Making Money with Change Orders

Brian Hoffelder and Derrick Delliquadri provide guidelines and best practices for creating change orders on electrical construction jobs. Brian uses Electrical Bid Manager, electrical estimating software, to provide specific examples and best practices.

[@pittkid32]

For material issues for the target pricing I use a 5 to 10% mark up in the job extensions price factors. So the customer sees a slightly higher price but it is easily explainable. I often tell them that the original job was quoted under a certain price based on current EPIC pricing and that our pricing is updated monthly and the price increase is through EPIC not me. Often times from the bid process, to the award of the project, to the first change order enough time has passed that an increase in material costs is more than reasonable. They do not see that 10% increase when marked up that way only a higher cost and only if they have something to compare it to previously. I also us the excuse if they are comparing pricing from Home Depot etc that it is not an accurate comparison because Home Depot does not deliver to the site for free and in addition for something like EMT conduit etc Home Depot discounts that item but increase fittings pricing by hundreds of percentage. If they have pricing from large contractors I usually state that they have a large discount because they do more volume than I do to explain a price difference.

[@Visioninfosoft]

Thank you for sharing your strategies! EPIC Pricing is a great service to leverage for just that purpose. www.visioninfosoft.com/electrical-material-pricing/

[@Jeremiah9909]

How would you do a change order pricing when you have to credit one item and then add another. You would't what the higher pricing on the credited items.

[@Visioninfosoft]

This is always the dilemma. If you try to get higher prices on additional work for change orders, the customer might expect that you will give them the same pricing when they want credits. The primary arguments for higher change order related prices is that additional work has to be priced higher than the values used in the bid because 1. you have to compensate for the fact that changes impact productivity 2. additional material purchases may not be available at discounted bid rates 3. and because it may not be possible to do changes with the same crew mix of apprentices to keep the overall rates down. It's not an easy case/argument to make. If the Electrical Contractor is relatively sure that there will be more additions than credits, he may have to bite the bullet and do the credits at higher rates. - Brian Hoffelder