Navigating Change Orders

How to understand, document, and manage changes during construction

Introduction

Even the most well-planned projects encounter changes. Maybe you decide to upgrade finishes, swap a layout element, or something unexpected turns up behind the walls. These changes are normal, but they should be documented clearly and agreed upon through a change order to avoid disputes, scope confusion, or surprise costs.

This page will walk you through what a change order is, how it works, when to use it, and how to handle different types of changes as your project progresses.

What Is a Change Order?

A change order is a formal document that modifies the original construction contract. It outlines changes in scope, materials, price, and sometimes the project timeline. Any time work is added, removed, or significantly altered from the agreed scope, it should be captured in writing through a signed change order.

Typical reasons for change orders:

• You request something different (e.g., upgrade to wood floors)
• The contractor uncovers something unexpected (e.g., termite damage behind a wall)
• The city or building department requires a change during plan review or inspection
• The plans were unclear or missing information

Not all change orders are bad. In fact, legitimate change orders are a normal and expected part of most construction projects. As a project evolves and more information comes to light, through demolition, inspections, or evolving design decisions, it’s common to adjust the scope. The goal of pre-construction planning is to minimize avoidable or predictable changes, but not every issue can be foreseen. A well-managed change order process ensures these adjustments are handled transparently and with mutual agreement.

Even small changes can affect labor, materials, or schedule, so it’s important to document them.

Change Order vs. Contract Addendum

While both are formal modifications, they serve different purposes.

Change Order

• Used for scope-specific changes within the original agreement
• Example: Changing the tile, adding a window, removing a closet
• Typically prepared by the contractor and signed by both parties

Contract Addendum

• Used to modify the core terms of the contract itself
• Example: Changing payment structure, extending project timeline due to financing delays, updating the overall contract value
• May be used if a large group of changes are bundled together

When to use which:

• If you’re changing the work being done, use a change order
• If you’re changing how the contract itself functions, use an addendum

Types of Change Orders

There are several common scenarios:

Owner-Requested Changes

• Finish upgrades, added features, or layout tweaks requested during construction
• Example: Upgrading countertops to quartz, adding a built-in desk

Contractor-Initiated Changes

• Conditions encountered during construction require new work
• Example: Dry rot under flooring, missing insulation, HVAC ductwork relocation

Permitting or Inspection Changes

• Changes required by the building department after plan check or during inspection
• Example: Fire blocking, additional insulation, relocating plumbing vents

Clarification-Based Changes

• Result from gaps or ambiguity in the original plans or scope
• Example: A lighting plan that doesn’t specify dimmer switches

Deductive Change Orders

• These reduce the scope of work, and therefore the cost
• Example: Removing custom built-ins, simplifying exterior trim, cutting back on landscape elements
  A deductive change order results in a credit back to the owner and should still be documented formally

How to Document a Change Order

Change orders should be submitted in writing and signed by both parties before the work is done.

A typical change order includes:

• Description of the change
• Reason for the change
• Pricing impact (additional or credit)
• Timeline impact (added days or no impact)
• Signatures from both the contractor and owner

Change orders can be managed on paper, through email with written approval, or via construction software.

Tip: Don’t rely on verbal agreements. If it’s not documented, it’s easy to forget or misinterpret later.

How Change Orders Affect Cost & Timeline

Most change orders involve a cost adjustment. This can be a:

• Flat price
• Time and materials (T&M) rate
• Allowance adjustment (if finishes were selected under a pre-set allowance)

Some may also affect the timeline. For example, adding a new bathroom could add 2–3 weeks, while swapping a light fixture may have no impact.

Ask your contractor:

• What’s the total cost difference?
• Does this change add days to the schedule?
• Is anything else affected by this change (inspections, permits, subcontractors)?

How Change Order Pricing Is Often Structured in Contracts
Many contracts include a section that explains how change orders are priced. A common structure is:

“Change orders will be billed based on actual costs plus a contractor markup of 15% for overhead and profit.”

This means if you request a change that adds $1,000 in labor and materials, the total charge would be $1,150 with markup included.

In some cases, the markup may vary for subcontracted work vs. in-house work, or additional fees may be added for project management or administrative time.

Example Change Order Breakdown:

Always review how the change order is priced, and ask for clarification if costs seem high or unclear. If the contract doesn’t explain how change orders are handled, bring it up before signing. Clear expectations up front can prevent surprise markups later.

Change Order Best Practices

• Keep a running log of all approved changes and their cost/timeline impact
• Clarify that work should not begin until a CO is signed
• If you’re unsure whether something is a change order or not, ask
• Plan for at least 5–10% of your construction budget to go toward change orders

What If You Disagree with a Change Order?

It’s okay to ask questions or push back on change order pricing. Common steps:

• Ask for a cost breakdown (labor, materials, markup)
• Get clarification on why the work is needed or why it wasn’t included initially
• Ask if it’s time-sensitive or if you can defer it
• If needed, get a second opinion, especially for large changes

You don’t have to approve every change, and your contractor should be open to discussing alternatives.

Action Items for Project Owners

• Review your original contract to see how change orders are handled
• Confirm who will prepare them and what format they use
• Make sure your contractor explains any change that will affect price or schedule
• Keep copies of every signed change order in your project file
• Include a change order buffer in your initial budget

What’s Next: Wrapping Up Preconstruction

Once change orders are understood and your contractor is selected, you’re approaching the final steps before construction begins. But there are still a few important pieces to organize before the project officially kicks off.

The next section, Preconstruction Wrap-Up, covers what to expect and prepare for in the final phase before breaking ground. You’ll learn how to run a productive kickoff meeting, set up tools to track your timeline, get clarity on FF&E (fixtures, furniture, and equipment), and understand what happens next once the construction team takes over.

Continue to Preconstruction Wrap-Up to tie everything together and step confidently into the construction phase.