What is a Change Order
Summary: A change order is a formal written agreement that modifies the original construction contract’s scope, schedule, or cost. It documents what changed, why it changed, and the resulting impact on price and timeline. Change orders are the primary mechanism for getting paid for work beyond the original contract scope.
Definition
A change order (CO) is a legally binding modification to a construction contract that alters the original scope of work, contract price, or project schedule. Change orders require agreement from all parties—typically the owner, general contractor, and relevant subcontractors.
Change orders exist because construction projects rarely proceed exactly as originally designed. Design revisions, unforeseen conditions, owner requests, and errors in contract documents all create legitimate reasons to modify the original agreement.
| Element | Description |
|---|---|
| Scope change | What work is being added, deleted, or modified |
| Cost impact | How the contract price changes (positive or negative) |
| Schedule impact | How the completion date changes (if at all) |
| Authorization | Signatures from parties with contractual authority |
Types of Change Orders
By Source
| Type | Description | Example |
|---|---|---|
| Owner-directed | Changes requested by the owner | Adding a conference room |
| Design changes | Modifications to drawings or specifications | Architect revises structural details |
| Field conditions | Unforeseen site conditions | Encountering rock during excavation |
| Errors and omissions | Corrections to contract documents | Missing electrical panel on drawings |
| Value engineering | Cost-saving alternatives | Substituting equivalent materials |
| Regulatory | Code or permit requirement changes | New fire safety requirement |
By Status
| Status | Description |
|---|---|
| Potential Change Order (PCO) | Identified change not yet priced |
| Change Order Request (COR) | Priced proposal awaiting approval |
| Approved Change Order | Signed agreement modifying the contract |
| Rejected Change Order | Denied request (may be disputed) |
By Pricing Method
| Method | When Used |
|---|---|
| Lump sum | Well-defined scope with clear pricing |
| Time and materials (T&M) | Undefined scope, tracked as work proceeds |
| Unit price | Quantities vary but unit costs are agreed |
| Cost plus | Actual costs plus agreed markup |
The Change Order Process
Standard Workflow
Trigger Event
↓
Change Identification
↓
Notice to Owner
↓
Pricing/Proposal
↓
Review/Negotiation
↓
Approval
↓
Execution
↓
Billing/PaymentStep-by-Step Process
| Step | Actions | Documentation |
|---|---|---|
| 1. Trigger | Drawing revision issued, field condition discovered, owner request received | Revised drawings, RFI, meeting minutes |
| 2. Identification | Identify scope change and affected work | Change comparison, scope analysis |
| 3. Notice | Notify owner within contract-required timeframe | Written notice per contract requirements |
| 4. Pricing | Estimate cost and schedule impact | Detailed breakdown, subcontractor quotes |
| 5. Review | Owner/architect review and negotiate | Correspondence, clarifications |
| 6. Approval | All parties sign change order | Executed change order document |
| 7. Execution | Perform the changed work | Daily logs, progress photos |
| 8. Billing | Include in pay application | Schedule of values update |
Critical Timelines
Most contracts specify notice requirements for change orders:
| Contract Type | Typical Notice Requirement |
|---|---|
| AIA contracts | Within 21 days of event |
| ConsensusDocs | Within 14 days of event |
| Federal (FAR) | Within 20 days of event |
| Custom contracts | Varies (read your contract) |
Missing notice deadlines can waive the right to additional compensation, even for legitimate scope changes.
What Triggers Change Orders
Drawing Changes
Drawing revisions are a primary source of change orders in construction. Every time the design team issues revised drawings, contractors must review for scope changes.
| Drawing Change | Potential Change Order Impact |
|---|---|
| Added elements | Additional work and materials |
| Deleted elements | Credit for work no longer required |
| Dimension changes | More or less material/labor |
| Specification updates | Different materials, methods, or equipment |
| Detail revisions | Modified installation requirements |
| Layout modifications | Rework if work already in place |
The Documentation Challenge
The challenge is identifying what actually changed in revised drawings. With drawing sets of 100-1,000+ pages, manually finding changes is:
- Time-consuming (hours per revision)
- Error-prone (missed changes = missed change orders)
- Inconsistent (different reviewers find different changes)
This is why automated drawing comparison is critical for change order management—it ensures no scope-impacting change goes undetected.
