Are Change Orders a Necessary Evil?

4th October 2016 (Last Updated July 18th, 2018 11:52)

Henry Kerali examines the best ways to guard against the threat of Change Orders

Are Change Orders a Necessary Evil?

Change orders. An action sponsors regularly enact that CROs invariably dread. They’re unavoidable and can at times set a trial back. In the past, the industry has sought find ways to lessen the impact of change orders on a business. But is it possible to avoid change orders altogether and is this is a realistic goal?

While on the one hand, the removal of change orders would greatly benefit sponsors, the impact it would have on vendors could be far-reaching and affect the CRO landscape. To lend a bit of perspective, for CROs, a significant amount of their revenue stream comes from change orders (up to 100 percent additional revenue can be generated on change orders alone). Without change orders, CROs would likely miss out on refunds for out of scope work or more studies would be forced to close. There would also be a rise in Time and Material contracts.

So what can be done to mitigate the threat of change orders altogether?

Sponsors and service providers must accurately forecast their timelines in order to develop realistic plans. While it’s easy to rush ahead and start your study as quickly as possible, rushing creates confusion, confusion creates errors, errors create change orders. Therefore, sponsors should be mindful of not rushing into a trial for the sake of getting that first patient through the door. Rely on your past experiences; plan early and prepare for any eventuality.

“If you’re developing a drug for a rare disease, it’s difficult to find patients for recruitment, so plan a timeline accordingly,” Jessica Kaman, Executive Director, Development Outsourcing, Exelixis, Inc.

Speaking at the 2016 Outsourcing Clinical Trials conference in San Mateo, CA, Kamen said sponsors should always guard against being overly optimistic. “Most times you end up with a contract that has an incomplete scope. If the enrolment period exceeds your projected timeline, a change order will be required,” she said.

It’s important, therefore, that both the sponsors and the CRO foster open communication to ensure all parties are aware of potential issues. Transparency is key as no one likes surprises. For the stakeholders who manage change orders and out of scope work, it’s important they’re kept informed, so if an issue arises they can deal with it in a timely, orderly fashion. However, if the sponsor encounters unforeseen changes, such as a protocol amendment, they must communicate the change to the CRO as soon as possible so they can manage the resources to deal with it. 

“If an issue is caught at the very beginning and dealt with accordingly, there’s a small chance the matter can be resolved without resorting to a change order or an out of scope. It’s akin to defeating cancer when you catch it at an early stage,” said Kamen.

When it comes to a global trial, communication becomes even more critical. A global scope change can impact sites in multiple countries. With numerous people working on your trial in various places, not only is open communication and transparency important, but also understanding the cultural differences between each site and country. Therefore, put in place effective processes. Sponsors should try to negotiate out of scope work and its cost prior to change orders. If that’s achieved, document the process and have all stakeholders sign it.

While there are a variety of ways to manage change orders, not every way is efficient. Anticipate the financial impact of change orders and ensure those costs are considered in early budget plans.

“Establish parameters and trigger points that could lead to a change order,” Kamen said. “Once you’ve done that portion out a percentage of your overall trial budget and put it to one side.”

Ultimately, change orders are a necessary evil and are, for the most part, unavoidable. For as long as you conduct clinical trials, changes in scope will occur. Therefore, it is vital sponsors communicate any potential scope changes early on to your Finance team . When necessary, implement financial review meetings between the CRO and the sponsor. Don’t shy away from processes, document them well and ensure compliance. Lastly, don’t forget that time is money, so plan as realistically as possible. Plan early to avoid setbacks at a later stage, learn from your previous mistakes, and don’t repeat them.

 

 

References

Jessica Kaman, Executive Director, Development Outsourcing, Exelixis, Inc. – Should We Accept Change Orders as Inevitable? What can we do to Reduce their Impact? (Presentation)