No construction project is built exactly as drawn. Owners change their minds, drawings miss details, and crews uncover conditions nobody expected. A change order in construction is the formal way to adjust the contract when that happens. Handled well, it protects both the owner’s budget and the contractor’s margin. Handled badly, it becomes the number one source of disputes on a job.
Why Change Orders Happen
| Cause | Example | Who Usually Pays |
|---|---|---|
| Owner request | Upgraded finishes, extra rooms, added equipment | Owner |
| Design error or omission | Missing structural detail, clash between trades | Owner, who may recover from the designer |
| Unforeseen conditions | Buried rock, old foundations, rotted framing | Depends on the contract’s differing site conditions clause |
| Code or authority requirement | Inspector requires added fire protection | Depends on contract and cause |
| Value engineering | Contractor proposes a cheaper equal product | Credit to owner, often shared |
The Change Order Process Step by Step
Step 1: Identify the Change
A field issue, RFI response, revised drawing or owner request shows that the work differs from the contract documents.
Step 2: Give Written Notice
Notify the owner or architect in writing within the notice period in the contract. Late notice is one of the most common reasons claims are denied.
Step 3: Prepare the Change Order Request
Describe the change, attach drawings or photos, and price the cost and schedule impact with a clear breakdown.
Step 4: Review and Negotiate
The owner and design team review the request, ask questions and agree on scope, price and time.
Step 5: Sign and Proceed
Both parties sign the change order, often on a standard form such as the AIA G701, and the contract sum and schedule are updated. The new amount is then billed through the schedule of values.
How to Price a Change Order
- Labor: hours by trade times the burdened labor rate. See how to estimate labor costs.
- Materials: measured quantities times current prices, including waste, freight and tax.
- Equipment: rental or owned equipment time needed for the change.
- Subcontractors: sub quotes plus the markup the contract allows on sub work.
- Overhead and profit: the percentage set in the contract, commonly applied to the direct cost.
- Time: extra days and the general conditions cost of extending the schedule.
- Credits: any deleted work, priced as a deduction.
Worked Example: Adding Two Interior Doors
| Item | Calculation | Amount |
|---|---|---|
| Materials | 2 door assemblies, frames, hardware | $1,400 |
| Labor | 16 hours x $65 burdened rate | $1,040 |
| Direct cost subtotal | $2,440 | |
| Overhead and profit | 15% of $2,440 (as set in the contract) | $366 |
| Change order total | $2,806 | |
| Schedule | Added time to frame, hang and finish | +1 working day |
Markup percentages vary by contract, so always use the rates written in your agreement rather than a rule of thumb.
Change Order vs Construction Change Directive
Sometimes work must continue before the price is agreed, for example to avoid delaying the critical path. In that case the owner may issue a construction change directive, such as an AIA G714, ordering the work to proceed. The contractor tracks actual costs, often on time and material tickets, and the final amount is settled later and converted into a change order.
Common Change Order Mistakes
- Missing the notice deadline in the contract.
- Starting work on a verbal OK without a signed change.
- Forgetting time: pricing cost but not schedule impact.
- Vague descriptions that lead to arguments about what was included.
- No backup: missing photos, daily logs and time sheets. A good site diary solves this.
Frequently Asked Questions
What is a change order in construction?
A change order is a written agreement between the owner and contractor that changes the contract scope, price, schedule or all three after the contract is signed.
Who can request a change order?
The owner, architect, engineer or contractor can start one. Changes often come from owner requests, design errors or omissions, and unforeseen site conditions.
How do you price a change order?
Add direct costs for labor, materials, equipment and subcontracts, then apply the overhead and profit markup allowed in the contract, plus any bond and schedule costs.
What is the difference between a change order and a change directive?
A change order is agreed and signed by both parties. A construction change directive orders the work to proceed before price or time are agreed, with the amount settled later.
Can a contractor refuse a change order?
Most contracts require the contractor to perform changed work within the general scope, but the contractor is entitled to fair adjustment of price and time as the contract allows.
Price Change Orders Fast and Accurately
Change orders need quick, defensible numbers. Mega Estimating measures the changed scope from revised drawings and prices labor, material and markup so you can submit change order requests with confidence. Mega Estimating is a U.S. construction estimating company that prepares quantity takeoffs and detailed cost estimates for residential, commercial and industrial contractors.
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