Changes in work can spark at any time for many reasons on any development. From design changes to unforeseen conditions, you really need to stay on your game! It is important to know how to navigate through these many scenarios, especially if you are involved in a project involving a public financing component (i.e. reimbursable cost element). Below are some change order handling best practices and tips that have led to successful reimbursement efforts, but first – let us dive into what a change order is.
A Change Order is typically a written agreement between an Owner of a project and the general contractor that involves a changed condition (field and/or contract) to the executed contract. Change orders can add to, delete from, or otherwise alter the work set forth in the contract documents at the time that the construction contract was bid.
Scenarios of when a change order may take place:
- Drawing Errors and/or Omissions
- Design Changes
- Unforeseen Conditions
Change Order Best Practices for Successful Reimbursements:
Organization / Document Control
- Gather and include all needed backup material (Signed Tickets, Field Memos)
- Attach any detail to the change order (contractor field tickets, signed field memos, inspector memos, etc.) as this will assist the lead jurisdiction in understanding the reasoning for the adjustments under consideration for reimbursement.
Jurisdiction Review / Approval
- Discuss significant proposed changes with the Jurisdiction’s fund management prior to authorization
- Get staff members engaged and involved in the process so they can review and put forth consideration to the changes. This limits any end of project “surprises” when conducting the formal credit validation or reimbursement review
Understanding the Financing Program / Agreement Type
- Examine the project change orders to identify any eligible (and non-eligible) items for your project’s related financing programs (i.e. TUMF (Transportation Uniform Mitigation Fee), Community Facilities District (CFD), and Development Impact Fee (DIF). Each program may have different views on reimbursement eligibility of change orders
- Avoid putting line items together in “Lump Sum” format when possible – we recommend using real unit prices and quantities. Lump-sum items prove difficult to identify which elements of the work can be attributed to a funding program as some projects may incorporate several
- As shown in the example provided, the line items have been allocated to the specific funding sources creating alignment for the project’s accounting and a distinct presentation for eventual reimbursement efforts
Murow Development Consultants’ services enhance the management and administrative practices of any project. To learn more on our Credit & Reimbursement division, please visit https://murowdc.com/services/post-development/
Blog Written By: Christian Gagne, Director of Reimbursements and Agreements
Comments or Questions? Please feel free to contact Christian at firstname.lastname@example.org