Treat you projects as stand-alone profit centers when calculating change orders.
My contract sets the markup limits on any change orders to lower percentages than my standard markups. How can I handle this so that I do not lose money on change orders?
- Review the contract
- How are the markups defined? What is overhead?
- Clarify what should be included in the allowable overhead markup
- Negotiate the terms if you can
- Handling the CO
- Clearly outline the scope of work for any changes – create line items of the work
- Include line items for the support and preparation of the work items
- Use publicized rates where applicable – these can set benchmarks and can be higher than you need
- Include everything you can – consider the project as a stand-alone company/profit center
- Load up and be fair
- Put every cost associated with a particular change then review and remove things that don’t seem fair
- Negotiate win/wins with the Owner by dropping some of the costs
- Be sure to include some low hanging fruit for easy picking
Are you capturing the right stuff?
Are your markup %s correct?
Are you using the right rates?
Are you leaving money on the table?
Review your change order process
Build good estimates for all changes treating your project as a profit center
Negotiate fair charges with your Owner/Client