Unapproved or Underpriced Change Orders
Definition
Shipyards perform work on change orders without timely approval, leading to unbilled services and lost revenue. Aggressive pricing strategies are used to negotiate down to profitable levels, but unapproved changes result in no legal binding for payment. Buy-in bidding followed by excessive modification pricing attempts often fails to recover full losses.
Key Findings
- Financial Impact: Loss of profit on performed work without approved documentation
- Frequency: Weekly in ongoing ship construction projects
- Root Cause: Excessive time to process and approve changes; initial low bids without adequate profit margins
Why This Matters
This pain point represents a significant opportunity for B2B solutions targeting Shipbuilding.
Affected Stakeholders
shipyard billing teams, project managers, contract negotiators
Deep Analysis (Premium)
Financial Impact
$100,000 - $350,000 per CG vessel (unbilled T&T labor; risk of denial) • $100,000 - $350,000 per cruise ship (unbilled T&T overhead) • $100,000 - $400,000 per program (15-25% of change order value lost to pricing disputes and unbillable overhead)
Current Workarounds
Change order log maintained in spreadsheets; costs estimated but not formally reserved until approval received; work proceeds on verbal direction; back-charging attempts after project completion • Contracts admin maintains shadow spreadsheet of 'pending change orders'; forwards to finance team as 'claims for future recovery'; work proceeds on verbal approval from project manager • Coordinator logs test hours manually; charges labor to project overhead pending change order approval; test data stored in shared folders; back-charges applied post-testing with markup estimate
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Methodology & Sources
Data collected via OSINT from regulatory filings, industry audits, and verified case studies.
Related Business Risks
Cumulative Disruption from Multiple Change Orders
Inaccurate Forward Pricing of Change Orders
DFARS Non-Compliance Leading to Contract Suspensions and Remediation Costs
Excessive Warranty Repair Costs from Post-Delivery Defects
Unsecured Warranty Liabilities Causing Cash Flow Bleeds
Lost Warranty Claims Due to Procedural Non-Compliance
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