Changes that languish in the "pending" status are a serious threat to the successful completion of the project. Pending changes can lead to many undesirable effects. Often enough, these changes get approved at the very last minute and then we are expected to perform magic tricks, like having materials, tools and manpower readily available to perform the work immediately. The ensuing ripple effect on the base contract becomes costly and disruptive, the work sequence changes, on-going tasks get suspended, manpower gets re-directed, productivity goes right down, and confusion takes over.
Detailed, accurate, and consistent documentation, along with persistent management, will get change orders approved or rejected in a timely manner.
The owner, the GC, or the engineer are not expert estimators, nor do they have the skills and tools to appraise changes. In fact, they do not have the time either, and they consequently expect the electrical contractor to provide a detailed breakdown and cost justification in accordance with the contract documents.
The engineer is not paid enough money for the changes to want to spend additional time pricing them. One good way to alienate the engineer is by providing incomplete or unclear information that will force him to do more work.
It is the contractor’s responsibility to provide a document that clearly depicts the scope of work, the conditions, the materials, tools, equipment, general expenses, field labor, indirect labor, supervision, and all other costs incurred to perform the work.
The change order proposal should start with conditions like:
Next, you should have a full description of the work required, including the impact that the proposed work will have on the base contract. It should be written in a way to be understood by people who do not know much about electrical estimating. Explaining that the work is to be performed after hours, in a restricted area, in a crawl space, in extreme temperatures (hot or cold), in occupied premises, at heights exceeding 12’, or any other abnormal conditions is helpful in the approval process.
The bill of material should be comprehensive and detailed. All the components should be listed with quantity, unit price, unit NECA labor, total price, and total labor. Do not forget that any component listed will increase the value of the change; therefore, the more the better.
Field labor should be priced at journeyman rate and supervision should be calculated at the ratio of one foreman per 4 journeymen, or 1 to 6, depending on the complexity of the project. NECA labor does not include any supervision.
Engineering, estimating, material expedition, project schedule revision, as-built drawings revisions, clean up, safety, warranty, mobilization, de-mobilization, and other applicable labor charges should be listed.
Indirect and consequential costs like crew size, stacking of trades, overtime impact, schedule acceleration, and any other applicable factor should be estimated as per MCAA recommendations.
MCAA suggests three levels of additional labor percentages depending on the circumstances. The following are some of the conditions cited in the labor manual:
We suggest that you get fully acquainted with the MCAA’s Labor Factors as described in the MCAA labor manual under the section titled "How to use MCAA Labor Factors."
Charge for tools, equipment, and any job expense that you incur for the changes, including bonding.
Provide the pertinent pages of the NECA book showing the labor units used in the change, and a few Trade Service catalog pages showing the material prices. A tool and equipment rental cost schedule, a breakdown of the hourly rate cost, and finally a copy of the change order on company letterhead should also be included.
This methodology will allow the contractor to charge an estimated amount of extra labor for anticipated loss of productivity based on industry averages.
Pricing changes realistically and including all costs up front will pre-empt the need to pursue a claim later on, thereby benefiting both owners and contractors.
Remember that the owner has the unilateral right to direct the contractor to perform the work, but does not have the right to tell us what the cost should be. Your neck is on the line, you are incurring the risk and the financial burden, so price the changes including all reasonable costs, direct, indirect, and consequential. If the owner does not like the price, he can reject the change and not have the work done, or award it on a cost-plus basis.
It is not in your best interest to underwrite the risk with a lump-sum proposal that does not adequately compensate you for the work. Shift the risk to the owners with a cost-plus based compensation.