©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 1 Business Services, Inc.

Session 4-6

Friday, October 13 10:15am – 11:45am Room 619

Session 4-6

Sage 100 Contractor Change Order Management

Presented By: Kathy Gotzenberg

Construction Business Services, Inc. kgotzenberg@cbs-solution.com

Credits/Revision History

• Original Author(s): Kathy Gotzenberg • Revised Date: 10-01-2017 • Major Revisions Include:

o o

©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 2 Business Services, Inc.

Sage 100 Contractor Change Order Entry Screen 6-4-1 • Change Orders have 2 components: Prime Change Orders and Budget and Sub Change Orders • Depending on the type of change work being performed, change orders can be entered that alter

the job budget, contract (proposal), or subcontracts, or any combination of the three • After work begins on a contract, any changes to the budget or contract (proposal) should be

entered in this window • When changes are approved, Sage 100 Contractor reflects the changes to cost codes in the

contract and job cost reports, but the original budget and contract (proposal) remains unchanged • Change orders are closely integrated with subcontracts, providing more control over contracts and

invoicing by providing accessible information • An A/R Invoice or Purchase Order can be created from approved prime changes • The Change Order window supports Attachments and Routing

Budget and Sub Change Details Tab

• Changes will almost ALWAYS impact the budget for a project, so best practice to start with this tab first

• To change the budget or a subcontract, enter the changes in this tab • Example: Job 215 – Plans were incorrect, which will entail moving the location of already installed

electrical service, adding a water downspout, and painting area where electrical service was previously located. This will have an impact on 2 existing subcontracts, and incur costs for painting.

©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 3 Business Services, Inc.

• Grid information will be as detailed as budgeted cost codes/cost types impacted • When Change Order status is marked 1-Approved, Budget Hours and Amounts will be increased

on various job cost reports

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• Provides opportunity to adjust impacted subcontracts and issue Subcontract Change Order from

Menu 6-4-3 Print Subcontract Orders o Change # and Status on grid line are specific to the referenced Subcontract o Reference Subcontract Line to increase specific line item on Subcontract OR leave line

blank to append as new line on Subcontract o When line item Status is marked 1-Approved, Subcontract amounts will be increased on

various subcontract reports

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Prime Change Details Tab

• To change the contract (proposal) amount on a project, enter the changes in this tab • Grid information will be as detailed as required by contract specifications

o Estimated, O/H Rate and Profit Rate are NOT required • Cost Code and Cost Type are required, and impact job proposal or importing into Progress Billing

Menu 3-7 and Loan Draw Request Menu 3-8

©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 6 Business Services, Inc.

©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 7 Business Services, Inc.

• Change Order designs for Requested and Approved

o Requested forms bring in amounts from Requested field on Prime Change Order Tab o Approved forms bring in amounts from Approved field on Prime Change Order Tab

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• When Change Order status is marked 1-Approved, contract amount will be increased and

reflected on various project management reports

• Delays Approved have no impact on Menu 10-3 Schedules; adjust manually

©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 9 Business Services, Inc.

Factors that Establish a Change Order

• Design Modifications • Errors and Omissions • Changed Conditions • Additional/Reduced Conditions • Owner-Directed Schedule Acceleration or Slowdown • Work Sequencing • Adjustments to Unit Pricing • Force Majeure Delays • Added Cost Incentives • Delayed, Denied, or Restricted Access to a Project Site • Inappropriate Rejection of the Contractor’s Work • Delays to Owner-Supplied Services and Materials • Internal Budget Changes • Cross Charge/Back Charge to Subcontractor

©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 10 Business Services, Inc.

Change Order Billing Options

• Directly from Menu 6-4-1 Change Orders o Status must be Approved to activate Invoice option o Invoice created at Menu 3-2 Receivable Invoices/Credits for final review and save o Invoiced field on Change Order automatically filled in with date

©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 11 Business Services, Inc.

• Menu 3-7 Progress Billing or Menu 3-8 Loan Draw Request – Update Change Orders

o Add to Existing Lines will use Cost Code information from Prime Change Details Tab o Append as New Lines will add full value of Change Order as separate line on the grid o Can use one Update option or the other, but not both o Can also manually enter value of Change Order in Changes column

• Menu 3-10 – Time & Materials Billing o For extra work that is completed on a T&M basis at unit rates and markups for overhead

and profit o To segregate and compute costs specific to a T&M Change Order, consider setting up a

Job Phase at Menu 3-5 Jobs, and include the phase on all cost records

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©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 13 Business Services, Inc.

