Change order management is crucial for project success as it can impact cost and schedule. Effective change order management requires close coordination between engineering disciplines early in the project to minimize errors and changes later. It also requires the procurement team to thoroughly review supplier offers and calculations to reduce commercial errors. While some changes are unavoidable, taking actions like cross-discipline reviews, early supplier involvement, and double checking prices can help optimize the number of change orders and reduce impacts to cost and schedule.

1. TOPIC: CHANGE ORDER MANAGEMENT TO PROJECT SUCCESS:
ABSTRACT
It can be argued that the successful management of change is crucial to any organization in order to
survive and succeed in the present highly competitive and continuously evolving business environment.
The purpose of this paper is, to provide an industrial views / Action to Reduce / Minimize the changes
(either it is an Engineering change or a Commercial change) at post award of Contracts or Purchase
Orders. Supply Chain Team plays important role towards constructing a new framework for managing
changes.
1. Introduction:
Change Order Management is the backbone of the Project. Project Team need to handle it very
strategically to achieve the Project Success. In Oil & Gas, Power, Petrochemical Industrial, We generally
build Large Refineries, Chemical Plants. It is a huge Investment by the Government / Private Investors.
Governments / Private Investors do the feasibility studies in critical areas concerning to the project For
example cost & schedule, Site Environmental condition, Design, Process, Safety, logistic, cultural
differences and political & social interference etc. with the help of Engineering Consultants / Financial
planners / Project Planners / Equipment Cost estimation / Construction Cost Estimation etc. Based on the
inputs from these consultants, Investor will take a decision to Kick-start the project, if find it feasible or
profitable (will able to complete within the desired schedule & Cost). Here in this paper we will focus
How Change Order Management plays critical Rolls in project success / failure. Cost & Schedule is the
only key components shall be impacting due to changes.
2. Definitions:
Change Order Management: A change order Management is a component of the change management
process whereby changes in the Scope of Work agreed to by the Owner, Contractor and
Architect/Engineer are implemented or executed.
Project Cost: The project cost is the total project cost which includes engineering fees, material costs,
and construction costs, permit fees, land, furnishings, financing and all other costs that were incurred in
completion of the project.
Project Schedule: The Project Schedule that communicates what work needs to be performed, which
resources of the organization will perform the work and the timeframes in which that work needs to be
performed. It is a part of Contact documents.

2. 3. Basics:
We define Project Cost in 2 major heads, Material Cost and Construction Cost (Appx. 90%), balance 10%
is the miscellaneous costs. You will surprise to hear that Material Cost, specially the Project Long Lead
Materials comprising 35-40% of total project cost.
For example in building a Petrochemical plant, we need Boiler, Waste water Treatment plant, Cooling
Tower, Transformers, DG Sets, Pumps, Electrical Cables, piping bulks, Electrical bulks,
Instrumentation’s bulks and many other small items / Equipments.
The Equipment Purchasing Cost & manufacturing / fabrication process must be closely monitored with
respect to allotted budget and Project Baseline schedule respectively.
4. Change Order Management:
When we think about Change Order Management following questions start running around us:
A. Who initiate the Change Order & Why we need Change Order after placing the Purchase Order?
B. Who approve the Change Order?
C. Who negotiate & release the change orders to the Supplier?
D. How Change orders impacting the Project overall Cost & Schedule completion date?
E. What actions should be taken to minimize the Change Orders?
Answering these questions create a firm foundation about the understanding on Change Order
Management.
A. Change order could be initiated by Equipment Responsible Engineer / Buyer.
a. Change order initiated by the Engineer is termed as Technical / Engineering Change Order,
mostly due to the any one or more of the reasons listed below.
Size/ capacity of Equipment Change
Process Change
Client Inputs
Construction Inputs
HAZOP (Hazard and operability study)
Change in quantities (Increase / Decrease) /substitution of one item for another
b. Change order initiated by the Buyer is termed as Commercial Change Order , mostly due the
following reasons
Inadvertently omission of supplier’s commercial offers few pricings.
Inadvertently follow the wrong Technical Bid Evaluation Sheet.
Price Calculation Error /change in price for an ordered item
Delivery Extension

3. B. In general Technical Change order will be approved by the Engineering Manager / Client (if
applicable). Commercial Change orders will be approved by the Project authorised signature matrix
listed approval Authorities or by the clients (as agreed in Client Contract).
C. Buyer will negotiate & release the Change Order to the Supplier.
D. Change orders impact the Project in terms of Cost & schedule, it can be positive cost impact (means
reduction to the PO value) or Negative cost impact (means increase in the PO value). In terms of
schedule, if material delivery delayed from the agreed PO contractual delivery date than it will extend
the overall project completion date. If we get early delivery of material than we can save the
construction cost or overall project cost with respect to the budget by early completing the project.
E. We can minimize or optimize the change order counts, but not touch the zero count. For example, in
large Project, Material Requirement / Requisition were generated by the Engineering disciplines such
as, Civil, Structural, Mechanical, Electrical, Control System, Piping, and Safety etc. Mostly the lack
of close coordination or communication gap between engineering departments will leads to origin of
Change Orders on the projects.
Following action must be taken to optimize the change order counts.
a) Conducting Weekly / Bi-weekly meetings among engineering disciplines before release of
technical RFQ to the Procurement Department.
b) Peer review of engineering documents by discipline colleagues.
c) Early involvement of Procurement, Quality department in reviewing the technical RFQs.
d) Client review of Engineering RFQ
e) Buyer must review & crosscheck the commercial offers pricing in detailed manner to
eliminate the wrong prices errors.
f) Buyer must read the Engineer’s issued final Purchase Requisition OR Technical Bid
evaluation.
g) Price calculation error must reach to the zero count; it can be archived by re-checking and
getting the peer review of prices.
h) Delivery extension Request always comes from the Supplier, buyer to issue the change
order based on the facts presented by the supplier.
5. Conclusion:
All projects, even the best planned projects, will experience change, and there will be costs, impacts, and
disruptions associated with implementing the changes. So we need to minimize or try to remove the root
cause of Change Orders. This paper will help you more in achieving the organization goals of best change
order management in terms of minimizing the change order counts.