# Change Orders



## Jaws (Dec 20, 2010)

Interested in hearing how others mark up change orders .

Do you have an initialization fee? 

Thanks


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## TNTRenovate (Aug 19, 2010)

Pardon my ignorance, what is an initialization fee?


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## summithomeinc (Jan 3, 2011)

TNTSERVICES said:


> Pardon my ignorance, what is an initialization fee?


Another way to make customers feel warm and fuzzy about covering the costs associated with changing things in the middle of a job is my guess?


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## Jaws (Dec 20, 2010)

:laughing:

I had to ask the guy who told me :laughing:

He charges a $175 fee to generate any change order, and marks them up atleast 50%. He showed his books at the last Remodelers Council meeting, he is for real. 

I dont have an initialization fee, and mark up the same as the mark up on the whole project.


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## overanalyze (Dec 28, 2010)

The fee is meant to make a customer think before they make changes. We are thinking of adding a fee. The last home we just finished got out of control with changes. Spent so much bs time pricing three different things out then they would take forever to make up their mind. The fee gets paid regardless if they make the change or request the pricing for the change...time is money.


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## schaefercs (Jul 10, 2008)

Maybe limit your change orders before the fee is imposed.


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## Oconomowoc (Oct 13, 2011)

overanalyze said:


> The fee is meant to make a customer think before they make changes. We are thinking of adding a fee. The last home we just finished got out of control with changes. Spent so much bs time pricing three different things out then they would take forever to make up their mind. The fee gets paid regardless if they make the change or request the pricing for the change...time is money.


That's what all my remodelers do. They all charge a CO fee that's steep to keep people from killing the job and changing at every will.

One company I work with charged a home owner a fee because he changed tile 2 days before the install. The HO actually went out and bought his own tile and he was stuck with the original tile as well.


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## TNTRenovate (Aug 19, 2010)

Got it. I haven't to date, but this last Kitchen kicked my arse. I am going to institute a fee as such in the next one.


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## fcfc (Mar 10, 2012)

Having a policy or contractual terms for change orders is great, make sure that is communicated clearly prior to starting. An educated customer tends to be less a burden than simply zapping someone for being a nilly skidmark. Its always the ones you wished you could have zapped that end up in these stories.


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## Jaws (Dec 20, 2010)

fcfc said:


> Having a policy or contractual terms for change orders is great, make sure that is communicated clearly prior to starting. An educated customer tends to be less a burden than simply zapping someone for being a nilly skidmark. Its always the ones you wished you could have zapped that end up in these stories.


Most of our clients are educated, and make a great deal of changes.


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## overanalyze (Dec 28, 2010)

The fee can obviously be whatever amount you want. Even if it's $50 it will be enough for a consumer to think twice. The client will never fully understand how much time and effort goes into running large scale projects. And when they change the tile two days before its to be installed, it will throw off everything behind it. It then causes the GC to go into sh!t shift mode to try and salvage the schedule as best as possible. I have had this conversation with another builder friend of mine. He has similar experiences that we all have here. It's not just a money making fee, it's a pain in the ass fee!


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## ohiohomedoctor (Dec 26, 2010)

I love change orders.. Any chance to make more money I relish. I charge for everything I mean everything involved in a change order including delays and phone time for res scheduling. Some of my subs even have rescheduling fees which I mark up as well.


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## Jaws (Dec 20, 2010)

ohiohomedoctor said:


> I love change orders.. Any chance to make more money I relish. I charge for everything I mean everything involved in a change order including delays and phone time for res scheduling. Some of my subs even have rescheduling fees which I mark up as well.



Wow


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## Jaws (Dec 20, 2010)

overanalyze said:


> The fee can obviously be whatever amount you want. Even if it's $50 it will be enough for a consumer to think twice. The client will never fully understand how much time and effort goes into running large scale projects. And when they change the tile two days before its to be installed, it will throw off everything behind it. It then causes the GC to go into sh!t shift mode to try and salvage the schedule as best as possible. I have had this conversation with another builder friend of mine. He has similar experiences that we all have here. It's not just a money making fee, it's a pain in the ass fee!


 Dude I referenced had 90+ COs on his last major remodel ($750,000+) . He said the CO fees, not including mark up paid for his vacation to europe, almost. :blink::thumbup:


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## ohiohomedoctor (Dec 26, 2010)

Jaws said:


> Wow


Thank you. If you order a steak for dinner and once it gets there you want the chicken, guess what, the steak is still on the bill.


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## overanalyze (Dec 28, 2010)

Jaws said:


> Dude I referenced had 90+ COs on his last major remodel ($750,000+) . He said the CO fees, not including mark up paid for his vacation to europe, almost. :blink::thumbup:


Wow!! Prob could have had some serious coin as well on our last one...changes from day one to the end! Live and learn....


