What Causes Construction Change Orders? 10 Common Reasons for Cost Overruns

Constructing a building is complicated. Many factors can affect a project’s budget and schedule, and sometimes even a project’s profitability. Changes can be Owner- or conditions-of-the-site-related. There are other owner- and site-related changes that could have been identified and addressed before construction began. Some things that can be misaligned during the design of a project include Incomplete construction documents, ambiguous language in construction documents, gaps in the coordination of the various construction trades, and other miscellaneous issues.

A change order formally alters the scope, cost, or schedule of a construction contract. Discrepancies of this nature are addressed by constructing additional portions of the project and/or using additional project resources.

Preconstruction coordination can better align and integrate concerns in design, Construction Documents, and contractual documents. Other issues, such as aligning the limits of scope for various trades, can be addressed before the awarding of the contract to establish a more accurate project baseline.

Here are the top 10 reasons for project change orders and overruns, and what can be done to lessen the chance they occur.

Execute Scope Gap Analysis to Protect Project Margins

There are gaps in a project’s construction scope when certain parts of the work are not assigned to contractors and subcontractors. These gaps occur when responsibility for the work is defined in thousands of documents containing different designs and plans.

A thorough analysis of the project scope identifies responsibility gaps and redundancies in project documents, notes, plans and specification materials. This analysis is usually done during the final negotiation of contracts.

For example, a subcontractor may believe that wiring for mechanical controls is part of the scope of work for the mechanical subcontract and, therefore, is not their responsibility. The mechanical subcontractor may believe the wiring is not part of their scope of work and, therefore, is not their responsibility.

The trade’s responsibility boundaries need to be delineated before work begins to resolve disputes. This work helps management and the contracting teams identify responsibility for work to be done and helps resolve potential disputes. This work helps clarify subcontractor scope of work and serves as the basis for subcontracts.

Identifying Scope Gaps with AI-Driven Document Review

Manual review of the thousands of drawing sheets, specification pages and other project documentation can be ineffective at locating all the issues requiring coordination.

AI-enabled document review can be a breakthrough technology for project teams in reviewing large documentation sets. Scope Gap Analysis tools can analyze documentation across various disciplines and identify inconsistencies and areas requiring coordination.

One example could be using this technology to determine whether a structural element conflicts with an open mechanical or plumbing element.

While some project team members may fear that the use of AI will displace them, it is evident that this technology will give them the opportunity to focus on higher-level activities.

Deploy AI Scopes to Automate Document Verification

The introduction of automated verification workflows changes how teams handle drawing reviews. Utilizing AI scopes allows project teams to process entire drawing sets simultaneously. The automated engine scans every line of text, callout and cross-reference across disciplines to flag hidden coordination conflicts. This automation ensures that human oversight does not translate into field change requests.

Manual document checks depend heavily on the alertness of the project manager’s alertness. Tired eyes miss a small note on a structural revision sheet regarding grade beam modifications. Automated processing tools do not experience fatigue. They trace document connections across disciplines to surface discrepancies before material procurement starts.

