Audit of the City’s Change Order Management Process

From 2011 to 2014, the City of Los Angeles incurred costs of $5.5 billion to outside contractors for construction projects that were originally expected to cost $4.9 billion.

I asked for an audit to determine if the City’s extra costs were in line with those experienced by other cities and by private builders. I also wanted to know if practices in use elsewhere could help the City reduce its exposure to cost overruns in the future.

Some cost overruns in construction projects are commonplace and even unavoidable. Extra costs are reflected in change orders, which are typically acknowledgements that costs have gone up because construction conditions have changed. Changes are most commonly attributed to unexpected field conditions, such as encounters with unmapped utility lines when building in urban centers, or errors or ambiguities in plans. That was the case in the majority change orders we examined.