What is a Potential Change Order (PCO)?
A Potential Change Order (PCO) is a document used in construction and project management to notify relevant parties of a possible change to the project’s scope, budget, or timeline. Unlike a formal change order, a PCO does not immediately alter the terms of the contract. Instead, it serves as a notification that a change may be forthcoming, allowing for preliminary discussions and evaluations before a formal decision is made.
About Potential Change Orders
Potential Change Orders help identify and document potential changes early, providing an opportunity to assess the impact on the project before formalizing any alterations to a Change Order. PCOs can arise from various situations, such as unexpected site conditions, design modifications, client requests, or regulatory changes. By issuing a PCO (most often by the General Contractor), the project owner, contractor, and other stakeholders can collaborate to evaluate the proposed change and determine the best course of action.
Best Practices for Managing Potential Change Orders
- Early Identification: Identify potential changes as soon as they are recognized. Early notification helps mitigate the impact on the project.
- Thorough Documentation: Clearly document the details of the potential change, including the reason for the change, its scope, and its potential impact on the project.
- Preliminary Impact Analysis: Conduct a preliminary analysis to understand how the potential change might affect the project's budget, timeline, and overall scope.
- Stakeholder Communication: Maintain open communication with all stakeholders to ensure they are aware of the potential change and its implications.
- Collaborative Evaluation: Work collaboratively with the project team to evaluate the PCO and develop possible solutions or alternatives.
- Formal Review Process: Establish a formal review process for evaluating PCOs, including criteria for determining whether a potential change should proceed to a formal change order.
- Record Keeping: Establish a PCO Register to keep track of PCO status.
Potential Change Orders vs. Change Orders
- Potential Change Orders (PCOs): Serve as preliminary notices of possible changes to the project. They do not immediately alter the contract but initiate discussions and evaluations of the proposed change.
- Change Orders: Formal documents that modify the original contract terms. Change orders are legally / contractually binding and officially adjust the project scope, cost, or schedule based on the evaluated PCO.
When to Use Potential Change Orders
- Unexpected Site Conditions: When unforeseen conditions at the construction site may necessitate changes to the project plan.
- Design Modifications: When changes to the design are proposed, either by the client or as a result of technical requirements.
- Client Requests: When the client requests modifications or additions to the project scope.
- Regulatory Changes: When new regulations or codes require adjustments to the project plans or specifications.
How Mastt Helps with Potential Change Orders
Mastt provides a comprehensive platform that supports the efficient management of potential change orders in construction and capital projects. Here’s how Mastt can assist:
- Centralized Dashboard: Mastt's dashboard offers a centralized view of contract details, project progress, and financial status, helping project managers track and manage lump sum contracts effectively.
- Cost Management Tools: The platform provides tools for accurate budgeting, change orders and financial tracking, ensuring that the project stays within the agreed price.
- Change Order & Request Management: Mastt facilitates the management of change orders by documenting changes, tracking their impact on the contract price and timeline, and ensuring approval from all parties.
- Stakeholder Communication: Mastt enhances communication between the project owner, contractors, and other stakeholders, ensuring transparency and collaboration throughout the project lifecycle.
- Budget, Contarct & Payment Management: Mastt helps manage accurate project budgets and contracts with reliable data. Mastt allows its projects to see in real time how your project, program or portfolio is tracking across commitments, cash flow and more.
- Risk Management: By offering robust risk management tools, Mastt enables identification and mitigation of risks early, ensuring projects stay on track.
PCO Construction Reporting Dashboard Example
By leveraging Mastt, Project Owners and Project Managers can enhance decision making, leading to more efficient project execution, increased quality and more successful outcomes.
Mastt showing Change Order against a General Contractor Contract
