Dental project cost overruns: understanding the ‘change order’

July 1, 2010
Those who have built a new dental office probably experienced pitfalls that had they known otherwise, they could have avoided.

Jeff Carter, DDS, and Pat Carter, IIDA

For more on this topic, go to www.dentaleconomics.com and search using the following key words: dental office design, dental office construction, Dr. Jeff Carter, Pat Carter.

Those who have built a new dental office probably experienced pitfalls that had they known otherwise, they could have avoided. Unfortunately, looking back over one’s experience without understanding what happened perpetuates the problems for others as you warn your colleagues to brace themselves for the same.

Project cost overruns are a top concern for dentists with little understanding about how they contribute to these. It is time to learn, starting with a primary cost trigger — the change order (CO).

As the name implies, the CO is a general contractor’s (GC) pricing response to an unforeseen change in your project. And because it signals a cost add to your project, it is a primary source of adversarial positions between you and the GC during construction. An aggressive GC may threaten to stop work if not paid, and you may unwittingly insist that unknown conditions are covered by an original price quote.

Both sides are working to protect their interests. Your GC wants to be compensated for work that expands beyond the original scope of work, and you want your project to be completed at the originally quoted price.

If you really want the original price of your project to be the final cost, then you must understand how you trigger change orders for your project.

1) If it isn’t in the drawings, then it isn’t in the original price. It will therefore be added to your final cost by the end of the project.

Experienced GCs will price and build projects from almost any level of drawings, because to be successful they must continue to build projects and be profitable doing so. Therefore, when pricing your project, GCs will identify costs based on the information given and not presume additional costs that scare you away from the project. Items shown in the drawings will be in the price.

Items not in your drawings are either given an allowance (e.g., flooring not selected) or are not included in the price. During construction, if things are clarified and are not in the drawings, then the GC has a legitimate reason to trigger a CO. Keep in mind that you triggered the CO with drawings that did not fully describe your project.

To avoid this: At time of pricing, provide your GC with a complete set of drawings that fully describes the design and construction intent for your project.

2) You approve change orders when you make changes on-site.

Your GC wants you to be pleased with the project. So, when you answer questions or request changes during your construction site visits (e.g., clarifying what a material will be or moving an outlet), the GC assumes you know you made a change that could add cost to your project. You may assume you simply clarified what you wanted at no additional cost. In fact, you inadvertently trigger COs by becoming your own project manager (PM).

To avoid this: As the owner, you have every right to observe the progress of your project’s construction; however, answering questions on-site sets you up as a target for cost overruns. Any concern or issue you observe on-site should be discussed with your Architect of Record (AoR) or PM, with the request that any cost to resolve an issue should be approved by you before the work is performed.

3) A change order involves an approval process.

A GC is typically obligated by contract to have work approved prior to performing the work when it is different from the drawings or may add cost to a project; however, dental projects often advance without any agreement about how COs will be handled. The assumption is they just happen and you are obligated to pay the CO invoices issued during construction because they exceed the original price quotes. At its ugliest, you could pay out the entire construction loan amount and discover you still face another 20% to 25% balance to finish the project.

To avoid this: Before construction begins, establish in writing that all COs will be submitted in writing and approved by your AoR or PM prior to any work performed. This adds time to changes but avoids unexpected costs and tells the GC that any work performed without prior approval is a legitimate reason for you to deny payment.

The best project outcomes are those that meet your design, quality, and cost expectations. Understanding and avoiding typical owner missteps that add cost to your project can make that “best project” a reality.

Jeff Carter, DDS, and Pat Carter, IIDA, are owners of PDG- Practice Design Group. Located in Buda, Texas, PDG offers a full range of design and consulting services to dentists nationwide. For information, call (800) 511-7110 or visit www.practicedesigngroup.com.

More DE Articles

Sponsored Recommendations

Clinical Study: OraCare Reduced Probing Depths 4450% Better than Brushing Alone

Good oral hygiene is essential to preserving gum health. In this study the improvements seen were statistically superior at reducing pocket depth than brushing alone (control ...

Clincial Study: OraCare Proven to Improve Gingival Health by 604% in just a 6 Week Period

A new clinical study reveals how OraCare showed improvement in the whole mouth as bleeding, plaque reduction, interproximal sites, and probing depths were all evaluated. All areas...

Chlorine Dioxide Efficacy Against Pathogens and How it Compares to Chlorhexidine

Explore our library of studies to learn about the historical application of chlorine dioxide, efficacy against pathogens, how it compares to chlorhexidine and more.

Enhancing Your Practice Growth with Chairside Milling

When practice growth and predictability matter...Get more output with less input discover chairside milling.