Construction Curiosities #71
Change Order Impacts || Construction MF'ers || ConTech Roundup
Hey! Happy Saturday! Matt here.
Welcome to the Construction Curiosities newsletter!
This weekly Newsletter explores my Curiosities about the Construction Industry. It's meant to make you think, smile, and become a better, more thoughtful Construction Professional.
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Summary
This week we will look at:
One Guest Article: Change Orders and Their Impact
One Podcast: Construction MF’ers
One Other Substack: ConTech Roundup
One Meme: Self-Inflicted C.O. Pain
One Guest Article
This week’s Guest Article comes from CM Mentors Episode 12 star, Scott Peper. Scott is Big on the importance of Cash Flow, but what can make or break cash flow? Proper Change Order Management.
Here he’s let me repurpose an article he previously wrote for his Funding Insights Digest LinkedIn Newsletter. And also sent me a few other resources for Owners/ Developers, General Contractors, and Subcontractors.
Take it away Scott:
Change Orders and Their Impact on Subcontractors: A Deep Dive
In our latest newsletter, we're diving deep into a subject that doesn't always get the spotlight but is important in the construction industry: Change Orders.
Specifically, how they impact subcontractors and the ripple effect they can have on a project's cash flow.
What Are Change Orders?
At its core,
a change order is a modification in the scope of work.
While this might sound simple, anyone in the construction industry knows that these changes can be multifaceted and can vary depending on one's position in the project. From an owner's perspective, it's a straightforward change in scope. But for subcontractors, it can mean navigating a maze of modifications, each with its own set of challenges. There are various types of change orders, from owner-directed ones to method, material, and delay change orders. Each type presents its unique set of challenges and implications.
The Real Impact on Subcontractors
Change orders can significantly affect subcontractors.
Here's why:
Risk Addition: Every change order introduces a new layer of risk. Subcontractors often bear the brunt of this risk, facing payment delays, increased costs, and cash flow disruptions.
Financial Instability: The uncertainty stemming from change orders can jeopardize not just the project but also the financial health of a subcontractor's business.
Performance Implications: A change order can alter schedules, material arrival times, and labor force requirements. If not managed correctly, subcontractors can be remembered for non-performance rather than the challenges posed by the change order.
Mitigating the Impact
So, how can subcontractors navigate this tricky terrain? Here are some strategies:
Clear Scope of Work: The more detailed your scope of work, the better. It helps in identifying what constitutes a change order and what doesn't.
Contractual Clarity: Ensure your contract clearly states when and how you'll charge for a change order. This clarity can save time, energy, and potential disputes down the line.
Effective Communication: The moment a team on the ground identifies a potential change order, it should be communicated up the chain. Regular meetings with general contractors can help in keeping everyone on the same page. Weekly meetings to discuss change orders can be particularly beneficial.
Cash Flow Management: Understand how a change order will impact your cash flow. Whether it's a minor or major change, being prepared can make all the difference. Cash flow is critical to a project's success or failure, and any change, especially a change order, can significantly impact it.
In conclusion, while change orders can introduce challenges, with the right strategies in place, subcontractors can not only navigate them effectively but also turn them into opportunities. It's all about preparation, communication, and adaptability.
For more information, watch their comprehensive YouTube video on Change Orders:
Resources:
Thank you Scott for being part of the Newsletter and for sharing your knowledge and stuff with us.
If you want to connect with Scott you can get him on LinkedIn or the Mobilization Funding YouTube.
One Podcast
I guess we will just make this week the “Scott Show.”
This week he released Construction MF’ers Podcast Episode 24.
One Other Substack
No, its not Scott….
This is a Substack I’ve been enjoying for a few weeks now. Lots of ConTech news in a quick bullet point format.
Great stuff
! Keep it rolling!
One Meme
Pretty sure I’ve shared this one before but it's perfect for this week.
Interested in writing a Guest Article? Want to get your article Gif-ified by yours truly? Shoot me an email at matt@constructionyeti.com. And let’s do it!