How Should a Medical Practice Review Construction Change Orders?

A medical practice should review a construction change order as a business decision, not just as a price. The owner needs to understand what changed, why it changed, whether the work was already included, how the amount was developed, what happens to the schedule, and whether the change affects design, equipment, landlord obligations, financing, or opening readiness. A signed number without that context can make the project budget impossible to manage.

The goal is not to reject changes automatically. Renovations involve unknowns, owner decisions evolve, and design coordination can reveal legitimate additional work. A disciplined owner-side change order review process distinguishes legitimate scope changes from avoidable ambiguity and gives leadership enough information to authorize, negotiate, defer, or redesign the work.

Step 1: Identify the Change Event Before Reviewing the Price

Every change should begin with a clear event statement. Examples include an owner-requested revision, a concealed existing condition, a design clarification, a code or authority comment, a landlord requirement, an equipment change, a material substitution, schedule acceleration, or a contractor-requested correction. The category matters because it determines which documents and participants to consult.

A change labeled "additional electrical" is not descriptive enough. The project team should be able to state what electrical work was added, which drawing or requirement changed, when the issue was discovered, and what triggered it. If the event cannot be described in one or two precise sentences, the pricing may be premature.

Maintain a change event number from the first notice, even before a formal change order exists. This allows the owner to track potential exposure while design and pricing are still developing.

Step 2: Reconstruct the Original Scope

Before deciding whether work is extra, compare the proposed change with the contract, drawings, specifications, addenda, accepted proposal, allowances, alternates, RFIs, submittals, and pre-award clarifications. The objective is factual: what did the contractor agree to provide at the time of award?

This is where scope discipline pays off. A vague original proposal makes later evaluation harder. A well-documented construction delivery package gives the owner a better baseline for change review.

Do not make legal conclusions informally when the issue involves contractual entitlement. If the contractor and owner disagree about whether work is included, counsel and the design professional may need to review the relevant documents. The owner's representative can organize the record and quantify the business impact without replacing legal advice.

Step 3: Separate Quantity, Unit Cost, Labor, Markups, and Credits

The owner should understand how the proposed amount was built. Depending on the contract, a change may include subcontractor quotes, labor, material, equipment, general conditions, overhead, profit, bond/insurance effects, taxes, and other agreed markups. A complete review also looks for credits when work is deleted or replaced.

If a wall moves, for example, the change may add framing and electrical work while reducing work elsewhere. If one finish is substituted for another, review the net difference, not just the cost of the new material. If a piece of equipment changes, separate the owner's equipment purchase from the contractor's added rough-in or connection work.

The point is not to force every change into a unit-price audit. It is to make sure the owner knows whether the amount is lump-sum, time-and-material, allowance reconciliation, or another pricing method and whether the supporting detail matches the contract.

Step 4: Evaluate the Schedule Impact at the Same Time

A low-cost change can be a major schedule problem. Ask whether the change affects design, permit revisions, fabrication, long-lead procurement, inspection, sequencing, access, or owner-vendor work. Determine whether the contractor is requesting additional time and whether the change moves a milestone or simply uses available float.

The owner should also evaluate its own schedule consequences. If construction moves one week, does equipment installation move? Does a lease commencement date or rent obligation remain fixed? Does the lender draw schedule change? Does the practice have a move date, staff onboarding, marketing launch, or operational commitment tied to the opening?

A change order decision should present both money and time. Treating schedule as a note at the bottom of a cost form understates its business effect.

Step 5: Check Contingency Before Approving the Change

Project contingency is not free money; it is a risk reserve. When you approve a change, classify it as construction contingency, owner contingency, a landlord allowance, an equipment reserve, or another budget category. The correct structure depends on how the project budget was established.

Track the original contingency, approved uses, pending exposure, and remaining unallocated balance. Leadership should be able to see not only that a project is "within budget" today but how much protection remains for unknowns still ahead.

This is why medical office construction costs should be managed as a total project budget rather than a single contractor number. A construction change may also trigger design fees, equipment changes, financing effects, or other owner costs that do not appear in the contractor's proposal.

Step 6: Require a Decision Package, Not an Email Thread

A useful change order package can be concise. It should include:

This format allows an executive who did not attend every coordination meeting to understand the decision. It also creates a defensible project history for lenders, auditors, partners, and future disputes.

