Contract Change Management is the process used to control, evaluate, and authorize changes to the original scope, schedule, or commercial terms of a contract or project. Once a scope is defined and a price is agreed upon with the customer, contractor, and other stakeholders, contract execution begins. During execution, it is likely that changes to the initial order will occur. A contract change order (variation order) is used to manage these changes in a controlled way. It allows new work to be added or deleted from the original scope, altering the contract amount or completion date without creating and approving a new contract.
Contract Change Management ensures that proposed changes are received, analyzed, valuated, and approved before implementation. It also makes it possible to track implemented changes together with the original contract or project. Since the original plan does not represent the current situation once changes arise, Contract Change Management provides commercial control and a financial view of the change process. It becomes easier to track changes and understand their consequences once they are approved or requested.
Contract Change Management includes the following capabilities:
Contract Change Management goes through the following stages:
A request for change can be received from a person inside or outside the organization. Once received, it can be justified as a valid change order. Important information at this stage includes the requester, responsible person, type of change, reason for the change, what happens if the change is not carried out, whether a proposed solution exists, and important dates. The status is set to Preliminary.
The change is reviewed, for example by the project team, to determine whether it is valid.
The required change is analyzed, and the impact is assessed regarding:
When the analysis is complete, the status is set to Analyzed, and the impact is recorded.
The impact analysis is reviewed internally and, if needed, externally. Approval routing templates can be attached and used at any stage or status. Both the sponsor and applicable external parties (such as the customer) may be required to approve the requested change.
If external approval is required, information is submitted to the external party. Before submission, internal approval can be performed. Once internally approved, the status is raised to Submittal Approved, after which the information can be submitted. When the external response is received, it is registered as externally approved or externally rejected.
If a requested change is rejected, the requester or responsible person is notified. A change order can be reopened and modified to meet the approvers’ requirements, and the revised version will require new approval. When approved, the change order is set to Active and becomes ready for implementation. The work is then carried out according to the change order, and project plans and contract lines can be updated.
When all work and financial transactions related to the contract change order are completed, it is set to Closed.
If the contract change order is no longer valid—such as when the requester changes their mind or internal or external rejection occurs—it can be Canceled.