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During delivery, the investor changes materials, widens the scope, orders additional installations or expects work that was not included in the cost estimate. The team starts work because it does not want to stop the construction, and the formal arrangements are to be “completed later”.
The problem appears at settlement.
There is no signed order, no unambiguous pricing and no confirmation of scope. Subcontractors have already issued invoices, employees have worked extra hours, and the investor claims the work fell within the original contract.
We know what it is like when a single change seems too small to trigger a formal procedure. But across the whole investment, a few such decisions can mean tens of thousands of zloty in additional costs.
That is why the settlement of additional works should begin before the work is done, not only after the final invoice is issued.
Additional works are one of the most common reasons why a well-priced construction project loses its expected profitability. The team starts the work, and the formal arrangements are to be “completed later”. The problem appears at settlement.
Why do additional works so easily reduce a project’s profitability?
On a construction site the scope rarely stays completely unchanged. New circumstances arise, along with unforeseen technical conditions, design changes and investor decisions.
The change itself is not the problem. The problem is the lack of a process that allows it to be identified, priced, approved and settled.
Work starts before the price is confirmed
Time pressure means the contractor’s team often starts additional work on the basis of a verbal conversation, a message or an instruction given during a meeting on site.
The arguments usually sound similar:
- we have to keep to the schedule,
- the investor will approve the cost later,
- the scope is small,
- it is not worth stopping the whole crew,
- the details will be added to an annex,
- we will settle everything at the end.
In practice the contractor bears the cost before obtaining formal confirmation that the investor will cover it.
The base scope and the additional scope start to blur
If additional works are not recorded as separate items, after a few weeks it is hard to establish:
- which work came from the original contract,
- which was ordered later,
- who made the decision,
- when the change was accepted,
- how many hours the work took,
- which materials were used,
- which subcontractor did the work,
- what the full cost of the change was.
Without separating the works, the additional costs disappear into the overall investment budget.
Additional work does not mean only additional materials
When pricing a change, it is easy to include the cost of material and labour but overlook organisational costs.
Additional works can affect:
- the project manager’s work,
- the schedule of other crews,
- equipment hire,
- logistics and extra deliveries,
- downtime,
- redoing documentation,
- technical supervision,
- acceptance inspections,
- corrections to work done earlier,
- the completion date of the whole investment.
If the quote covers only the direct cost of execution, the margin on the change may be much lower than assumed.
The company does not see the impact of the change on the whole budget
A single additional item may seem small. But with many parallel changes, the project starts to exceed its planned cost.
If each change is recorded in a different place — in a message, a spreadsheet, a note or the site documentation — the business owner does not see their combined impact on profitability.
As a result, the financial report shows an overrun but does not explain whether it comes from:
- an incorrect estimate of the base scope,
- rising material prices,
- inefficient work by the team,
- additional works,
- corrections,
- delays on the investor’s side.
How to settle additional works properly?
An effective process should be simple enough for the team to actually use it, while at the same time protecting the scope, cost and responsibility of the parties.
1. Record the change before work begins
Every request outside the original scope should be recorded as a separate request.
The request should contain:
- a description of the required change,
- the reason for introducing it,
- the person who raised it,
- the date of the request,
- the project or stage it concerns,
- information on whether it affects the schedule,
- the person responsible for pricing.
It does not have to be an elaborate document straight away. The most important thing is to create an unambiguous trail showing that a new requirement has appeared.
2. Estimate the full cost and the impact on the deadline
The quote should include more than labour and materials.
You also need to check:
- the number of employee hours,
- subcontractor costs,
- transport and logistics,
- the equipment needed,
- additional documentation,
- the impact on other stages,
- the cost of downtime or reorganising the work,
- a risk buffer,
- the assumed margin.
If the change affects the schedule, its quote should also state the new completion date and the possible delay of the whole investment.
3. Obtain approval before execution
Before the works begin, the investor should receive clear information on:
- what will be done,
- what the original contract does not cover,
- how much the change will cost,
- how it will be settled,
- what the impact on the deadline will be,
- when the work can start.
Approval should take a form that can later be verified unambiguously. Depending on the scale of the change, it may be an additional order, a protocol, an annex or an accepted offer.
Without confirmation, the contractor takes on the financial risk.
4. Separate the cost of the change from the base budget
Once approved, additional works should be assigned to the project as a separate financial item.
The following should be tracked separately:
- revenue resulting from the change,
- hours used,
- materials,
- subcontractor invoices,
- additional costs,
- the amount invoiced,
- the payment received,
- the margin on the change.
This lets you check whether the additional scope actually delivered the expected result, or only increased turnover and the load on the team.
How did we solve a similar problem at Administy?
In our agency projects, the equivalent of additional works was successive versions of materials, new subpages, extra integrations and corrections going beyond the agreed scope.
Individual client requests often seemed small:
- an extra section on a page,
- another design variant,
- a change to a solution that had already been approved,
- a new integration,
- a data migration,
- additional consultations,
- another round of revisions.
The team wanted to maintain a good relationship with the client, so some of this work was done without a separate quote. Each change took only a few hours, but their combined cost gradually eroded the project’s margin.
The biggest problem was that the extra hours went into the project’s general time. After a few months we could see the budget overrun, but it was hard to say clearly which part came from the original estimate and which from the expansion of scope.
That is why we introduced a procedure with three stages:
- Recording the change — every additional requirement gets a separate description and an owner.
- Estimating the cost — we determine the number of hours, the specialists needed and external expenses.
- Separate assignment to the project — additional time and costs do not disappear into the base budget.
At Administy we combine information about:
- the value of the original contract,
- additional revenue,
- the team’s working time,
- the individual costs of specialists,
- external costs,
- invoices,
- payments,
- current and forecast margin.
Thanks to this we can see what impact a given change has on the result of the whole project.
If a client orders an additional integration, we can separately determine:
- the planned number of hours,
- the cost of the developers’ work,
- the Project Manager’s share,
- the cost of tools or subcontractors,
- the price for the client,
- the planned margin,
- the actual cost after delivery.
The same mechanism can be applied to construction investments. Additional works should not be treated as a comment on the project. They should operate as a separate, controlled scope with their own cost, revenue and settlement status.
A systematic approach lets you notice earlier that:
- work was started without approval,
- the cost of the change exceeds the original assumptions,
- more hours or materials were used,
- the additional scope has not yet been invoiced,
- the investor has not paid for the completed change,
- additional works are reducing the margin instead of increasing it.
The most important thing is that the decision to start work stops relying on memory, a verbal promise or the assumption that “we will settle it later”.
Additional works must be managed as a separate project scope
Changes are a natural part of an investment. They do not have to mean losing margin or a conflict with the investor.
Proper settlement of additional works requires recording the change, estimating the full cost, obtaining approval and separating the additional scope from the original budget.
The sooner a company puts this process in order, the more easily it will protect profitability and avoid a situation in which completed work goes unpaid.
Administy helps you bring revenue, working time, subcontractor costs, invoices and margin together in a single project view.
Contact the Administy team and see how to organise the recording of changes and the settlement of additional scope, before further work starts to burden the investment’s base budget.
