Page 70 - IEC Insights Sept-Oct21

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Grand Blanc, MI 48439
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CHANGE ® July 27, 2021
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We are about you!

ORDERS Change Orders – A Curse or Blessing?

Do change orders help or hurt your job productivity and profitability?
The perception of most project managers is that they can make good money on change orders (COs) due
to higher profit margins that can be charged for changes in project scope. In reality this is a dangerous and
A Curse or Blessing?
often a one-dimensional and misleading perspective. Research and studies conducted by MCA, NECA,
universities, and other associations indicate that contractors more often end up with less money than
expected despite higher priced labor using NECA 1, NECA 2, or sometimes even NECA 3 for their labor
units. How come we add more revenue for new scope, and still lose profit?
BY DR. HEATHER MOORE,
The graph below shows a case study analysis from an Agile Construction practitioner that was interested
DR. MEIK DANESHGARI AND ®
SONJA DANESHGARI in what the impact of project change orders (X-axis) is on labor productivity (Y-axis). The results from
the full investigation for the contractor confirmed the same pattern as illustrated in the graph below,
Figure 1: The higher the number and size of change orders on a job, the more likely is it that the job will
finish with lower than expected labor productivity, hence, lower than expected profit.
Do change orders help or
hurt your job productivity
and profitability?

The perception of most project managers is
that they can make good money on change

orders (COs) due to higher profit margins
that can be charged for changes in project

scope. In reality this is a dangerous and
often a one-dimensional and misleading

perspective. Research and studies conducted
by MCA, NECA, universities, and other

associations indicate that contractors more
often end up with less money than expected
despite higher priced labor using NECA 1,

NECA 2, or sometimes even NECA 3 for their
labor units. How come we add more revenue

for new scope, and still lose profit?

The graph to the right shows a case study
analysis from an Agile Construction®
practitioner that was interested in what the

impact of project change orders (X-axis) is
on labor productivity (Y-axis). The results

from the full investigation for the contractor FIGURE 1: The higher the number and size of change orders on a job, the more likely
confirmed the same pattern as illustrated in Figure 1: Impact of change orders on labor productivity
is it that the job will finish with lower than expected labor productivity, hence, lower
the graph to the right.
than expected profit.

68 Insights Magazine | September/October 2021 | www.ieci.org
MCA Change Order Article 07-21-2021 V1.3 Page 1 of 4
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