Step 7: Distinguish a Proposal From an Approved Change Order

Potential changes often begin as estimates or proposals. The owner should define when the contractor is authorized to proceed. Emergency conditions may require immediate action under the contract, but routine work should not become a completed extra before the owner understands the cost.

The AIA G701 Change Order is one industry example of a formal document that modifies the contract sum, time, or both. Projects may use different forms, but the control principle is the same: distinguish notice, pricing, negotiation, approval, and incorporation into the contract.

Track pending changes separately from approved changes. A project with $100,000 in approved changes and $400,000 in unresolved potential exposure is not in the same position as a project with no pending issues.

Step 8: Review Cumulative Patterns, Not Just Individual Changes

A single change can be reasonable, but the overall pattern may indicate a management problem. Group changes by cause each month. Are owner revisions driving the majority? Are repeated design coordination issues appearing? Are concealed conditions concentrated in one building system? Are equipment decisions arriving late? Are landlord requirements being discovered after permit?

Trend analysis helps the owner intervene. If equipment changes are repeatedly affecting electrical work, freeze the equipment schedule earlier. If landlord comments are creating redesign, add an earlier landlord review milestone. If concealed conditions dominate, increase targeted investigation before opening additional areas.

The change log should therefore be both a financial record and a feedback system.

Step 9: Connect Changes to Construction Draws and Financing

Approved changes should flow into the schedule of values, forecast, and lender reporting where applicable. A lender may require evidence that the revised project remains fully funded or may require approval before financing certain changes. Requirements vary by lender and loan structure, so the owner should follow the actual financing documents rather than a generic rule.

The AIA G702/G703 payment forms illustrate a common industry approach in which contract status, previous payments, retainage, change orders, and current payment are reflected in progress-payment documentation. Even when a project uses different forms, the owner should reconcile the approved change log with every payment cycle.

Unapproved changes should not quietly appear as billing line items without explanation. The owner-side team should understand what has been authorized and what remains at risk.

Step 10: Close Each Change Completely

A change is not finished when the price is signed. Confirm that revised drawings or sketches are issued as needed, submittals reflect the new scope, procurement is updated, the schedule is revised, the budget forecast changes, and affected owner vendors are notified. At closeout, ensure the as-built record reflects the installed condition.

For equipment-related changes, update the equipment matrix and utility requirements. For landlord-related changes, retain the approval. For regulatory comments, preserve the design-team response and approved documents. This reduces confusion when the same issue resurfaces months later.

A Five-Minute Executive Test Before Approval

Before leadership approves a change, it should answer: What changed? Why is it not in the original price? What does it cost net of credits? What happens if we do not approve it? Does it change the schedule? Which budget reserve pays for it? Who has reviewed the technical basis?

If those answers are clear, the owner can decide in a timely way without becoming the estimator or designer. If they are not clear, the project team has more work to do before asking for authorization.

Change orders are not inherently evidence of a poorly run project. What matters is whether the owner can see the cause, cost, time, and cumulative effect. A structured review process protects decision quality, keeps the forecast current, and turns every change into information the team can use to manage the rest of the project more effectively.

Review Design Changes Before They Become Construction Changes

The least expensive change order is often the one resolved before field work begins. During design and submittal review, track decisions that can change quantities, equipment, finishes, utilities, or layout. When an owner request is still conceptual, ask the design team to describe the likely downstream effects before authorizing redesign. When a contractor identifies a constructability issue, resolve it while options remain open rather than waiting until installation is blocked.

This does not mean freezing the project prematurely. It means creating a decision threshold: changes that affect cost, schedule, clinical function, landlord obligations, or equipment interfaces should receive a documented impact review. That discipline keeps small preferences from accumulating into unplanned scope and gives the owner a chance to choose between alternatives while the cost of changing direction is still relatively low.

A second useful control is an approval threshold. Leadership can delegate routine changes below an agreed level while reserving changes that affect clinical function, material schedule milestones, or major budget categories. The threshold should match the organization's governance and contract terms. Delegation speeds decisions without sacrificing executive visibility, as long as every approval is still recorded in the change log.

Discuss Change Order Governance With Medical Construction Group

If change orders are affecting your medical office budget, schedule, or opening plan, contact Medical Construction Group to discuss an owner-side review process that organizes scope, pricing, schedule impact, contingency, and approval decisions.