Requesting Design Change Orders When you Underestimated Work 2

[rockman7892]

Finding myself in a situation where I’m half way through design process of developing design drawings and realized that I significantly underestimated work.

Looking for advice on how to potentially approach customer for change order when I underestimated work and complexity of work.

There are some examples I can point to where work was a bit more involved and complex than I first thought however the majority of overages were based on underestimates on my part.

Looking for advice from anyone who has been successful with getting change order from customer when being transparent with the fact that you underestimated work.

 

[SWComposites]

Tough one.
How good is your relationship with the customer?
How bad do you want to retain this customer?
Did you take the contract as fixed price or hourly rate with an hours estimate?
What percent of total cost would your over run be?
Are there specific things in or not in the SOW that you could point to as unclear or undefined?

 

[GregLocock]

Sounds like you need a contract lawyer.

I have heard that a project that was underbid had the team develop some (significant and important) improvements to the original project, then show them to the customer. The customer says - I want that, change order goes through, original underbid is corrected.

Cheers

Greg Locock


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[CWB1]

IME the only challenge bigger than convincing management or a customer to continue funding a project that's over budget is convincing them that your revised budget is realistic when your original was not.

 

[IRstuff]

Those "get-well" DCOs worked great until the customer got too annoyed at Boeing on FCS. We did pretty well with the "contract termination" costs too, though.

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert!

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[phamENG]

Is this an underestimate on a $5k contract or a $500k contract?

Broad strokes:

If they gave you a basis of design to set the scope and that basis hasn't changed, it's your problem and your cost to bear.

If they have you a basis that didn't adequately describe the the actual design and the scope was wrong sa result, it's back to negotiating.

I've had both happen more than once. It's great when an architect asks for an estimate for a "4000sf house, rectangular layout, pretty basic". Drawings arrive and it's an 8000sf mansion with zero structural efficiency and a roof layout from hell. They expect me to do it because they already gave my estimate to the owner. Too bad.

 

[LittleInch]

Time to read the contract in fine detail to see what your liability is if you just default on the contract, i.e. just stop work.
Also look at the definition of what you are bound by contract to supply and deliver that and only that, not any extras you would usually throw in?
Was the scope well defined and you just screwed up?

Only then do you know how far to push the conversation and be prepared for the argument that you wouldn't have given them money back if you had OVER estimated the job would you??

But if the potential downside is quite low then you have the option to approach them and start some sort of conversation along the lines of you've screwed up the cost and if you continue to do the work you'll go bankrupt and they won't get any designs and have to start again hence pay me 50% of the difference so you break even.

Or if the penalties / issues with them suing you are too intense then can you complete it and write it down to experience?
Are you anticipating any extras where you can gild the lily and make up some of the shortfall? Most people don't mind paying more for something extra, but really don't like the cost increasing just because you made an error.

Will you actually loose money or just not make any?
Do you have external costs you can't avoid?

The answers to the questions raised by others would help everyone understand the magnitude of what you're facing.

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

 

[RVAmeche]

Is it time & material work or lump sum? Did you miss something in the RFP docs or was the scope/docs not clear and now that you're getting into it you realize the true effort?

In my job change orders are a common fact of projects. It's always a balancing act of eating things where you can and asking for money when needed as well as negotiating with the client on contentious items.

 

[XR250]

I've had both happen more than once. It's great when an architect asks for an estimate for a "4000sf house, rectangular layout, pretty basic". Drawings arrive and it's an 8000sf mansion with zero structural efficiency and a roof layout from hell. They expect me to do it because they already gave my estimate to the owner. Too bad.

LOL, I have a few architects who are notorious for this. They always say, "it's an easy job". I know now to double or triple the estimate on these.

 

[dik]

You can explain the problem to your client and hope he understands and is forthcoming... else, legally, you may be SOL.

-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[alchemon]

As stated, you need to carefully read the contracts. Specifically, you should focus on the "exclusions and clarifications" that I hope, for your sake, was included.

Once you do that, ask yourself, am I doing anything out of scope. If yes, just be upfront with your customer/client and say per exclusion, blah I did not include this or only budgeted this amount.

If you have no exclusions/clarifications - this might be an expensive lesson for you to learn why they are valuable. If you don't, I'd be open and upfront with the customer and say that you are experiencing more work than expected. You should try to come up with a legitimate reason that isn't "because I didn't bid the job correctly". Maybe you can explain why things are more work than you thought and explain how it would be reasonable for you to have concluded that when you proposed. Is there another example, similar project that you could use? If so, explain how this is different, and how you couldn't have known when pricing the project.

 

[LittleInch]

Within this forum the OP has started 4 posts but never replied to any of them....

So we'll never know the answers to our questions.

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

 

[LOTE]

I agree with GregLocock. Try to find a way to bring value/ improvement to your client beyond the original plan and bill for that. Make it a win win for you and the customer.

 

[glass99]

There is usually a way to communicate this to the client and frequently they will respond. You are working with deep shades of grey and a lot of unknowns at the time of offering them a price and most clients actually understand that to an extent. Tell them the ways in which things are more complicated than when you bid, and tell them the ways in which you will have to service the job in a more minimal/crappy way if you are forced to stick to your original fee. For example the kind of thing I say is I will have to leave a lot of things undesigned and up to the contractor to figure out which will leave the client more expose to bigger change orders down the pike. Usually your contract does not specify exact levels of service, and there is a wide range of "reasonable" levels of service in the industry. You will (typically) not be able to "demand" extra fee, but with some sweet talking you can minimize the pain.