Change order management: Overview, definition and example
What is change order management?
Change order management is the process of handling and documenting any changes to the original terms of a contract, project, or agreement. It ensures that any modifications, whether they involve scope, timelines, costs, or other aspects, are properly reviewed, approved, and tracked. This is crucial in industries like construction, software development, and manufacturing where projects can evolve and require adjustments.
Why is change order management important?
Change order management is important because it helps ensure that all changes to a project or contract are controlled and documented. Without proper management, changes could lead to confusion, cost overruns, or disputes. It ensures that both parties agree on the changes, and helps businesses avoid misunderstandings, budget issues, or legal challenges.
Effective change order management also provides a clear audit trail for future reference, ensuring that both parties are on the same page and that the project remains on track.
Understanding change order management through an example
Imagine a construction company is building a new office complex. The original agreement specifies the design and materials to be used. Midway through the project, the client requests a change to the materials used for the exterior. The construction company must issue a formal change order, which outlines the changes, adjusts the timeline, and updates the cost estimate. Both the contractor and the client must sign off on the change order to ensure that everyone is in agreement.
In another example, a software development company working on a custom app for a client receives a request to add new features that weren’t part of the original scope. The company would issue a change order to update the project’s timeline and budget, ensuring that both sides understand and agree to the new terms.
An example of a change order clause
Here’s how a change order clause might look in a contract:
“Any modifications to the scope of work or terms of this agreement must be documented in a written change order, signed by both parties. The change order will outline any adjustments to the project’s scope, timeline, and cost, and shall be incorporated into the original contract upon mutual approval.”
Conclusion
Change order management is essential for keeping projects on track when changes arise. By carefully documenting and approving any alterations to the original agreement, businesses can avoid confusion, protect both parties’ interests, and ensure that the project stays aligned with its goals. Proper change order management helps maintain clear communication and provides a way to handle adjustments without derailing the project.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.