Development of a formal change order pricing procedure

Change orders are an element of highway construction that often pits the state department of transportation (DOT) and contractor against each other in a game of cost risk allocation. Much of the risk is due to the uncertainty of the change order's total cost. Calculating a fair and accurate price can be difficult and time consuming due to different goals of the negotiating parties. This paper examines change order pricing within the Kentucky Transportation Cabinet. Change order cost data from Kentucky Transportation Cabinet projects is used to evaluate the effectiveness of three available historical cost databases; the R. S. Means Heavy Construction Manual, Trnsport Estimator, a commercially available estimating software package, and the Kentucky Transportation Cabinet's Average Unit Bid Price database. A formal change order pricing process is developed using information gathered from interviews with Kentucky Transportation Cabinet field engineers, other state DOT change order pricing practices, and best practices identified in existing literature. This process provides a quick reference tool that can be used by new and experienced field engineers to price change orders and ensure a uniform pricing procedure across the state. The results of the study indicate that Kentucky's Average Unit Bid Price database provides the most consistent change order pricing for state transportation projects and the formal change order pricing process developed here is a potentially useful tool for ensuring uniformity in pricing change orders.