Custom home builders often face the challenge of managing change orders. A change order is a written request to modify a construction project's scope, schedule, or budget. While change orders can help a project meet its goals, they can also be costly. In this article, we'll explore why change orders are so costly for custom home builders and provide some solutions to mitigate those costs.
According to recent statistics, change orders can add up to 10-15% to a custom home's total cost. Additionally, they can cause delays, leading to increased labor costs, project overhead, and lost revenue. These issues arise for several reasons, including design changes, unforeseen site conditions, owner preferences, and incomplete or inadequate plans and specifications.
Design changes are one of the primary reasons for change orders. When a client decides to alter the design or add features after construction has begun, it can be expensive. For example, changing the flooring type after the flooring has already been installed means the contractor must remove the old flooring and purchase and install the new one. Similarly, adding a room requires additional materials, labor, and permits.
Unforeseen site conditions are another factor that can lead to change orders. Issues like soil problems, underground utilities, and environmental concerns can require additional work and materials, which can increase the project's overall cost.
Owner preferences can also result in change orders. For example, a client may decide they want a specific type of lighting, which was not part of the original plan, or they may change their mind about the paint color.
Lastly, incomplete or inadequate plans and specifications can lead to change orders. When a plan is incomplete, the builder may need to make assumptions about how to proceed, which can lead to additional work when the assumption proves incorrect. Similarly, if the specifications are inadequate, the builder may need to purchase additional materials or redo work, leading to increased costs.
So, what can custom home builders do to mitigate the costs of change orders? Here are some solutions:
Establish clear communication channels with clients to avoid misunderstandings about project requirements.
Provide detailed plans and specifications to clients before the project begins, outlining all the necessary materials and expected costs.
Anticipate potential issues before construction begins, conducting thorough site assessments and soil tests.
Allow for flexibility in the project timeline and budget to accommodate unforeseen changes.
Incorporate change order provisions into the contract, outlining the process for approving and implementing change orders.
In conclusion, change orders can be costly for custom home builders. However, by understanding why they occur and implementing strategies to mitigate their impact, builders can minimize their costs and deliver successful projects. Building clear communication channels, establishing thorough planning, conducting site assessments, incorporating flexibility into the budget and timeline, working with experienced contractors and incorporating change order provisions into the contract can all be effective solutions for managing change orders.