shadi Abu Alshaar , PMP®, ISO, ICM.

Project Manager | Mega Projects | Infrastructure | Architecture | Project Management | Team Leadership | Quality Control | Risk Assessment | Stakeholder Communication | Safety | Schedule Management | Cost Control
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Effectively handling client disputes over change order costs begins before the contract is signed. Carefully consider risk allocation in the contract's claims and dispute clauses to protect your interests. Once a dispute arises, review these clauses to understand the agreed-upon procedures. Openly communicate with the client, explaining the change order costs with supporting documentation. Approach the discussion collaboratively, emphasizing a shared goal of project success. Explore alternative solutions, such as value engineering or scope adjustments. If a resolution cannot be reached, consider mediation or negotiation with a neutral third party.This helps facilitate a mutually beneficial outcome preserving a positive working relationship.

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Dan Baker

Owners Project Manager
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Explain to clients in intelligent layman terms the reason the change order cost is what it is everyone extras for free or minimal cost because they think you are making a great deal of money on base contract which you need to assume they shopped their project and selected your company because it represented the best work quality etc. for what they agreed to you need to asked them if the understand their are cost you have no control of like permits, insurance, materials and taxes, most people when shown what the cost are will agree with the Change order. Also offer them ways to lower the costs by changing materials.

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4 Negotiation Tactics

Negotiation is an essential skill in construction management, particularly when it comes to resolving cost disputes. Approach the negotiation table with a willingness to find a middle ground. Offer alternatives where possible and be prepared to explain how these might affect the project timeline and quality. Remember that negotiation is about reaching a mutually beneficial agreement, not winning a battle.

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Hany Elmancy, MSc, BSC, SFC, SSYB, PE, PMP, MBA

Senior Program Control | PMO Consultant | Planning & Project Control | Risk Manager | Delay Analysis Expert | Forensic Planner and claim specialist | Instructor | PMC-Senior Portfolio Controls | Public Speaker
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From my vantage point in construction, employing effective negotiation tactics is key to resolving disputes over change order costs. This includes understanding both parties' positions, exploring compromise solutions, and emphasizing the benefits of reaching a mutually agreeable outcome. For example, presenting alternative cost-saving measures or phasing options can demonstrate flexibility while protecting project interests.

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5 Legal Framework

Understanding the legal framework surrounding change orders is crucial. Be aware of the contractual obligations of both parties and ensure that any agreements made during the dispute resolution are legally sound. This knowledge not only protects you from potential legal issues but also gives you a firm standing when explaining the situation to the client.

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Hany Elmancy, MSc, BSC, SFC, SSYB, PE, PMP, MBA

Senior Program Control | PMO Consultant | Planning & Project Control | Risk Manager | Delay Analysis Expert | Forensic Planner and claim specialist | Instructor | PMC-Senior Portfolio Controls | Public Speaker
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Reflecting on my construction experience, understanding the legal aspects and contractual obligations related to change orders is essential. This involves reviewing the contract terms, including provisions for change orders and dispute resolution mechanisms. For example, consulting with legal counsel to interpret contract clauses and obligations can provide clarity and support during negotiations.

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6 Future Prevention

Finally, use this experience as a learning opportunity to prevent future disputes. Consider revising your change order process to include more precise cost estimations or better communication strategies. This proactive approach not only minimizes the risk of future disputes but also demonstrates to clients your commitment to continuous improvement and customer satisfaction.

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Hany Elmancy, MSc, BSC, SFC, SSYB, PE, PMP, MBA

Senior Program Control | PMO Consultant | Planning & Project Control | Risk Manager | Delay Analysis Expert | Forensic Planner and claim specialist | Instructor | PMC-Senior Portfolio Controls | Public Speaker
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Based on my expertise, implementing proactive measures to prevent disputes over change order costs in future projects is beneficial. This includes enhancing change order management processes, educating clients on the implications of scope changes, and refining contract language. For example, conducting post-project reviews to identify lessons learned and improve change order procedures ensures continuous improvement.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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SHYAM SUNDAR YADAV

IIT BOMBAY ALUM| CIVIL ENGINEER| FOUNDER-ASCE2000
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It is a financial dispute to be resolved carefuly .Terms and conditions for costing of housing units to be evaluated explicitly .Based on this estimation cost of units to be offered to clients with detailed terms and conditions.Agrements for purchasing to legal document .Order cost change arise due to change in facilities or specifications ,what soever be the reason but to be well documented with estimation and profit being charged .This details convince clients that change in order cost is justified.Physical verification of change in specifications and additional facilities also reduce litigations.Responding to client queries promptly also helps in avoiding such litigations.Holding meeting to put up reasons and logics is good step .

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You're facing client disputes on change order costs. How can you handle them effectively?

1

2

3

4

5

6

7

1 Understand Issues

2 Clear Documentation

3 Effective Communication

4 Negotiation Tactics

5 Legal Framework

6 Future Prevention

7 Here’s what else to consider

Construction Management

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You're facing client disputes on change order costs. How can you handle them effectively?

1

2

3

4

5

6

7

1 Understand Issues

2 Clear Documentation

3 Effective Communication

4 Negotiation Tactics

5 Legal Framework

6 Future Prevention

7 Here’s what else to consider

Construction Management

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