In most construction projects, things rarely go as planned. A client may request work that was not included in the original contract. Additionally, on-site inspections reveal unexpected tasks that require more labour, materials, or equipment.
These add-on changes to the project can affect project costs, schedules, and profitability. Completing all the extra work without clear documention or approval makes it hard for contractor to recover the cost. Even small changes can reduce the project’s margin when they are not tracked properly.
This is where change order management software can be a crucial new-age tech tool for contractors.
Contractors can use change order management software to record changes, calculate their financial impact, request approval, and connect approved work to project execution and invoicing. The software allows contractors to create a consistent process for managing work that falls outside the original scope.
This guide explains how construction change order management software supports margin protection, how it fits into construction work order management, and what contractors should look for when choosing a solution.
Key takeaways
Record every change: Document additional work, its reason, revised scope, costs, and supporting information.
Calculate costs before approval: Include labour, materials, equipment, subcontractors, transport, and overheads.
Track approval status: Make sure additional work receives the required authorisation before execution.
Connect changes with work orders: Communicate approved changes clearly to the teams responsible for completing the work.
Monitor actual costs: Compare estimated costs with actual labour hours, materials, and other project expenses.
Protect project schedules: Consider how additional work affects existing activities, trade availability, and completion dates.
Prevent missed invoicing: Connect approved changes and completed work with the invoicing process.
Use connected project information: Integrating project management, work orders, procurement, invoicing, and cost calculations helps contractors maintain better financial control.
Why Poor Change Order Management Reduces Project Margins
Unmanaged or unplanned changes in the project can directly impact the construction project margins. However, in the construction business, the problems are not often limited to the changes themselves. Let’s discuss the other factors that reduce the project margins.
1. Extra work is completed without approval
Site teams may begin additional work after a verbal request from a client or site manager. If the request is not recorded, the contractor may have difficulty proving that the work was outside the original agreement. The client may later question the additional charge or refuse to pay it. The contractor is then left covering the cost of labour, materials, and other resources.
2. Costs are underestimated
A change order may involve more than the cost of a material or a few extra hours. It can also require equipment, subcontractor support, transport, site preparation, or additional coordination. If these costs are not included in the change order calculation, construction cost estimating software can help contractors assess the additional expenses and avoid approving work that generates little or no margin.
3. Approved changes are not passed to the office
A change may be agreed on site but not communicated to the project manager or administration team. As a result, the work may not appear in the project budget or invoice. Due to this communication gap, there’s a difference between what the team has delivered and what the business expects to recover.
4. The schedule is affected
When a contractor handles the additional work, it can affect other trades or the sequence of activities. If the schedule impact is not considered, this can result in overtime, idle labour, or extra site costs.
5. Invoicing is delayed
When change orders are scattered across emails, messages, spreadsheets, and paper notes, the office team may not know which changes are approved and ready to invoice. Further, delays in using construction invoicing software to bill approved changes can affect cash flow and increase the risk of missing billable work.
Understanding the Impact of Change Order Management Software Protects Project Margins
Contractors can use construction change order management software to manage changes through a documented workflow. Rather than informal communication, teams can follow a consistent process from request to approval and invoicing.
1. Records every change in one place
Make sure the change order includes enough information for the project team, client, and office staff to understand what is changing. Contractors can use the software to help centralize details such as:
Original scope and requested change
Reason for the change
Labour and material requirements
Additional equipment or subcontractor costs
Price adjustments
Schedule impact
Supporting documents, photos, or notes
Approval status
Construction workflow management software helps keep change order details together and reduces the chance of losing important information across separate communication channels. Maintaining a clear record also helps contractors distinguish additional work from tasks that were already included in the contract.
2. Calculates the financial impact before work begins
Contractors need construction project cost tracking to understand the financial impact of a change before committing to additional work. A change order calculation should account for the resources required to complete the work. Based on the construction project, the information may include:
Additional labour hours
Material quantities and prices
Equipment costs
Subcontractor charges
Delivery or disposal costs
Overhead and applicable markup
Any schedule-related costs
A structured calculation helps the contractor set a price that covers the additional work and preserves the intended margin.
3. Makes approval status visible
Contractors need to have a clear overview of the changes, such as requested, priced, submitted, approved, rejected, or completed. Without a clear status, site teams may begin work before the client has agreed to the price. The office may also assume that a change is approved when it is still being reviewed. The software makes the approval stage visible to relevant team members. And further, this supports the key rule: do not treat additional work as approved until the required authorization has been received.
4. Connects approved changes to site execution
An approved change needs to be communicated to the team that is responsible for carrying it out. Site teams should know what work has been added, which materials are required, and whether the schedule has changed. This is where change order management connects with construction work order management. The software records the work and communicates the task to the team responsible for execution.
