Change Orders are an inevitable part of the construction process. However, the time it takes for Change Order Requests to get approved and paid can be a significant source of frustration for Specialty Contractors. By fronting the cost of time and materials to perform changes, Subcontractors put revenue at risk. Getting Change Orders paid promptly is key to protecting that revenue and the cashflow necessary to keep the business going. While it’s easy for many contractors to blame General Contractors for bottlenecks or even deliberately delaying payments, the reality is often more complex.
Here are some of the primary reasons why Change Orders can take so long to get paid:
1) Poor Documentation
One of the most common reasons for delayed Change Order payments is poor documentation. Incomplete or inaccurate documentation can lead to confusion and disputes, delaying the approval and payment process. Specialty Contractors should ensure that all Change Orders are properly documented, including:
2) The COR Log Back and Forth
The COR (Change Order Request) Log is a critical tool for tracking Change Orders. However, the back-and-forth process of submitting, reviewing, and revising COR Logs can be time-consuming. To expedite the process, contractors should:
COR logs can often suffer from version control or contain incomplete or out-of-date information when exchanged back and forth via email. By using a shared, cloud-based Change Order Log, Specialty Contractors can rest assured that they are aligned with GCs on Change Order status in real time. Clearstory’s universal COR log, for example, automatically tracks Change Order history and shows all stakeholders up-to-date status and how long Change Order Requests have been aging as they await approval.
3) Late or Incomplete Information
Specialty Contractors may experience delays in receiving payments if they submit late or incomplete information. This can include:
To avoid these delays, contractors should submit Change Orders as soon as possible after the change occurs, ensure that all required documentation and approval signatures are included, and then follow up with the General Contractor regarding questions or concerns. A real-time Change Order communication tool like Clearstory ensures that all stakeholders have visibility into changes as they occur, eliminating the end-of-project surprises that can spiral into disputes.
4) Complex Change Orders
Some Change Orders may be more complex than others, requiring additional layers of review and multiple approval sign-offs. This can contribute to delays in the payment process. To minimize the complexity of Change Orders:
Organization and documentation is critical as Change Orders become more complex in scope. By using digital tools and shared, one-stop-shop solutions, Specialty Contractors can reduce the risk of error from time-consuming, manual workflows and be confident that they’re aligned with GCs.
5) Communication Breakdown
Communication breakdowns between Specialty Contractors and General Contractors can also lead to delays in Change Order approvals, and are a key culprit in disagreements and strained relationships. To streamline collaboration and alignment:
Manual Change Order processes, including the use of paper T&M Tickets, Excel spreadsheets, and email messages can slow down communication and lead to disconnect. If your project teams are spending too much time hunting down documentation, correspondence, and approvals, consider again using a shared, cloud-based COR Log that updates all stakeholders in real time.
6) Insufficient Staffing or Resources
It’s no secret that the industry is facing a critical personnel shortage. General Contractors may experience delays in processing Change Orders due to insufficient staffing or resources. This can be particularly problematic during busy periods or when dealing with complex projects. Multi-phase and longer commercial construction schedules can leave projects exposed to turnover of General Contractor supervisors, PMs, and cost managers.
By using a cloud-based Change Order communication tool, Specialty Contractors can be confident that Change Order Requests, T&M Tickets, and documentation don’t walk off the job or get lost in someone’s computer when they leave a project.
7) Legal Disputes
In some cases, disputes may arise between GCs and Subcontractors over the validity or amount of a Change Order. These disputes can significantly delay the payment process. To avoid legal disputes:
By understanding these common reasons for delayed Change Order payments, Specialty Contractors can take proactive steps to expedite the process, protect revenue-at-risk, and improve their cash flow. Effective communication, thorough documentation, proactive problem-solving, and real-time alignment with GCs are essential for ensuring timely payment of Change Orders.
Want to learn more about how Clearstory’s cloud-based Change Order communication tool can get your CORs processed faster? Click the link here to schedule a free demo to see how easy it is to put Clearstory to work on your next project.