Keywords

1 Introduction

Change order is the alteration in the original agreement signed between client and contractor. It is actually the addition or subtraction of work in a project agreed between two parties before through a complete agreement. Change order has been called the biggest cause of dispute between the contractor and client. Before commissioning the change in a project, it probably requires to notify the client for any changes.

Change order is issued by owner, engineer or consultant. Owner issue change order for further development of the project increasing the cost or wants to substitute some part of the project to change the scope or quality of the project. Also due to some unfavorable condition, the contractor or consultant also issue change orders.

A construction contract consists of drawings details, project specification, bill of quantity (BQ) and clarifications for every kind of project like i.e. buildings, roads. Prior to making any change the change order is notified to the contractor. Need of the owner may be changed.

1.1 Problem Statement

Change order is one of the major cause of dispute between the contract parties. There are some major factors that causes change order which lead to increase the project cost, scope of the project or the time schedule, which sometimes create an unpleasant environment between the contract parties.

The aim of this research is to develop an understanding of change order, identify and analyze the factors, and formulate guideline for contracting parties to overcome the unpleasant environment because of change order.

1.2 Research Significance

The purpose of this study was to recognize and evaluate the factors that affect the construction projects of Khyber Pakhtunkhwa, Pakistan, leads to change order. This study is useful for the stakeholders of construction projects to become attentive to the critical factors that need special attention in order to minimize the discrepancies and the negative impact of change order on the project. Even though the study emphases on construction projects, the judgment and the consequences could be suitable to experts in further construction projects and also provide further guidance for researchers.

2 Literature Review

There have been numerous types of research done and articles are written regarding change orders in construction project. Every research is done by expertise and has provided a guideline for further studies Change order is usually a variation request that contains a set of instructions made in the original contract document [15]. Osman et al. [11] stated that Change order is the deviation from a well-known scope signed prior. The word change order demonstrates strong feelings of dispute and negativity and has a bad impression for all stakeholders. Change order can cause serious disruption in the cost and time of the project [14]. Sun and Meng [16] stated that rework in the construction due to change order in project increases the cost from 10 to 15% which impact on time loss, additional work, design modification and have also an indirect influence on labor efficiency, resource planning, loss of rhythm, and cost overflow. According to Yana et al. [17] there are two influential factors that effect change in design of construction project. One is an internal factor which includes an owner, contractor, designer and consultant. Second is the external factor which involves a third party, political interference, the natural environment, economics and advanced technology. Alaryan [2] conducted a field survey in Kuwait construction projects and investigated the main causes of change order, their effects on project and control measures. The major causes include the change of plans by the owner, change of project scope by owner, problems on construction site, errors and omission in design and poor design were found most common effect of the change order. Further, it was concluded that on the basis of acknowledging, the change order is formally specified through documents that explain the scope of the project which affects both the time and cost of the construction project. If there is no agreement issued between the different parties regarding the change order then it turns into disputes and claims, which impose a negative effect on the success and execution of the project. A change order is issued through a notice that legally alters the original documents of the agreement signed between the parties James [7].

Lokhande and Ahmed [10] identified that the change order causes the main problems such as the delay in project completion, increase or decrease in budget and defects in the project quality. Nigeria construction projects have been suffered badly as a result of huge change orders in the projects, which had exhibited in time overrun, cost overrun, dispute litigations and project abandonment. That causes a negative impact on the efficiency of the Nigerian Construction Industry (NCI) [1]. Few factors that initiate change order are funding, geological nature, acts passed by legislative body, product rectification, imbalance between contract documents [3]. Iyagba and Ijaola [6] analyzed and compared change order in Nigeria and Oman construction projects and concluded that Client’s modification in design and extra work were the critical causing factor for the change order in Nigeria and Oman. Variation results in the claims and disputes, in Nigeria while delay in completion date of project and cost overruns were the critical factors caused by change order in Oman. Pourrostam and Ismail [13] analyzed that the project failure by contractor to complete the project within estimated budget and time is due to the result of change order. Olsen et al. [12] analyzed the statistics of the causes for change in highway construction in Taiwan and found that the errors in the design were the main cause for majority of changes. A study was conducted on roadway construction by Ismail et al. [5] in south of Iran from 2001 to 2010 and found that change of planes or scope by owner, errors and omissions in the design and owner’s financial problems were the main factors that cause the change order in roadway construction projects of Iran. Keane et al. [8] identified the causes and impacts of change order on construction projects and made suggestions that how to minimize the distinctions in a project.

Studies showed that the proper way to overcome the change is to negotiate the problem between two parties. Kegan and Lahey [9] stated that obstruction to change does not reflect opposition. Instead, the person is applying dynamic drive towards a hidden competing commitment that builds a personal resistance to change. To process enormous amount of detailed information to the contractor about changes, continuously showing the designs or videos and other details to the contractor can transform the resistive environment into a positive behavior. The purpose of this idea is to increase the knowledge about the contract of the project among the participants. Due to the absence of project integration and contract knowledge it is difficult to understand the construction contract completely. To reduce the conflict level of communications between the project actors, it is required to use extensive legal language which allow the capacity for dual interpretation. Ibbs et al. [4] on their part considered that a project cannot completely free from change order. For successful management the project should be managed properly, resolving the change order in timely manner.

3 Methodology

3.1 Data Collection

This research is based on literature review, structured interview from stakeholders, and factors identification from local construction industry, pilot survey, major survey and data analysis. Factors causing change order are found and ranked them on the basis of an exploratory survey.