5. Captures actual labour and material costs
A contractor needs to compare the estimated and actual cost to understand whether the work delivered the expected margin. The site team can record the hours spent, materials used, and relevant project details. When this information is linked to the correct project or work order, the office can review the actual cost of the change. With this, the contactors can identify:
Changes that required more labour than expected
Material price differences
Extra equipment or subcontractor costs
Work that was completed but not included in the invoice
Patterns that may improve future estimates
Change Order Management vs. Construction Work Order Management
A change order answers: What is changing, and what has been agreed?
A contractor work order software answers: What work needs to be done, and how will it be carried out?
A Practical Change Order Management Workflow
The contractor needs to ensure that the change order management software is implemented in the right way to ensure accuracy and transparency. A consistent workflow helps contractors manage changes without losing control of costs or approvals.
Step 1: Identify and record
As soon as the change order request is raised and received, it should be recorded. Further, record additional information regarding who requested it, why it is needed, and which part of the project it affects. Contractors should abstain from entertaining any verbal instructions or informal messages regarding construction work.
Step 2: Review the original scope
Before beginning the construction work, check the contract, quote, drawings, specifications, and existing work orders. Confirm whether the requested work is already included in the original agreement. With this, contractors can prevent themselves from charging for work that was already priced or missing work that should be treated as additional.
Step 3: Estimate costs and schedule impact
Next, a contractor needs to calculate the labour, materials, equipment, subcontractor support, and other resources required. Review whether the change affects the planned sequence or completion date. Additionally, use realistic quantities and current supplier prices where possible.
Step 4: Submit the change for approval
Provide the client or authorized representative with a clear description of the change, its price, and its schedule impact. Keep a record of the approval and follow the contract’s requirements for authorization.
Step 5: Update project plans and work orders
Once approved, communicate the change to the people responsible for execution. Update the project schedule, work order, material requirements, and relevant project records. This helps ensure the site team works from the latest agreed information.
Step 6: Record completed work
Capture actual hours, materials, and other relevant costs. Attach supporting notes or photos where useful. Make sure the records are connected to the correct project and change.
Step 7: Review and invoice
Compare the approved change with the work completed. Confirm that the agreed amount is included in the appropriate invoice and that supporting documentation is available. This final check helps reduce missed billing and gives the contractor a clearer view of the change’s financial result.
How Bouwflow Supports Change and Work Order Processes
Contractors need project information to move smoothly from the office to the site and back again.When estimates, work orders, actual costs, and invoices are disconnected, construction accounting software integration can help connect financial information with project operations and improve margin control.
Bouwflow brings key construction workflows together, including project management, work orders, supplier management, invoicing, and pre- and post-calculation.
Further, our OnSitePro mobile app allows site teams to receive digital work orders and record hours, materials, photos, and other job information. This helps office teams review what happened on site without rdelying entirely on handwritten notes or repeated data entry.
The software's pre- and post-calculation features also help contractors compare estimated costs with actual project costs. By reviewing registered hours, purchase invoices, and project invoices, contractors can identify differences between planned and actual results.
For change-related work, connected project records can help teams keep track of what was planned, what was carried out, and what needs to be included in the financial review. Contractors should confirm the specific change order and approval capabilities of any software before adopting it for formal contract change management.
Conclusion
Changes that have not been managed could slowly erode margins on construction projects. Labor, material, equipment, and time all influence the profit from such work, particularly when there is no proper costing and approval.
Change order management software allows contractors an easy way to manage requests, calculate costs, get approvals, and link approved changes to construction work order management and billing. With actual hours and materials being tracked, the contractor can then compare the anticipated outcome with the cost of doing the work.
Change management process consistency can enable contractors to deliver the required work and recover costs.
FAQs
What is change order management software in construction?
The change order management software enables contractors to log, cost, evaluate, and control changes to the initial scope of work for a construction project. Such software could be used to log approvals, communicate changes to the site team, and tie new work to project costs.
How does change order management software protect project margins?
The software assists the contractor in identifying the total cost of extra work, gaining approvals before commencing any work, monitoring true labor and material costs, and minimizing the chances of failing to bill for work done. This process enables the contractor to understand and secure their margins.
What is the difference between a change order and a work order?
The change order is the documentation of an agreement on how the project has changed in terms of its scope, price, or schedule. The work order is used to assign the work that needs to be done. It can result from a change agreement.
Can construction work order management software track extra work?
In case the change request is tied to the work order, it may be easier to monitor additional work being carried out. However, a contractor will still need a procedure for recording the change request, assessing its consequences, and getting necessary approvals.
What is work order asset management?
Work Order Asset Management is the process of arranging work orders for assets like equipment, machinery, etc. This might also consist of maintenance, inspection, repair, spare parts and service history. It is similar to Construction Work Order Management but is different from Change Requests made by the client.