10 reasons why projects face budget overruns

• Defective Design Documents Design errors and omissions can be found during project construction. Examples include situations where a design team member fails to route a mechanical pathway around a structural element. As these errors are discovered, construction work usually comes to a standstill, and the design team is called on to resolve the problem. The design team’s resolution may involve preparing and distributing revised drawings and/or providing special inspector services. Depending on the situation, the corrective work may exceed the services and/or work called for in the original contract and may result in a change order. Prior to construction, problems associated with errors and/or omissions in the design may be identified during design review meetings and would be less costly to correct.
• Unforeseen Subsurface Conditions While site investigations provide essential information about site conditions, unexpected site conditions may still occur. Unexpected site conditions may include groundwater, rock, poor soils, improperly identified utility facilities and other subsurface conditions. Dealing with these conditions may require additional engineering and/or additional control, excavation, and/or stabilization measures. Whether these conditions result in a change order depends on the project contract and allocation of risk. Clear geotechnical investigations and well-defined contract provisions can help project teams better manage this risk before construction begins.
• Owner-Driven Scope Modifications Construction documents are revised throughout the design process based on the input of the design team and the client. As such, minor changes can be anticipated during the construction process. Changes to the tenant improvements can be disruptive if they occur too late in the process. Changes to the improvements can impact several different trades and may require additional work and coordination to complete. Changes to the improvements can occur for various reasons. Sometimes, the reasons for the change are not immediately apparent. To implement a change, the cost and time required must be evaluated.
• Ambiguous Specifications and Conflicting Details Construction drawings and specifications may be contradictory. Specifications may reference a particular material, and drawings may show an alternative or different material. Drawings may reference a given dimension, and specifications may state the same dimension differently. Contractors rely on the plans and specifications when pricing a project, and may interpret the documents in different ways. These discrepancies may remain hidden until the contractor is preparing to install the material in question. It may be necessary to issue a change order to construct the document as intended. Prioritizing the construction documents and resolving document discrepancies during the bidding process can eliminate the need for these changes.
• Gaps in Trade Responsibility Boundaries Change orders can arise when the responsibilities of different trades are not clearly defined. Common examples include penetration firestopping, equipment housekeeping pads, sleeves, controls wiring, access panels, testing, and connections between systems. When neither subcontractor includes an item in its bid, the omission may remain hidden until installation. A detailed scope review during subcontractor buyout can identify these gaps. Subcontractor exhibits define responsibilities and do so effectively. They reduce the number of conflicts throughout a project.
• Regulatory, Code, and Permit Requirements Code requirements, permitting conditions, or authority requirements can sometimes require changes after construction has begun. Problems may arise when an installation does not satisfy an applicable requirement or when project conditions require additional compliance measures. Some situations may include modifying fire protection systems to protect code-compliant assemblies or including monitoring systems to provide life safety. The financial and schedule impacts will depend on the parties’ responsibilities and the project team’s flexibility in allocating work to other trades. Early involvement and communication of the project team with the code and permit officials may assist in resolving compliance concerns.
• Material and Supply Chain Disruptions Manipulation of the construction scope may be necessary due to the unavailability of expected construction materials. Disruptions may be addressed by substituting equipment or construction materials. While substitution is not a change order, the alternatives may have adverse impacts such as increased cost, larger size or bulk, or changes in the performance of the systems constructed. Proactive procurement of long-lead items may allow other items to be substituted.
• Schedule Delays and Acceleration A project schedule can be delayed by many factors, including weather, problems with contract awards, delays in project design and inadequate project coordination. When schedule delays occur, the project owner or the project team may elect to employ schedule compression techniques. Acceleration can involve overtime, additional crews, extended shifts, resequencing, or concurrent work. When multiple trades are working in the same area or performing work outside the original sequence, productivity can decline, and coordination risks can increase. The resulting premium labor, additional supervision, temporary measures, or rework can increase project costs. The contractual treatment of acceleration depends on the cause of the delay and the terms of the agreement.
• Severe Weather Events Extreme weather conditions make certain construction activities, such as excavation, concrete work and roofing, very difficult to carry out. Placing of concrete is suspended during cold weather conditions. Extremely hot or cold weather conditions may affect the construction crew’s working time. In such conditions, the crew may need to protect the recently completed construction work. Economic losses and delays due to extreme weather conditions can be recovered through claims for change orders or other contractual remedies, depending upon the terms of the contract.
• Poor Subcontractor Coordination and Field Communication Trades working in the same area at the same time often result in unexpected conflicts, rework and delays. Drywall crews may cover up access to mechanical systems with several layers of wallboard before mechanical inspections are conducted. If the wall must subsequently be opened, the project incurs additional demolition, material, labor, and finishing costs. Strong coordination meetings, updated drawings, inspection checkpoints, and clear installation sequencing can help reduce these problems. Digital coordination and automated document review can also support teams by identifying potential conflicts before installation.

Prevent Scope Gaps Before Construction

A structured scope-review workflow can help project teams identify documentation conflicts and unassigned work before contracts are finalized.