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## Jaws (Dec 20, 2010)

ohiohomedoctor said:


> Thank you. If you order a steak for dinner and once it gets there you want the chicken, guess what, the steak is still on the bill.


Not saying I disagree, but if the restaurant and the cook had fees on top of the menu price Id probably go to Ruths Chris.:whistling:laughing::laughing::laughing:


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## ohiohomedoctor (Dec 26, 2010)

The fees are built into the cost. Chicken $25. You dont get it for $20 because they already brought you your water and napkin.


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## Jaws (Dec 20, 2010)

Day after I discussed COs with this remodeler, my dad gave me an ear full over a douche of a client he has. Good way to shut guys like that client up is probably a CO fee.


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## Oconomowoc (Oct 13, 2011)

Obviously I don't deal much in CO but from what I see on jobsites they really scree things up and cost money to the GC. Even with my limited exposure when the HO adds something to a remodel on the fly it stretches out my schedule and I end up calling other jobs to push them backward. I hate that.


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## Jaws (Dec 20, 2010)

ohiohomedoctor said:


> The fees are built into the cost. Chicken $25. You dont get it for $20 because they already brought you your water and napkin.


Ah, doesn't really work with the restaurant analogy because they dont have change order in their menu prices :laughing:

If you have all that in one price, that all makes a lot of sense. I thought you had several fees. I could see a confrontation or two there....

As long as its spelled out in your contract, it doesnt really matter. :thumbsup:


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## Ninjaframer (May 28, 2011)

A GC friend of mine said he charged 25% for change orders, I started doing the same and have been happy.


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## Jaws (Dec 20, 2010)

Oconomowoc said:


> Obviously I don't deal much in CO but from what I see on jobsites they really scree things up and cost money to the GC. Even with my limited exposure when the HO adds something to a remodel on the fly it stretches out my schedule and I end up calling other jobs to push them backward. I hate that.


Im somewhat surprised more subs dont have a fee of some sort for getting rescheduled last minute or getting cancelled the day of. Usually the subs are the ones who get the worst out of it. I can understand that, not a sub but have my own guys and rescheduling last minute constantly is something im used to but still a PITA.


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## Jaws (Dec 20, 2010)

What do yall consider a CO? If they change the tile but you havent ordered it, is it a CO? Paint colors?


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## Oconomowoc (Oct 13, 2011)

Jaws said:


> Im somewhat surprised more subs dont have a fee of some sort for getting rescheduled last minute or getting cancelled the day of. Usually the subs are the ones who get the worst out of it. I can understand that, not a sub but have my own guys and rescheduling last minute constantly is something im used to but still a PITA.


Well, I probably could and should but I don't. I try to be flexible for my customers. It's pretty rare I'm effected by these though, plumbing isn't really a last minute thing.

I also bid smart. What I mean is, I account for things and include things that the GC misses. An ice maker for example, I just assume it's happening and always include it even though they don't always ask........ and as usual they almost always need it.


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## Ninjaframer (May 28, 2011)

Jaws said:


> What do yall consider a CO? If they change the tile but you havent ordered it, is it a CO? Paint colors?


Any addition that wasnt detailed in the scope.


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## griz (Nov 26, 2009)

:whistling:whistling:laughing::thumbsup:


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## Jaws (Dec 20, 2010)

Ninjaframer said:


> Any addition that wasnt detailed in the scope.


Thats what I do. Most others it seems do a CO for changes in finishes, floors, fixtures, ect....


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## ohiohomedoctor (Dec 26, 2010)

Jaws said:


> Ah, doesn't really work with the restaurant analogy because they dont have change order in their menu prices :laughing:
> 
> If you have all that in one price, that all makes a lot of sense. I thought you had several fees. I could see a confrontation or two there....
> 
> As long as its spelled out in your contract, it doesnt really matter. :thumbsup:


Too me a change order is just like a whole new job. I give them a bid for the proposed additional or altered scope of work. It is a lump sum not broken down. I find that clients would rather get one number verses a highly broken down version despite what they may say.


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## r4r&r (Feb 22, 2012)

To me this falls behind the "charging for estimates" discussion. I can see charging just for preparing a CO. Not only does it take time but depending on what it is and when it is requested it can bring a job to a halt. Then once they get the numbers for the three different options they are considering they decide to just stay with the original scope. Now your not only out the cost of prepping the CO's but your job is down a day. 

If it's in your contract and it is explained at signing then they should expect the up front CO fee of $***.xx or whatever it is. 

I think I just talked myself into incorporating this into my biz practices.


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## griz (Nov 26, 2009)

I've known guys who have been relegated to building dog houses & the like for trying to nickel & dime a job for all it's worth.

Change orders are for unforseens, unknowns & significant changes in the SOW.....not because someone wants to change a color/style before it has been ordered.

Greed can ruin a guy faster than cheap booze &......:whistling


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## country_huck (Dec 2, 2009)

Jaws said:


> What do yall consider a CO? If they change the tile but you havent ordered it, is it a CO? Paint colors?


