From PCO to executed change order: the lifecycle owners should track

The executed change order total on the pay application is the number everyone reports. It is also the least useful number for an owner who wants to know where the project is heading. By the time a change is executed, it has been known for weeks or months.

Every change passes through a series of states. A good owner's register records each one with a date, so the owner can see not just what has been signed but what is coming. This post walks through those states and what each one tells the owner.

The states, in order

Names vary by contractor and platform. The underlying sequence is the same on nearly every CM at risk project.

Identified

Someone has raised a condition that may lead to a change. An RFI response, a field discovery, an owner request. There is no price yet. The owner should log it anyway, with the discovery date, because this is when the notice clock starts.

Potential change order

The contractor has submitted a PCO with a rough or detailed price. The owner's register should carry the contractor's number and, separately, the owner's own estimate if it differs. Many PCOs never become change orders. They are withdrawn, absorbed, or rejected. But while open, each one is exposure.

Under review or in negotiation

The owner's representative and design team are checking scope, quantity and pricing. The cause should be settled in this state if it was not already. This is where the number moves most, and the owner should record each revised amount with a date rather than overwriting the last one.

Approved, not executed

The owner has agreed in principle, often by signing a change order request or issuing a directive so work can proceed. The formal change order has not been signed by all parties. The contractor may already be doing the work. This state is real cost that has not yet touched the GMP.

Executed

All parties have signed. The GMP is adjusted. The schedule of values on the G703 gains a line or an adjustment. From here the change is billed through pay applications like any other work.

Billed and paid

The change appears in work completed on the G703. The owner's ledger should be able to show how much of each executed change has been certified and paid, so that executed but unbilled work is visible too.

Why the owner needs every state, not just the last one

An anticipated final cost that counts only executed change orders is wrong on the day it is written. The right figure adds approved but unexecuted changes at their agreed value, open PCOs at a weighted or owner estimated value, and identified items at whatever rough allowance the owner thinks is prudent. Each of those layers comes from a state in the register.

Consider a fictional $52 million hospital outpatient building. The pay application shows $1.1 million in executed change orders. The owner's register shows another $640,000 approved and waiting for signatures, $900,000 in open PCOs, and eleven identified items with no price. The board has been told the change order total is $1.1 million. The owner's representative knows it is closer to $2.5 million. Both statements come from the same project. Only one of them is useful for a decision.

Dates are the part most registers skip

A state without a date is a label. A state with a date is a record. The owner should store the date each change entered each state, because those dates answer questions that come up later: how long PCOs sit before a decision, whether notice was timely, how far behind the contractor's billing is on executed changes, and whether the review backlog is growing.

Registers kept in a spreadsheet usually have one status column that gets overwritten. The history is lost each time. An owner's ledger that stores every state transition, with who made it and when, keeps the history by default. Costwitness is built that way, with the lifecycle on the owner's side and the states feeding straight into the anticipated final cost.

In the product

Change order register, Anticipated final cost, Monthly owner report. Free tool: Change Order Exposure, Pre-GMP Readiness Score.

Keep reading

Earlier: Unforeseen conditions: what the contract says about who pays. Later: Notice deadlines: the clock that nobody on the owner's side is watching. All articles on change orders.