• Collect the complete document set Upload the latest drawings, specifications, schedules, addenda, and other relevant contract documents.
• Review across disciplines Integrate the architectural, structural, and other pertinent design disciplines, and identify conflicts and dependencies in the integrated documents.
• Identify scope gaps and overlaps Create a scope matrix showing unassigned work, overlapping responsibilities, and items requiring clarification.
• Issue pre-bid clarifications Use the findings to ask subcontractors specific questions and ensure bidders are pricing the same scope.
• Incorporate findings into contracts Update scope exhibits and subcontract documents so clarified responsibilities are documented before work begins.
• Repeat the review after major revisions Significant design revisions or addenda should trigger another review because previously resolved scope issues may change.

Field Coordination Example: Identifying a Foundation-Level Conflict

A commercial office development project encountered a coordination issue during the foundation phase. The structural drawings showed a grade beam arrangement, while the plumbing drawings indicated that a main drainage line, identified as P-04, needed to pass through the concrete structure near Column Line J-14.

Before the concrete pour, the project team used iFieldSmart AI to review the relevant structural and plumbing documents together. The review identified the potential conflict between the grade beam and the planned plumbing pathway.

The issue was then reviewed by the project team, which identified the required sleeve location before reinforcement and concrete placement were completed.

Identifying the conflict before the pour avoided the need to address the penetration after the concrete had cured. The example illustrates how cross-disciplinary document review can help project teams identify coordination issues at a stage when corrective work is generally easier to manage.

Project-specific results and savings should be supported by documented project records where quantitative figures are presented.

Construction Change Order Metrics to Track

Project controls teams can track several metrics to understand how effectively a project is managing scope and change. The appropriate targets will vary by project type, contract structure, complexity, and delivery method.

Measuring metrics allows project teams to identify recurring sources of change and find opportunities to better integrate the work scoped by design, procurement, and construction management teams.

Frequently Asked Questions

What is the difference between a scope gap and a design error?

A design error occurs when the design contains an incorrect or incomplete technical requirement, such as an incorrect dimension or engineering detail. A scope gap occurs when required work is not clearly assigned to a contractor or subcontractor. A project can experience both types of issues at the same time.

Can a subcontractor request a change order for work missing from mechanical plans?

It depends on the subcontract language, incorporated contract documents, scope descriptions, and document-precedence provisions. If the work falls outside the subcontractor’s defined contractual scope, the subcontractor may have grounds to submit a change-order request. The contract documents should be reviewed before determining entitlement.

How can AI-assisted document review support bid leveling?

AI-based document review systems can extract project information from drawings and other project documents, and synthesise that information by trade. Estimators can use this information to prepare bid packages for subcontractors’ scope of work and identify any gaps or discrepancies in the packages.

What role can digital coordination tools play in reducing field clashes?

Digital coordination tools can combine information from multiple disciplines and help teams identify potential geometric or system conflicts before installation. BIM-based clash detection, for example, can identify physical interferences between modeled building systems. The effectiveness of the process depends on the quality and completeness of the underlying models and information.

How often should teams perform a scope gap analysis?

A scope gap analysis should be performed during preconstruction and repeated when significant design revisions, addenda, or scope changes are issued. Major changes can introduce new gaps or alter previously established trade responsibilities.

Conclusion

Construction change orders cannot be eliminated from every project, but many document- and scope-related changes can be identified before they reach the field.

Effective use of the preconstruction period to complete a thorough review of the project documents can help the project team to resolve a number of issues, including trade responsibilities, omissions in the project scope, and other construction document coordination issues. It can also help the team address changes in the project scope resulting from architectural and engineering design revisions.

Using Artificial Intelligence (AI) to assess project documentation can also help the project team identify and prioritise issues requiring further analysis and resolution.

Rather than simply striving to electronically process project documents in less time, the aim should be to identify and analyze potential construction scope, coordination and change issues to help avoid or minimize costly surprises to the project team and the end user.