Work Smart with the SCA McGraw-Hill Supplement - 26

A SPECIAL ADVERTISING SUPPLEMENT TO NEW YORK CONSTRUCTION CHANGE ORDERS SPEEDING PAYMENT VIA ALLOWANCE CHANGE ORDERS sk anyone to name an SCA business process that has the greatest impact on its business, and change orders is always high on the list. For this reason, the change order process is an important focus of the SCA’s continuous improvement initiative. As a result, obtaining change order approvals is getting easier. CURRENT PROCEDURES Whenever a problem or issue in the " eld is raised by a contractor or Architect of Record (AOR) that may require a change order, it is brought to the attention of the Project Of" cer. After a change order request is initiated by the contractor, consultant or SCA Construction Management, the issue is discussed by all parties. A&E initiates the change via a Bulletin or written response to a Request For Information (RFI), and the SCA Project Of" cer issues a Notice of Direction (NOD) and RFP (Request for Proposal) to the contractor. If the contractor’s proposal is for more than $25,000, it is sent to the Change Order Unit. If it is less than $25,000, it is evaluated by the Project Of" cer and sent to the Senior Project Of" cer for negotiation with the contractor. “It’s very important to submit complete back-up documentation with proposals in order to expedite the negotiations and create a reasonable estimate,” says Barbara McIntyre, SCA Director of Change Orders, “Providing a detailed breakdown of labor and materials, and documentation that substantiates the proposal amount eliminates a lot of ‘back-and-forth.” The process of documenting and negotiating change orders can be time-consuming. According to George Toma, SCA Vice President of Construction Management, the SCA recognized that subcontractors found the change order process challenging, especially when they could not be paid for work until a change order was approved. “Before our contract change [as described below], the SCA issued a NOD, and the contractor would start the work, but it could take up to six months before they could bill,” says Toma. THE SOLUTION: ALLOWANCE CHANGE ORDERS In response to the contractors’ need to maintain cash " ow, the SCA modi" ed its contracts to incorporate Allowance Change Orders (ACOs) and implemented a new and improved tracking system to manage change orders that incorporates the allowance process. Now a change is issued and submitted with an estimated cost, and an allowance change order is sent to the contractor, who can bill up to 80%, after which the cost may be adjusted up or down based on " nal negotiations. According to McIntyre, ACOs release funds to contractors in order to give them time to get proposals together and submit them to the SCA for review without stopping work on the project. “Both the SCA and contractors bene" t from Allowance Change Orders,” says Toma. Some of the bene" ts are as follows: Timing. “The requirement under the old process that contractors turn around the documentation in 15 business days was impossible to meet,” McIntyre says, “We implemented ACOs to give contractors suf" cient time to put together a complete proposal.” Efﬁciency. According to Toma, using Expedition and ACOs enhances tracking and further streamlines the process. The new approach helps all parties negotiate a " nal price. Considering that the SCA processes about 475 change orders a month, the time saved really adds up. Reduced Cost. “A seamless change order process improves quality and reduces the overall cost of construction for the SCA,” says McIntyre. “Streamlining the process means contractors get their money in a timely manner, projects are completed with no exposure, risk management is enhanced, and total cost is reduced.” “Contractors and subs shouldn’t have to take money out of their own pockets,” says Toma. “The new system gives cash to the contractor and affords a substantial amount of time to put together a clear and detailed proposal, which makes our work easier. It’s a win-win situation for everyone.” ■ TOP TIPS FOR CHANGE ORDERS • Read the contract. Familiarize yourself with your contract and your responsibilities with regard to the change order process. • Submit change order documentation on a timely basis. Doing so will avoid delays. • Provide details. The change order process is dependent upon accurate documentation. A change order without suf" cient information could go back and forth several times, extending the process. The more information you submit upfront, the easier the negotiation. Avoid lump sum proposals and itemize costs by labor and materials. • Follow the process electronically. The SCA publishes all change orders—as well as the status of these orders— by contract number in the Sub Contractor Change Order Report, which is available online. Check this report regularly to determine the status and schedule for your change orders. • Engage in constant communication. To ensure a smooth construction process and successful project completion, it is very important for the project team, contractors, subcontractors, and all involved in the project to be “on the same page” at all times. • Always present issues in a timely manner. Avoid project delays and confusion by raising issues/concerns as they occur and responding in a timely fashion when requested. • Understand how the SCA does business. The SCA tries to make its contract language as clear as possible, but urges contractors to familiarize themselves with the ACO process to avoid common misconceptions. 25

Work Smart with the SCA McGraw-Hill Supplement

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