Other Common Triggers
| Trigger | Example |
|---|---|
| RFI responses | Architect clarification adds scope |
| Substitution requests | Approved alternative affects installation |
| Coordination conflicts | Trades require redesign to fit |
| Owner decisions | Selection of higher-grade finishes |
| Permit conditions | Additional fire stopping required |
| Concealed conditions | Existing conditions differ from documents |
Documentation Requirements
Essential Change Order Documentation
| Document | Purpose |
|---|---|
| Change order form | Formal document modifying contract |
| Detailed scope description | Exactly what work is added/deleted/modified |
| Cost breakdown | Labor, material, equipment, subcontractor costs |
| Supporting calculations | Quantities, production rates, hours |
| Subcontractor quotes | Pricing from affected subs |
| Schedule analysis | Time impact justification |
| Drawing references | Specific sheets and revisions affected |
| Correspondence | Emails, RFIs, meeting notes establishing cause |
Cost Breakdown Structure
A defensible change order includes detailed cost buildup:
| Category | Components |
|---|---|
| Direct labor | Hours by trade, wage rates, burden |
| Materials | Quantities, unit costs, delivery |
| Equipment | Rental rates, ownership costs |
| Subcontractors | Sub quotes with their breakdowns |
| Markup | Overhead and profit per contract terms |
| Bond/insurance | If contract requires adjustment |
Schedule Impact Documentation
When changes affect the schedule:
| Element | Documentation |
|---|---|
| Impact analysis | How the change affects critical path |
| Time extension request | Days requested with justification |
| Updated schedule | Revised CPM showing impact |
| Acceleration costs | If schedule compression is required |
Why Change Order Tracking Matters
Financial Impact
| Risk | Consequence of Poor Tracking |
|---|---|
| Unbilled work | Performing scope changes without compensation |
| Margin erosion | Profit consumed by untracked extra work |
| Cash flow | Delayed billing on changed work |
| Disputes | Contested claims without documentation |
Studies show that poor change management contributes to cost overruns of 10-15% on typical projects, with severe cases exceeding 30%.
Legal and Contractual Impact
| Risk | Consequence |
|---|---|
| Waived claims | Missing notice deadlines forfeits recovery rights |
| Disputed scope | ”That was always in the drawings” without proof |
| Audit exposure | Inability to justify costs to owner/auditor |
| Litigation disadvantage | Weak documentation in legal proceedings |
Relationship Impact
| Risk | Consequence |
|---|---|
| Owner distrust | Perception of inflated or unjustified claims |
| Subcontractor disputes | Backcharges for untracked scope changes |
| Team friction | Finger-pointing over responsibility |
How Drawing Comparison Supports Change Orders
Automated drawing comparison directly supports change order management:
Identification
| Manual Process | With Drawing Comparison |
|---|---|
| Hours reviewing drawings | Minutes for entire set |
| Missed changes common | Comprehensive detection |
| Subjective interpretation | Objective documentation |
| Reviewer fatigue | Consistent analysis |
Documentation
Drawing comparison creates evidence for change order justification:
- Visual overlays showing exactly what changed
- Change reports listing all modifications by sheet
- Timestamps proving when changes were identified
- Objective record independent of interpretation
Timeliness
Faster change identification means:
- Meeting contractual notice deadlines
- Pricing changes before work begins
- Avoiding “out of sequence” change orders
- Proactive rather than reactive change management
Best Practices
| Practice | Implementation |
|---|---|
| Read your contract | Know notice requirements, markup allowances, dispute procedures |
| Document everything | Daily logs, photos, correspondence for every potential change |
| Compare every revision | Use automated tools to ensure nothing is missed |
| Submit timely notice | Never miss contractual notice deadlines |
| Price accurately | Detailed breakdowns prevent negotiation erosion |
| Track pending changes | Maintain log of all potential and submitted change orders |
| Communicate proactively | Early owner notification reduces disputes |
| Preserve records | Maintain documentation for warranty period + statute of limitations |
FAQ
What’s the difference between a change order and a change directive?
A change order is a mutually agreed modification with agreed pricing. A change directive (or construction change directive) is an owner instruction to proceed with changed work while pricing is still being negotiated. Directives are used when work cannot wait for pricing agreement.
Can I be forced to do change order work without agreement on price?
Most contracts require contractors to proceed with owner-directed changes even without price agreement, with the price to be determined later. Refusing to proceed may be considered breach of contract. The remedy is to dispute the pricing, not refuse the work.
What if the owner disputes that a change order is warranted?
Document your position thoroughly, including the contract language, original drawings, and changed drawings. If agreement cannot be reached, most contracts specify dispute resolution procedures (negotiation, mediation, arbitration, or litigation).
How do I track changes across multiple drawing revisions?
Maintain a revision log tracking all drawing issues. Compare each revision to the previous version (not just to original bid documents) to catch cumulative changes. Automated comparison tools make this practical for large drawing sets.
What markup is allowed on change orders?
Markup (overhead and profit) is typically specified in the contract. Common ranges are 10-15% for general contractor work and 5-10% for subcontractor work passed through. Some contracts cap total markup on multi-tier changes.
Key Takeaways
- Change orders formally modify contract scope, cost, or schedule
- Required for getting paid for work beyond original contract scope
- Types include owner-directed, design changes, field conditions, and errors/omissions
- Process: trigger, notice, pricing, review, approval, execution, billing
- Drawing changes are a major source of change orders in construction
- Meeting notice deadlines is critical—late notice may waive claims
- Documentation requirements include detailed scope, cost breakdown, and schedule impact
- Automated drawing comparison ensures no scope change goes undetected
- Poor change order management contributes to cost overruns of 10-15%+
Last updated: 2026-02-04