The Change Order the Team Absorbed
A 10-month, 1,400-hour project is at month 7. The client has issued 11 small change requests - added casework, a revised lobby, a relocated stair - each handled informally by the project architect 'because they're small.' Individually each looked like 8-20 hours. Cumulatively the team has logged 340 hours of change-related work, none of it billed. The fee budget shows 1,050 hours consumed against 1,400, with 3 months of construction documents and all of construction administration still ahead. The client believes the changes are included in the fee and has started treating them as free. The firm's principal asks why utilization on the project looks fine but the project is 'somehow losing money.'
1. Explain the economics of what is happening and why utilization metrics masked it.
Read the worked answer
The economics. The project sold 1,400 hours of scope. The team has now committed to deliver roughly 1,400 + 340 = 1,740 hours for the same fee. With 1,050 consumed at month 7 and 3 months of CD plus all of CA remaining, the remaining scope realistically needs 500-650 hours - the project is heading for a significant overrun, and the unbilled 340 is the core of it. Each change was individually rational to absorb; the aggregate is a scope and fee failure.
Why utilization looked fine. Utilization measures whether people are billable, not whether the work is profitable. Staff were fully billable the whole time - they were just billing change work to a fixed-fee project that had no hours to give. Utilization is blind to scope creep on lump-sum work. The metric that would have caught it is earned value or hours-to-complete against the original scope, tracked monthly, with change work booked separately.
The real loss is 340 unbilled hours plus the compounding effect: the client now expects changes free, so the remaining 3 months will absorb more.
2. Design the recovery: how do you stop the bleeding, recover what you can, and reset client expectations without destroying the relationship?
Read the worked answer
Stop the bleeding. Institute a written change-control process immediately. No change proceeds without a written request, an hour estimate, and a written authorization - even if the authorization is 'approved, no fee' for goodwill. The point is that every change becomes visible and a conscious decision.
Recover what you can. Audit the 11 changes: which were truly within the original scope (absorb those gracefully) and which were genuine additions. For the genuine additions, issue a consolidated change order for the remaining work and, where the contract and relationship allow, a good-faith retrospective for the largest items. Do not try to bill all 340 hours after the fact - that reads as a bait-and-switch and will damage trust more than the money is worth.
Reset expectations. Meet the client with a clear, non-accusatory framing: 'Here's how we've been handling changes, here's what that has meant, and here's the process going forward.' Show the change log. Frame it as protecting the schedule and quality, not extracting fees.
Fix the firm's side. Book change work to separate task codes, track hours-to-complete monthly against scope, and give the project architect authority and a script to say 'that's a change, let me get you an estimate' without feeling obstructive. The principal's question - why utilization looked fine - gets answered by adding an earned-value view to project reporting.