THE INFLUENCE OF CONTRACT CHANGE ORDER (CCO) ON COST PERFORMANCE IN CONSTRUCTION PROJECTS

Abstract

This study investigates the influence of Contract Change Orders (CCOs) on cost performance in construction projects. Contract Change Orders formally amend the original construction contract. This research aims to answer the following main question: What is the relationship between the occurrence, reasons, and worth of CCOs and their cost overrun counterpart? More specifically, we try to correlate the frequency, worth, and reasons for CCOs directly with their identical cost overrun counterpart on a project level at three different scales. This research uses a quantitative approach to dissect and understand the project data from a collection of medium to large-scale construction projects. This project data were further elucidated through structured interviews with project managers and contractors directly involved with those projects. The project data were then subjected to a battery of statistical tools, such as regression analysis, to understand the relationship that exists between CCOs and certain cost performance indicators. The results show that frequent and late-stage CCOs are correlated with increased project costs. Moreover, insufficient initial planning and inadequate communication among stakeholders are major identified contributors to cost-related CCOs. Change management strategies are critical to counteract the cost impacts of CCOs. The study found that effective change management strategies, which include early stakeholder coordination and precise contract documentation, are essential to mitigate the bad cost impacts of change orders in construction projects. This knowledge can help all owners and stakeholders in the construction process manage big CCOs better.