To Read the first part of this question, Click Here

Question: 

What are some best practices for handling different types of change orders to the jobs we have bid? Should they be done in HeavyBid? If so, how?

Answer:

In Part 1 of this blog, we talked about setting up and applying cost to change order bid items. The bid items looked very much like alternates because that’s basically what they are. In this second part, we’ll look at organizing and analyzing the change order bid items.

Organizing Indirect Items as Package Alternates

After we have the change order bid items in place, added our activities to cover the cost of the work, and verified pricing of any necessary materials or subcontractors, we need to look at any potential indirect costs that may need to be covered, and how to account for them.

This is where Package Alternates in HeavyBId come in very handy.

• First, we want to go to BidItem Setup, right-click “Customize” and turn on the Package Alternate column.

• Next, we’ll apply a Package Alternate name to each bid item in the change order. If you have multiple change orders in the same estimate, just give each one a different name. The purpose of this is twofold. First is so that HeavyBid can easily group them for you to see the cost and price information in the Bid Summary/Package Alternates tab. Second is to handle indirect cost items that you may want to include in the change order, but don’t need to show it as a pay item. 

Supervision example

Let’s suppose that the change order work is going to extend the time of the contract and you need to cover job supervision, but you want it to be indirect. We now have to take a step back and possibly make a change in Preferences to handle this logic.

Under Tools/Estimate Preferences/Alternates you’ll see two options for handling Indirects. One for Indirects under the Base Bid and one for Indirects under a Package Alternate. The default for both is to spread any indirect to all additive bid items.

Select “Indirects biditems in the Base Bid” to only Base Bid and “Indirect biditems in a Package Alernate” to spread to only Package Alternate items. This prevents the indirects in our Base Bid from being spread to our Change Order items.

Going back to our supervision example, we can now add an indirect bid item with our change order items for supervision, add the necessary activity code(s), and set the duration of the activity to cover the added length of time.

The thing only left to do is make sure the indirect item is labeled the same as the change order bid items in the Package Alternate column. (I assure you, this sounds a lot more complicated than it actually is.)

See the Breakdown of the Change Order

Now comes the fun part. Go to Bid Summary/Package Alternates and you will see an excellent breakdown of Direct Costs, Indirect Costs, Markup, etc. of your Base Bid and any Change Orders/Package Alternates you’ve created. Just highlight the Package Alternate in the top field, and you see all the biditems included in it in the bottom field. (By this time, you’ve probably figured out that any bid item you don’t label is automatically put into your Base Bid.) You can even change packages from Additive to Non-Additive from this screen to see the effect on the totals.

One last step to finish our work. Let’s go to Setup/Biditems and click on the Subtotals tab. Select Add/Modify at the bottom and create whatever you need in the way of Headers and Subtotals. Depending on how you need to present your change order pricing to your client, you could just go to the Bid Pricing Screen and send the information to Excel. Or if this will be a common occurrence, you could even set up a Change Order Estimate Template in Summary.

So as you can see, creating the biditems necessary, adding activities to cover costs, both direct and indirect, and getting the price information out of HeavyBid is very easy. And everything you need is in one place. As other change orders come up, you can just keep adding them to the same estimate if you like. You always have the option to create a new estimate just for the change order too. If it’s a really large change order, that might make the most sense. 

For Part 3 of this blog, I’ll collaborate with one of our HeavyJob Consultants to discuss sending the change order information to the accounting system and HeavyJob.

If you have questions specific to HeavyBid, what to click (and where), you can always count on HCSS’s unmatched Support Department to solve those problems quickly. If you would like to dive deeper into creating your process for handling change orders, or any other aspect of the estimating process, HCSS now has a Consulting Department devoted to helping you utilize the resources available to help with that. The Consulting Department at HCSS can perform assessments of your company’s use of nearly any HCSS product, make recommendations for education and training and even help you develop a Continuous Improvement Plan to get your department up to speed and keep it there. If you’d like to know more about what the HCSS Consulting Department can do for you, just drop us a line at consulting@hcss.com or leave us a note in the comments.