Change Orders
Overview, Forms & FAQs

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What is a change order?

A change order is an agreement between two parties on a construction project to change or amend the scope of work in the original contract.

Construction projects are complicated, and plans can change often from the original design. However, when a change arises, it is critical to get as much detail about the change in writing. While a change may be initiated by either party, both must agree on the amendments to the work and cost associated with the change.

Top Down, Bottom Up Change Orders

Changes can come from the top down, such as when an owner or architect makes design changes after the project begins. Changes also come from the bottom up. If a contractor encounters differing site conditions or another obstacle that affects their ability to complete the scope of work, they may submit a change order to the GC or property owner.

Change Order Management Tips

Change orders create a record of any additional services requested by the customer, along with the relevant cost increases. It’s always best practice to get everything in writing, and in some jurisdictions, it may be legally required.

Here are some management tips to streamline the change order procedure:

  • Plan ahead
  • Use Change Order Templates
  • Collect Daily Reports, Photos, & other Detailed Information
  • Get Written Approvals
  • Communication

Best practices

Unapproved Change Orders

Poor change order management is a problem that can impact your entire business. Change orders can lead to many “hidden” losses for contractors. Because of this, contractors should also seek a written approval for their change orders. Experienced contractors and subs should avoid starting any jobs or work on any project until a change order is approved in writing. Aside from physically working on jobs, contractors should also hold off scheduling the work or ordering materials.

Change in the Scope of Work

A construction contract contains information about the scope of work that both parties agree upon. The scope of work is a detailed description of the work expected from contractors and subs. It spells out exactly what the contractor or sub is required to do under the contract. The scope of work might be a section in the contract, or a separate document attached to the agreement.

The scope of work will outline who is responsible for completing each task, the project schedule, and any other necessary details for contractors and subs to understand their role and responsibility on the job. It establishes each party’s rights and obligations.

Plans change often on a construction project. When changes come up that are outside of the original scope of work, a change order is generally required.

Scope Creep

It’s not uncommon for the hiring party to ask a contractor to perform additional work on the fly, without providing a change order. Often, these changes may seem inconsequential – they don’t take a lot of time, or significantly affect the project cost – so contractors and subs make the change without documenting it. A few small changes may not break the bank, but they can add up quickly; this is known as scope creep. If you’re not documenting change orders, you may not realize how much these small changes are costing you until you’ve completed the project.

Change Order Format

A change order typically includes:

  • A description of the requested change
  • An overview of the costs associated with the change in work
  • Supporting documents
  • Any impact on the construction schedule

Free change order templates

Payment Applications

When you submit a payment application, you should include all change orders approved during that period. An application for payment should contain documentation supporting all work that you’re requesting payment for – including change orders.

How Change Orders Work

Order or Directive?

A change order is a signed agreement between two parties. A change directive, on the other hand, is effectively a command. When the contractor and owner can’t agree on changes, an owner may be able to override their contractor with a change directive.

Deductive Change Orders

A change order doesn’t always increase the work and contract price. It can also decrease it through a deductive change order.

Frequently Asked Questions about Change Orders

Who issues a change order?

A change order can be issued by either party, though they typically come from the owner. A contractor or sub may also submit a change order when they encounter differing site conditions, or another obstacle that wasn't described or anticipated in the bid process.

When should I use a change order?

You should use a change order whenever you are asked to perform work that differs from the scope of work outlined in your contract.

Do I need to use a specific change order form?

Unless your contract documents call for a specific document, you don't need to use one. For example, if you are using AIA contract documents, your contract may require you to use the AIA G701 Change Order Form.

However, in most cases the more important thing is that you include as much detail about the change and impact on work, cost, and schedule as possible. Download a free change order form template to work from.

Do I need to get a change order in writing?

It's always best to get a change order in writing. Verbal agreements can be difficult to prove or enforce. If you don't receive payment, a written change order can support a mechanics lien claim or lawsuit.

How do change orders affect my payment application?

When you submit a pay application, you should include change orders approved during the pay period. Generally, it's a bad idea to include unapproved change orders, since that could delay application approval and your payment.

How do change orders affect a mechanics lien claim?

Documented, approved change orders can strengthen a mechanics lien claim. If you complete the change order correctly, your lien rights should remain intact. In fact, a change order could actually extend the filing deadline, or even revive lien rights.

What's better: A deductive change order or a partial termination?

First, check your contract. There should be guidance there about whether a partial termination is even allowed. Generally, minor changes in the scope of work are best done with a deductive change order. Major reductions should be made via partial termination. See deductive change orders vs. partial termination for more.

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Construction attorneys: Courtney Stricklen, Christopher Ng, Andrea Goldman, and Peter Ryan

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