Any added work or cost!!!

If they change paint colors before I have bought paint no big deal. They change after bought they own the paint, they buy new, pay for what was painted, and pay again for me to put on new color again. All at the set margin I have specified in my contact


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## Oconomowoc (Oct 13, 2011)

griz said:


> I've known guys who have been relegated to building dog houses & the like for trying to nickel & dime a job for all it's worth.
> 
> Change orders are for unforseens, unknowns & significant changes in the SOW.....not because someone wants to change a color/style before it has been ordered.
> 
> Greed can ruin a guy faster than cheap booze &......:whistling


Most people are pretty honest, It's not greed it's making sure you don't lose money.


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## J L (Nov 16, 2009)

Change orders get marked up at the same percent as the job was bid at, unless the change order has a higher risk factor or some other reason to cause the mark up to be more.

I also charge for my time in preparing change orders, whether or not they approve the change orders, they pay for my time. As a GC, there's no way to know which clients will have no change orders and which clients will want 3 prices on 20 different things every week.

Changes in colors or selections typically don't result in change orders, however, if we've got tile spec'd for the kitchen floor, and tile is scheduled to be installed the next day, and they tell me they now want hardwood, that's a CO. Same with painting. We spec 2 coats of paint so if they end up choosing a color that requires 3-4 coats to cover, that's a change order.

I refuse to nickel and dime my clients. I add for contingency in every project that covers a lot of the little stuff that other companies would write up change orders for. Honestly, for the paint example above, if they were good clients, they'd never see a change order for the 2 additional coats of paint.


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## Gary H (Dec 10, 2008)

ohiohomedoctor said:


> I love change orders.. Any chance to make more money I relish. I charge for everything I mean everything involved in a change order including delays and phone time for res scheduling. Some of my subs even have rescheduling fees which I mark up as well.


Same here. :thumbsup:


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## Jaws (Dec 20, 2010)

RemodelGA said:


> Change orders get marked up at the same percent as the job was bid at, unless the change order has a higher risk factor or some other reason to cause the mark up to be more.
> 
> I also charge for my time in preparing change orders, whether or not they approve the change orders, they pay for my time. As a GC, there's no way to know which clients will have no change orders and which clients will want 3 prices on 20 different things every week.
> 
> ...


That is my thinking exactly.


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## Creter (Oct 13, 2009)

Ahhh, thanks so much for this thread.

I have been doing some soul searching of late regarding this very topic.

I truly enjoy what we do but when a customer's mind changes in mid-stroke it has really killed my momentum.

If left to my own devices I can be very efficient during a day as soon as that change of direction gets entered into the equation I almost feel like I am going backwards.

Then the funniest part about it is that after all the direction changes and extras done for free mostly (up until now :jester: ) the next  question out of their mouths is "Are you done yet??"

I believe it was Griz that posted the pic of the boat named, 'Change Order'

I thank you and I have been inspired. I am going to print that picture and frame it as motivation.


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## J F (Dec 3, 2005)

On larger projects I always had it in the contract re: c/o's payments and fees (see pdf). I rarely charged the admin. fee of $150.00, only if someone started to drive me crazy with "what if" scenarios.

The c/o always had any time delay included as well. Another good thing to include is "original contract price" and "new and improved price" with any c/o. 

Change orders are ALWAYS signed AND paid in advance, before any c/o work is done.

Keeps things from getting murky. :laughing:


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## GCTony (Oct 26, 2012)

Wow, I need to close shop on the commercial work and start doing residential. A CO should be for changes an owner makes that is above and beyond what was included in the original contract. If a change costs the contractor money, that cost gets passed onto the owner. It's my opinion that making a profit on changes, especailly at 25% and up in down right dishonest.

We do quit a bit of state government work, the state allows 5% markup for material and 10% for labor and I have to show actual costs. It doesn't matter if it's a $300 change or a $30,000 change.


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## Jaws (Dec 20, 2010)

GCTony said:


> Wow, I need to close shop on the commercial work and start doing residential. A CO should be for changes an owner makes that is above and beyond what was included in the original contract. If a change costs the contractor money, that cost gets passed onto the owner. It's my opinion that making a profit on changes, especailly at 25% and up in down right dishonest.
> 
> We do quit a bit of state government work, the state allows 5% markup for material and 10% for labor and I have to show actual costs. It doesn't matter if it's a $300 change or a $30,000 change.




Well your opinion is flawed, in MY opinion. If a client changes paint colors, Im not doing a CO. If a client adds sq ft to, say a deck, It gets marked up like the rest of the job. Why should I not make a profit???? 

If you go into business as a resi builder, I think your clientele will catch on, give you a small scope and then a laundry list of additions. 

Also, I was a commercial super, and did state contracts. COs on commercial end were VERY profitable.


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