"Just go ahead and do it, we'll figure out the cost later." Those words have cost subcontractors millions. Extra work performed without proper change order documentation often goes unpaid. Here's how to manage change orders properly.
What Triggers a Change Order?
A change order is required whenever work differs from the original contract scope:
Owner/Design Changes
The owner or architect changes the design, adds features, or modifies requirements.
Unforeseen Conditions
Site conditions differ from what was reasonably expected from the plans.
Errors or Omissions
The plans had mistakes or missing information that require additional work.
Directive to Accelerate
You're asked to speed up work to recover schedule.
Specification Changes
Different materials or methods are required than originally specified.
The Golden Rule: Document Before You Work
Never — never — perform extra work without written authorization. Even if you trust the GC completely. Even if they promise to "take care of you." Even if it's urgent.
The process should be identify the extra work required, notify the GC in writing, provide a cost proposal, receive written approval, then perform the work.
If you perform first and document later, you have no leverage. The GC may deny the change was authorized, dispute your costs, or simply refuse to pay.
Documenting Change Order Requests
Clear Description
Describe exactly what changed from the original scope. Reference specific contract sections or drawing details that are being modified.
Reason for Change
Explain why the change is needed. "Per RFI response dated [date]" or "Due to unforeseen condition discovered [date]."
Cost Breakdown
Provide detailed cost documentation: labor hours by trade/classification, material costs with supplier quotes, equipment costs, subcontractor costs, overhead and profit markup.
Schedule Impact
If the change affects the schedule, document the impact. Additional time may entitle you to extended general conditions costs.
Supporting Documentation
Attach relevant documentation: RFIs, drawings, site photos, supplier quotes, specification sections.
Pricing Change Orders
Use Contract Rates
If your contract specifies rates for extra work (unit prices, hourly rates), use them.
Cost-Plus Approach
Without specified rates, use cost-plus: actual costs plus reasonable markup for overhead and profit (typically 10-20% for overhead and 10% for profit).
Lump Sum
For defined scope changes, a lump sum price may be appropriate. Base it on your actual cost estimate plus markup.
Time and Material
For undefined scope, propose time and material with not-to-exceed limits or weekly caps for cost control.
Negotiating Change Orders
Start from Documentation
Your cost documentation is your negotiating foundation. The more detailed and supported your numbers, the stronger your position.
Understand Their Constraints
GCs often have change order budgets or owner approval thresholds. Understanding their constraints helps you find workable solutions.
Be Flexible on Structure
If they can't approve your lump sum, perhaps time and material works. If they need cost certainty, offer a not-to-exceed. Find creative structures that work for both sides.
Don't Work for Free
Flexibility doesn't mean performing extra work without compensation. Be creative on terms, but firm on getting paid.
Document the Negotiation
Keep records of all change order negotiations. If agreements are reached verbally, confirm in writing.
When Change Orders Are Disputed
Keep Working (Usually)
Unless your contract allows you to stop for disputed changes, continue performing directed work while documenting your protest.
Formal Claims Process
Follow your contract's dispute resolution process. Submit formal claims within required timeframes.
Preserve Your Rights
Include reservation of rights language: "Subcontractor performs this work under protest and reserves all rights to claim additional compensation."
Track Costs Separately
Keep detailed records of disputed work costs separate from base contract costs.
Common Change Order Mistakes
Verbal Agreements
"He told me to just do it" isn't documentation. Get it in writing.
After-the-Fact Documentation
Trying to document changes after work is complete is far harder than documenting in real time.
Incomplete Pricing
Forgetting to include overhead, profit, or indirect costs means you don't fully recover what extra work costs you.
Missing Deadlines
Many contracts have strict timeframes for submitting change orders. Miss the deadline, lose the right to claim.
Being Too Agreeable
Wanting to be a "team player" is admirable, but not at the cost of doing free work. Professionals get paid for their work.
Contract Language to Watch
Review your contract's change order provisions for required notice timeframes (often 7-14 days), pricing methodology requirements, authorization requirements (who can approve?), and dispute procedures.
If these provisions are unreasonable, negotiate before signing.
Frequently Asked Questions
What if the GC says there's no budget for change orders?
That's their problem, not yours. If the work is outside your scope, you're entitled to compensation regardless of their budget.
Can I refuse to do change order work?
Generally, you must perform directed work, but you can perform "under protest" while reserving your rights to claim compensation.
What markup is reasonable for change orders?
Overhead markup of 10-20% and profit margin of 10% are commonly accepted. Your contract may specify rates.