• Change Order Request

o Create Custom Form Design Menu 6-11-2 Request for Information or Menu 6-4-1 Change Orders

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©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 15 Business Services, Inc.

CHANGE ORDER BACKLOG

• Advantageous to both owner and contractor that potential change orders on a project are processed in a fair, equitable and timely manner

• A significant amount of change order backlog, in terms of quantity and value, is indicative of a project that is in trouble

• Actively monitor change orders in Sage 100 Contractor: o Activate “Hot List” checkbox on change order record until resolution

Menu 6-12 Project Work Center Menu 6-11-9 Project Hot List

o Menu 6-4-1 – Create a Query o Menu 7-6 Alerts Manager o Dashboard

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©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 17 Business Services, Inc.

CHANGE ORDER PROCEDURES AND RECOMMENDED PRACTICES Changes often have a major impact on the success of projects. The procedures that are defined for change management in the general conditions sections of most construction contracts address the steps to take following the initiation of a Change Order. However, these guidelines do not normally identify the requirements for managing the change and its impacts. Items that should be considered as part of a project’s Change Order procedure include the following: • Written contracts, agreements, procedures, and roles and responsibilities should be established and

accepted during a project’s early phases. Difficulties and issues may arise that may affect the execution of the work if these documents are not in-place.

o Menu 6-9 Proposals - Not much in the System Proposals; use form design to design your own o AIA Documents o Use Attachments at Menu 3-5 Jobs to link to documents

• Anticipate that changes will inevitably occur on a project and plan for it accordingly. If the necessary

steps for managing changes are not taken, the Change Order process will not be managed well and the project will suffer.

o Educate field personnel on change order process o Have blank forms available in field for use

• Attentively monitor the trending of the project’s design progress. At the completion of the work

related to the design, it is important that the owner initiate and communicate a “freeze” of the design. Any revisions to the established scope of work will be measured against this baseline for the design.

o Menu 6-11-5 Plan Records

• During the design and pre-construction phases of the project, identify areas of uncertainty and areas lacking fully defined scope. Evaluate the risks that may be associated with these areas.

o Menu 6-11-2 Requests for Information

• Conduct constructability reviews and institute a value engineering program to assess the feasibility of the project’s design and defined work scope.

• Introduce changes as early as possible during a project in order to help minimize the impact of the

change. Comparatively, it is more cost effective to include changes early in a project than to wait until the later stages of the project.

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o Menu 6-11-2 Requests for Information or Menu 6-4-1 Change Orders

• Fully define the work scope for each change in terms that are understood by all parties. This clear and

concise definition helps to reduce confusion or the misinterpretation of the requirements of a change by the parties.

• Avoid delaying the approval of changes that will ultimately be approved. This tactic results in the

changes being pushed to later in the project where they become more costly to implement. It is a misconception to believe that the issues related to Change Orders resolve themselves.

• Authorization for a change should be mandatory before implementation, regardless of the type of

agreement or contract. Authorization should be timely and decisive.

• In advance of releasing the project design and bid package documents for tender and construction, ensure that the documents are complete and fully definitive.

• Establish a comprehensive system for budget and schedule baseline control.

o Menu 6-2 Budgets – Set Budget o Menu 10-3 – Set Original Schedule

• Process, approve, and execute Change Orders in a timely manner to avoid disputes and claims that

may affect the progress and completion of the project.

• Do not proceed with the work for Change Orders without authorization and avoid verbal

authorization.

• To avoid confusion and misinterpretations of the work scope and requirements that are defined for

Change Orders, work to ensure that the packages for each change are complete. Actively follow up with the parties involved and solicit any questions or requests for clarification.

• Define and establish a detailed change management process for the project that is part of the design

plan and procedures for the project.

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©2017, Construction Rev. 10/01/17 Session 4-6 Sage 100 Contractor Change Order Management - 20 Business Services, Inc.

Acknowledgements and Recommended Reading

• Effective Change Order Management by James M. Bolin, Long International, Inc. o http://long-intl.com/articles/Long_Intl_Effective_Change_Order_Management.pdf

• Construction Industry Institute, “Project Change Management”, Special Publication 43-1, November 1994, p. 29