Construction Industry veterans know that for
some contractors, the real profits are in the "change orders". In order to
win a bid, some contractors low-ball their initial estimates, and plan to
make it up with by adding on the additional work that is discovered once the
project gets underway.If you are a construction customer, monitor your
contractors very carefully. Watch to see if some contractors, especially the
one who come in with real low bids, seem to have more change orders than
other contractors. That can be a problem. Some construction customers even
throw out the lowest bids to prevent those types of problems.
Miami University has complained in writing about Buckeye Electric and
their games regarding change orders. Richard M. Engle, Director of Miami
University’s Physical Plant Department wrote to Donald Welsch of the State
Architect & Engineer Office with the following concerns:
"At the time the outside lighting was revised at the Communications
Building and a different fixture was selected by the Architect, they
(Buckeye Electric) attempted to again substitute another make. In the
course of developing the change order, we were advised by the supplier
of the fixtures that Buckeye had told them that they were to withhold
the actual true prices of the fixtures… so that they, Buckeye, could
make an unreasonable profit on the change order. We were able to
determine the true cost of the fixtures specified and were also able to
accurately estimate the contractor’s (Buckeye’s) costs of labor and
miscellaneous material required… When we received the prices from
Buckeye for this change order, the total price was more than double our
calculated costs, and… Buckeye had shown their fixture costs much higher
than actual…"
Mr. Engle concluded his letter to the Office of State Architect &
Engineer by stating that, " Buckeye Electric continues to be uncooperative
and extremely difficult to work with on scheduling of work and coordinating
with other contractors and the engineers."
While this letter may be somewhat dated, the fact still remains that
Buckeye Electric’s reputation for dealing with change orders is not good at
all. Customer service is very important in the construction industry, like
other industries, and as the customer you should feel like you are being
treated with respect. Does this kind of attitude that Buckeye has on change
orders give you, the customer, the respect that you deserve?
Even after this exposure of Buckeye’s manipulation of change orders, some
of Buckeye’s jobs have continued to feature change orders. The Emergency
Operations Center job in Columbus, Ohio for the Ohio Division of Public
Works was one of Buckeye Electric’s prominent jobs. Even so much that
Buckeye Electric touts that job in their advertising literature. But
Buckeye’s work on the Emergency Operations Center was riddled with change
orders. On one small bid package, Buckeye picked up an extra $343 for
repairing some damaged conduits. Then the grounding systems had to be tied
together, for an additional $2,193. In other words, those two change orders
amounted to another 5% of the original bid. No one is accusing Buckeye of
deliberately underbidding these jobs or inflating those costs, as Miami
University accused Buckeye of doing, on an earlier job. But Buckeye did bid
only $45,000 on a job that was estimated at $74,872.
During later work on that same project, Buckeye Electric bid over $2.8
million for the additional work. Along with the additional bid work, came a
flood of change orders for Buckeye. Buckeye received another $24,466 in
change orders for modifications to the lighting switch systems, the addition
of night-lights, and modifications to the flagpole lighting, which by itself
was another $4,889. (Change order #108 and #109-405)
Another change for electrical consumption added $823 (change order
#90-405). Replacements of lamps and ballasts and power to a fuel tank,
tacked another $2,585 onto the job’s costs (change order #097-045). Then
there was the addition of the sound system work for another $22,628 (change
order #100-045). Then somebody damaged the projection screen during the
construction job. That repair work totaled another $2,304 (change order
#105-405).
The operations room lighting modifications racked up another $16,720
under change order #103 and #104-405. A new exhaust fan cost another $386.
Reprogramming the fire alarms cost $544. Buckeye added on another $4,491 for
working on the smoke detectors, air compressor and fluorescent lighting work
(change order #88-405).
Buckeye really scored when they won the change order for the badge and
access control system, which cost a tidy $43,049. Some remodeling work came
available then adding $4,561 to Buckeye’s income (change order #081 and
089-405). Another eight change orders totaled $60,181 (change orders
#61,72,76,77,78,80,84, and #85-405). At this point, Buckeye had picked up
another $181,000 in change orders or 10% in income over their original bid.
Many of the change orders came at the State of Ohio’s request. These many
examples show in great detail how change orders can drive up the costs of a
construction job and enrich the contractor.