After establishing the problem statement and objectives, the literature review was carried out and the factors were identified. These factors were then modified through conducting a structured interview from the expertise like consultants, contractors and Engineers working in the construction industry of Pakistan. Based on their perception total 32 influential factors were highlighted and a questionnaire was developed based on Likert scale, where 1 = not important, 2 = less important, 3 = moderately important, 4 = very important and 5 = extremely important.

Pilot study was conducted on small scale between the stakeholders. In pilot survey the questionnaire was distributed to some percentage of the whole sample in order to confirm whether the respondents are able to understand the direction of the survey or not.

The population sample chosen for this research was the contractor, consultants and engineers registered with Pakistan Engineering Council (PEC). A total sample of 150 respondents was selected and questionnaires were distributed between them. Out of 150 questionnaires 102 responses were received and 48 questionnaires were not responded. The result was 66% and acceptable, as 30% is a good response. Among the 102 respondents, there were 28 consultancies, 22 engineers, 20 contractors and 32 clients respond to the questionnaire distributed.

3.2 Data Analysis

The collected data from the respondents were analyzed by Statistical Packages of Social Science (SPSS-23) and MS Excel.

Consistency and reliability of the data were checked by Cronbach’s alpha method using Likert scale responses. The results were satisfactory and the data eccentricity was further analyzed through normality test. It is a simple statically test which determines that the group of data follows standard distribution or not. When sample size is less than 2000 (N < 2000), Shapiro-Wilk normality test is performed for testing the normal distribution of gathered data. The data was non-parametric so for further analysis, a non-parametric Kruskal Wallis test is used. After successful results all the factors were ranked with the help of relative importance index (RII) calculating on the basis of importance level, using the Eq. (1)

$${\text{RII}} = \frac{{\sum {\text{w}} }}{{\left( {A *N} \right)}}$$
(1)

where, W = Weighting of each factor by the respondents and ranges from 1 to 5, A = Highest weight (i.e. 5 in this case), N = Number of respondents.

4 Findings

The obtained data was analyzed in SPSS-23 and MS Excel.

4.1 Reliability

Cronbach’s alpha method was used to check consistency and reliability having criteria shown in Table 1.

Table 1 Reliability chart
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The value 0.9 and above shows excellent reliability, 0.7–0.9 shows high reliability, 0.5–0.7 shows moderate reliability and 0.5 and below shows low reliability. The value of the test performed was 0.88, indicates high reliability as shown in Table 2. This result was satisfactory for further analysis.

Table 2 Cronbach’s alpha value
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4.2 Normality

Data normality was checked through Shapiro-Wilk test as the size of the sample was less than 2000 (N < 2000), having the criteria that if the significance value of the test is greater than 0.05, the data is normal and If it is below 0.05, the data significantly deviate from a normal distribution. Significance values of the tested data were initiated from 0.00, as shown in Table 3, less than the required criteria for normality 0.05 showing non-parametric data.

Table 3 Shapiro-Wilk test results
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4.3 Non-parametric Analysis

The data was non-parametric so for further analysis, we used a non-parametric Kruskal Wallis test, which had greater significant value (0.59 > 0.05) as shown in Table 4, showing the major variance between the perception of different engineers, consultants and contractors about the Impact of change order in construction projects.

Table 4 Kruskal Waliis test
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4.4 Relative Importance Index

After successful results, all the factors were ranked with the help of relative importance index as shown in Table 5.

Table 5 RII ranking of factors
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5 Discussions

According to relative importance index result the top most critical factors identified shown in Table 6.

Table 6 Top five critical factors
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5.1 Scope of the Project

The project scope is mostly altered by the owner’s direction for enhancement or reduction the design because of budget consideration and value engineering. Sometime the scope is altered by the consultant or engineer during execution stages because of issue arises in field.

5.2 Lack of Skilled Labor

Experienced and availability labor make it easy for contractor to achieve the quality and scope of the project. Without skilled labor it is unable to achieve the scope and quality of the project on scheduled time.

5.3 Defects in Drawings

Design modifications are charged as one of primary cause for change orders in project. It involves revision to the contract drawings usually initiated by owner or engineer.

5.4 Role of Technology

Availability of advanced technology accelerates the project and complete in proper timing achieving the scheduled time. In the absence or failure of technology the project delay as well as the cost increases for the contractor leading changes in the project.

5.5 Client Financial Problems

Funding a project is the only important factor of successes of project. When there is delay in funding or owner’s financial problem it delay the project scheduled timing.

6 Conclusion

The intention of this paper is to develop the understanding of change order among the stakeholders, who are directly or indirectly concerned with a construction projects. This research elaborated the factors that causes change order, which have severe impact on the cost and schedule of the project. Because to change order the cost and time of the project may reduce by removing some part of the project, or the cost and time could be overrun by some additional work in the project. Change order always have main role in dispute between the stakeholders. Based on the perception of different stakeholders 32 factors are identified among which a Scope of the project, defects in drawings, client financial problems, lack of skilled labor and role of technology are the most five critical factors identified based of Relative importance index (RII).

It was noted that mostly change order is issued by the owner, as the owner changes the project scope from time to time. The drawing is another critical factor that can be major cause of change order. The owner often cannot understand the design due to lack of technical knowledge and to visualize the design. The consultants also play important role, who make changes and conflicts in the design after the project start. Lack of advance technology and skilled labor also affect the quality of the project. Client financial situation mostly causes reduction or addition in the project which cause change order.

7 Recommendation

For success of the project it is required to clarify the scope of the project from beginning, the drawings should be checked by expertise, funds must be managed on time and advance technology also experienced labor should be arrange in order to avoid the later rejection of the work that lead to change order.