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Cumulative Change Order Impacts (Best Practice)

RT-158 Topic Summary
RT 158

Overview

Problem Statement:

  • Administration boards and courts recognize that effects of cumulative impact can go beyond the initial change itself.
  • It is difficult for owners and contractors to agree that cumulative impact exists, let alone come to an equitable adjustment for it.

Research Objectives:

  1. Investigate how change orders impact productivity over entire project.
  2. Isolate specific, measurable characteristics of impacted projects.
  3. Develop a model capable of identifying projects impacted by cumulative change.
  4. Develop a model to predict the magnitude of cumulative impact with a reasonable level of confidence.

Result of the Research:

  • Two models developed
    • Determine the probability of impact within a range of possible outcomes.
    • Predict the probable magnitude of impact within a range of possible outcomes.
  • Strong correlation found between the number of change items and some loss of labor productivity.

Owners and contractors should track actual work-hours against estimated work-hours to detect negative trends early, so steps can be taken to correct them before they become a major problem.

Key Findings and Implementation Tools

1 : Labor Inefficiency

Factors influencing the probability that changes led to labor inefficiency including Percent Change, Estimated and Actual Peak Manpower, Processing Time, Overmanning, Overtime. These factors can be appied to an equation to determine the confidence that changes impacted labor inefficiency. (RS158-1, pp. 10-11)
Reference: (RS158-1)

2 : Quantify Labor Inefficiency

Six variables were identified that can be used to quatifiy the labor inefficiency:  (RS158-1, pp. 15-16)

  • Percent Change
  • % PM Time On Project
  • % of Changes Initiated by the Owner
  • Productivity Tracking
  • Overmanning
  • Processing Time
Reference: (RS158-1)

3 : Recommendations to Contractors

 
  • Integrate any changes into the work flow as efficiently as possible.
  • Use project software to track productivity:
    • % complete by earned value
    • % complete by actual earned work-hours
    • % complete by actual installed quantities
  • Resource loading relationships (ratios):
    • Actual peak over actual average manpower
    • Estimated peak over actual peak manpower
    • Actual manpower loading curve versus estimated manpower loading curve
Reference: (RS158-1)

4 : Recommendations to Owners

 
  • The most common reasons for change orders are Additions, Design Changes, and Design Errors. Therefore you should do more up-front engineering.
  • Reduce change order processing time to decrease the likelihood of impact.
  • Require contractors to submit a manpower loading curve with proposal.
Reference: (RS158-1)
rt-158

Key Performance Indicators

Reduced change, Reduced claims, Reduced project growth

Research Publications

Quantifying the Cumulative Impact of Change Orders for Electrical and Mechanical Contractors - RR158-11

Publication Date: 02/2001 Type: Research Report Pages: 178 Status: Reference

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Quantifying the Cumulative Impact of Change Orders for Electrical and Mechanical Contractors - RS158-1

Publication Date: 10/2000 Type: Research Summary Pages: 36 Status: Supporting Product

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Presentations from CII Events

Session - Quantifying the Cumulative Impact of Change Orders

Publication Date: 07/2000 Presenter: Rich Camlic Number of Slides: 26 Event Code: AC00

Tags

Knowledge Areas:
Project & Program Management
Project Phase:
Commissioning & Startup, Concept, Construction, Detailed Design (Engineering), Detailed Scope, Feasibility, Procurement
Project Function/Role:
Project Controls, Project Management
Industry Group:
Buildings, Heavy Industrial, Infrastructure, Light Industrial
Regions:
Africa – South Africa, Asia – China, India, Southeast Asia, Australia, Europe – Scandinavia, Russia, Middle East, North America – USA, Canada, Mexico, South America – Central America, Brazil
10-10 input Metrics:
Controlling, Design Efficiency, Planning

Keywords

Change Order, Productivity, Change Management, Change

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