Change Order Basics

In order to modify information on a previously dispatched purchase order, a Change Order should be initiated in ARC.

While most change orders require University-level (central) approval, those made to POs for UWPAs and to decrease a PO amount do not.  Furthermore, financial change orders do not require involvement of or approval from CU Purchasing because such modifications to encumbrances or other accounting information do not change either the value of the PO or its terms.  Note that only financial change orders are allowed on Autosource POs.  Learn more ...

 

When to Create a Change Order

Change orders are the proper method for requesting the following changes to a purchase order:

• Increase/decrease the value of a PO

• Modify the Open Commitment of a PO

• Change the distribution of funds between ChartFields associated with a PO and establishment of new ChartFields associated with a PO

• Close a PO

• Reconcile PO value to payment

• Change contract dates

• Change ship-to or bill-to information

There is an allowable tolerance for the total payment amount to be greater than the total purchase order amount.  This variance allows for items such as shipping charges and small incidental fees that may not have been anticipated when the PO was originally created.  Above these thresholds, however, a change order is required to increase the value of the original PO.  When a payment is entered in ARC, the system will indicate whether or not the payment is “within tolerance” and processing can continue.  For more details on when tolerance does not apply and on thresholds, see the University’s Change Order Policy.

Helpful Resources to View or Print

Change Order Web-Based Training

Processing Change Orders

Purchasing Process QuickGuide

 


 

Financial Change Orders

A financial change order is a change order that does not alter the scope or terms of the PO, such as updating a ChartField or distribution.  A financial change order bypasses approval by CU Purchasing and is reflected on the unit’s financial reports in ARC.

 

Processing a Change Order

  1. When creating a new change order, enter a clear, valid reason to help the Purchasing Office contract officer process the order
  2. Once funds are encumbered, make an entry on the budget to reduce unallocated funds, so as not to overdraw (learn more)
  3. When a PO has been overpaid, correct the value of the PO without increasing the Open Commitment; if the overpayment applies to more than one ChartString, fix the overpayment in each individual ChartString
  4. When a PO is no longer needed, clear the unused PO value and unspent dollar value (open commitment)

 

Note: Change requests to a scope of work, services, contract end-date, and supplier name must be completed through the initiation of a new purchase requisition. 

 

Allowable Tolerances

There is an allowable tolerance for the total payment amount to be greater than the total purchase order amount.  This variance allows for items such as shipping charges and small incidental fees that may not have been anticipated when the purchase order was originally created.  Above these thresholds, however, a change order is required to increase the value of the original Purchase Order. ARC maintains a table of these tolerances. When entering a payment, the system will indicate if the payment is within tolerance and processing can continue. If the payment is not within tolerance, ARC will not allow payment processing to continue. This tolerance level does not apply to (and is not limited to):

• Leasing

• Catering (on-site)

• Maintenance and repair services


View Tolerance Threshold Levels >>

 

Responsibilities

Requestor of the Change Order
Initiates change order by inputting information into ARC, providing explanation and required supporting documentation to articulate rationale for the transaction.

Department Approver
Approves the validity of the change order request in ARC, both from operational and financial criteria; and verifies that supporting documents provide sufficient detail

Central Purchasing Approver
Reviews the original purchase order and validates that the requested change is in compliance with the terms of the original purchase order, and that supporting document(s) are sufficient; approve the change order request; convert the change order request to an updated purchase order.

 

Definitions

PO Value
The current total amount of the PO, regardless of payments.

Encumbrance
In purchasing, an encumbrance is an amount for which there is a legal obligation to spend in the future. A purchase order is a typical encumbrance transaction. Once funds are encumbered, the department should make an entry on their budget so as not to overdraw.  Encumbrances are comprised of all approved and pending for approval requisitions, purchase orders, and supplier invoices.

Total AP Payments
AP Payments made to date plus all open invoices that are currently in ARC.

Financial Change Order
A financial Change Order includes any Change Order that does not alter the scope of the PO, such as updating a ChartField or distribution. A financial Change Order bypasses approval by the Purchasing Office and is reflected on the department's financial reports in ARC.