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Change Order Protocol Part III

Introduction
In the last 2 months,  Extensions introduced a change order protocol that I had the opportunity to  draft with the Toronto Trade Association Standard Practice Committee, along with a taskforce made up of electrical, mechanical and sheet metal Contractors, as well as engineers, general contractors and owners/representatives. This protocol is a shift in thinking across these industries and promises to have significant impact going forward.

Part I (March) gave the background on the drafting of the Change Order Protocol and introduced the guiding principles that drove the document. It went on to define Labor Rates and Man Hour Calculations. Part II (April) described the Change Order Protocol and the various factors that can affect productivity, attaching a potential percentage of loss to each factor.

In Part III, the final chapter, we continue to explore the remaining costs and expenses impacting the change order.

Labor Supervision
Labor Supervision is the costs of providing direction and supervision on projects.  It includes:

  • Foremen
  • General Foremen

Project Supervision
Project Supervision is the cost arising from the coordination and management of a project.  It includes:

  • Superintendent
  • Project Coordinator
  • Project Manager

Material
Material cost must be fair to both parties and mutually agreed upon.

The price will include possible loss due to price escalation, waste, damage, vandalism, and theft plus all applicable freight and taxes.

The price will be based on Trade published prices like Allpri$er and Trade Service and adjusted for the specific project conditions.

Shop Expenses
Shop Expenses are those expenses associated with the operations and maintenance of fabrication facilities.

The major cost categories are the following:

  • Facilities
  • Shop Equipment
  • Operating Costs

Job Cost/Expenses

Job Costs/Expenses are all costs necessary for the performance of a contract that cannot be tied directly to the material, labor or subcontractors costs. 

  • Equipment
  • Equipment Rental
  • Site Facilities
  • Freight Rates
  • Storage
  • Permits
  • Inspection
  • Direct Room and Board
  • Travel Allowance
  • Parking(if not in labor rate)
  • Bonding
  • Site Clerical
  • Security
  • Consumables
  • Insurance
  • Other ...

Impact Costs
Impact Costs refer to the effect that change orders have on the rest of the project. 

Liquidated Damages
Liquidated damages are a pre-determined sum agreed to in a contract that is recoverable if specific conditions, such as schedule, of that contract are not met. Change orders may effect and even nullify liquidated damages clauses contained in contracts.

Overhead
Overhead expenses are administrative expenses of a business which cannot be allocated to any specific project, but are necessary for the business to operate. 

  • Home office rental, maintenance, utilities, and expenses
  • Home office equipment, furniture, and supplies
  • Property taxes, business licenses, and auto insurance
  • Dues and subscriptions
  • Postage and courier (non-job related)
  • Advertising and telephone
  • Legal and accounting fees
  • Sales and marketing
  • President’s salary and benefits
  • Sales force salary and benefits
  • Dispatcher’s salary and benefits
  • Purchaser’s salary and benefits (Estimating only)
  • Clerical staff salary and benefits
  • Estimators’ salary and benefits (except for Change Orders)

Profit
Profit is to compensate for risk, effort and return on investment. 

Acknowledgement
The Associations would like to acknowledge the contribution and participation of the following members of the Change Order Protocol Task Force:

Maurizio Ballardin OMC Mechanical
Bill Beaton Dunview Sheet Metal
Don Evans Adelt Mechanical
Burney Grist Grist Mechanical
Pete Lawson H.H. Angus
Mike Loughry H.H. Angus
Giovanni Marcelli Accubid Systems
Jeff Murva  CB Richard Ellis
Brian McCabe Mechanical Contractors Association of Toronto
John Mollenhauer Toronto Construction Association
Bob O’Donnell Greater Toronto Electrical Contractors Association
Wayne Peterson Toronto Sheet Metal Contractors Association
Al Prowse H. Griffiths Co. Ltd
Albert Salvatore Sprint Insight
Paul Sheridan  Plan Group
Dennis Thanasse Eastern Construction

For a complete copy of the Change Order Protocol, please contact editor@trimbleextensions.com.