Effect of Change Orders on Cost and Schedule for Small Low-Bid Highway Contracts

• Published in: Journal of legal affairs and dispute resolution in engineering and construction 2019-11, Vol.11 (4)
• Main Authors: Shrestha, Pramen P, Maharjan, Ruiko
• Format: Article
• Language: English
• Subjects: Bids; Construction costs; Contractors; Cost analysis; Costs; Highway construction; Researchers; Road construction; Roads & highways; Schedules; Scholarly Paper; Scholarly Papers
• ISSN: 1943-4162; 1943-4170
• DOI: 10.1061/(ASCE)LA.1943-4170.0000323

AbstractFor design-bid-build (DBB) projects, the assumption is that because the bid cost of the lowest bidder is usually below the estimated cost of the project, change orders during construction will increase. This study collected data on 615 small highway DBB projects (with costs of less than $1 million) from the Florida DOT (FDOT) related to the construction of roads and structures, and determined the correlation between these two variables. The study determined whether change orders affected cost and schedule performance; for projects that had no change orders or negative change orders, cost and schedule performance were significantly better than for of projects that had positive change orders. The results of this study demonstrate that projects that had positive change orders were those in which the contractors submitted bids significantly higher than those submitted for projects that had no change orders or negative change orders, even though—in both groups—the bids were lower than the estimated costs. An in-depth analysis showed that the projects that had no change orders or negative change orders had significantly lower cost and schedule growth as well as higher construction intensity compared to those of projects that had positive change orders. These results indicate that change orders have detrimental effects on cost and schedule growth, as well as construction intensity in small highway projects. The researchers recommend using a change order management process in order to reduce the effects of change orders on project costs and schedule performance. The researchers also recommend conducting a similar study with the data of all state DOTs in order to test whether the effect of change orders on cost and schedule performance of highway projects is similar to this study. The major contributions of this study to the body of knowledge are that the low bid had no effect on change orders, and positive change orders increased the cost and schedule growth as well as decreased the construction intensity of the small highway projects.