Even for seasoned contractors, unexpected project changes are inevitable. A client requests additional features mid-build, material availability forces a substitution, or site conditions reveal unforeseen challenges. Without proper documentation, these changes quickly cascade into schedule delays, budget disputes, and strained client relationships. A well-crafted change order isn't just paperwork—it's the difference between profitability and project chaos.
What Is a Change Order in Construction?
A change order is a written agreement that updates your original contract when something needs to change during a project. It officially modifies the work scope, schedule, or price, and usually requires signatures from you and your client before the new work begins.
Types of Change Orders and Their Common Triggers
- Scope Change Orders: Adjustments to the quantity or quality of work, often triggered when site conditions differ from plans or when new requirements emerge during construction.
- Design Change Orders: Modifications to plans, specifications, or materials that may arise from client preferences, material availability issues, or when better solutions become apparent during the build.
- Time Change Orders: Extensions or reductions to the project timeline, commonly needed due to weather delays, permit issues, labor shortages, or when project phases need rescheduling.
- Budget Change Orders: Price adjustments resulting from scope changes, material cost fluctuations, or when unforeseen conditions require additional resources.
Change orders can also be triggered by who initiates them:
- Owner-Initiated: When your client requests modifications to the existing project plan.
- Contractor-Initiated: When you identify necessary changes based on site discoveries, code requirements, or to address potential issues before they become problems.
- Cascading Change Orders: When primary changes trigger additional modifications that require coordination between client approval and subcontractor agreements.
Managing the Change Order Chain
Many change orders create a sequence of documentation that requires careful coordination. When scope modifications arise:
- Request Subcontractor Pricing First: For work involving subcontractors, obtain detailed pricing and timeline impacts from them before presenting changes to the client.
- Execute Subcontractor Change Orders: Formalize agreements with subcontractors to lock in pricing and availability.
- Create Client Change Order: Develop the client-facing change order that incorporates subcontractor costs plus your markup and management fees.
- Obtain Client Approval: Secure signed approval before directing subcontractors to proceed.
- Release Subcontractors to Perform: Once client approval is secured, formally release subcontractors to perform the modified scope.
This sequential approach ensures you don't commit to client pricing before knowing your actual costs, and don't commit subcontractors to work before having client approval to proceed.
The Risks of Not Implementing Change Orders
Making project changes without proper paperwork puts your business at risk:
- Unpaid work: Without written approval for extra work, you end up paying for expenses that your client should cover.
- Schedule headaches: When changes aren't documented, nobody knows what to prioritize or who should be where.
- Legal disputes: A handshake deal won't legally protect you when disagreements happen. You need paperwork.
- Payment delays: When changes aren't formalized quickly, payment gets delayed, putting stress on your finances.
What to Include in a Comprehensive Construction Change Order
A thorough construction change order form ensures all parties understand and agree to the modifications. Here are the eight essential components:
1. Project Information
Every change order must clearly identify the project through:
- Project name and address
- Start date
- Contract reference number
- Client or owner's complete contact information
- Contractor's information
This foundation ensures the change order connects properly to the correct project, preventing confusion across multiple jobs.
2. Change Order Number
Assign a unique identifier to each change order for tracking purposes. This numbering system facilitates:
- Easy reference during discussions
- Chronological organization of multiple changes
- Simplified construction change order tracking throughout the project lifecycle
3. Details of Contract Changes
Provide clear, specific descriptions of all modifications, including:
- Work being added, altered, or removed
- Reference to affected contract sections
- Reasons for the change
- Impact on subcontractors and their scope
Clarity here prevents misinterpretations that could lead to further disputes or additional changes.
4. Cost Implications
Clearly outline all financial impacts of the change order. You may provide either:
- An itemized breakdown (labor, materials, equipment, taxes, administrative costs)
- A comprehensive lump sum figure
Both approaches are valid depending on your contract terms and business practices. The key is to document financial changes sufficiently for client approval and project accounting purposes.
5. Revised Contract Value
Clearly state how the change order affects the overall contract price:
- Original contract sum
- Previously approved change orders (if any)
- Amount of this change order (addition or deduction)
- New contract sum
This running total helps all stakeholders understand the evolving financial commitment.
6. Impact on Project Timeline
Document schedule modifications with specific dates:
- Original completion date
- Days added or subtracted
- Revised completion date
- Critical path impacts
This documentation is crucial for coordinating subcontractors and managing client expectations.
7. Supporting Documents
Attach relevant materials that provide context and justification:
- Updated drawings or specifications
- Photographs documenting conditions
- Engineering reports or professional opinions
- Relevant communication records
These supporting documents strengthen the change order and protect all parties in case of later disputes.
8. Stakeholder Signatures
Obtain formal approval from all necessary parties:
- Owner/client
- General contractor
- Architect/engineer (when applicable)
- Relevant subcontractors
These signatures transform the change order from a request to a legally binding modification of the original contract.
Tips for Handling Change Orders in Construction
Make your change order process smoother with these practical strategies:
- Reference the original contract: Always review the change order clause in your contract to ensure compliance with predetermined procedures.
- Act quickly: Don't let change orders sit on your desk - handle them right away to keep your project moving.
- Use standardized templates: Use consistent forms to ensure all critical information is captured. Beam offers customizable change order templates that save you time and headache.
- Leverage construction management software: Tools like Beam simplify change order tracking and allow you to easily update project budgets and send invoices once they’re approved.
- Establish approval processes: Define who has authority to approve changes at various dollar thresholds to prevent bottlenecks.
- Document verbal discussions: Follow up on conversations with written confirmation to create a paper trail.
Manage Your Change Orders with Beam
Good change orders protect everyone involved in your projects by clearly spelling out what work is changing, what it will cost, and how long it will take.
Beam gives contractors like you the tools to handle change orders without the headaches. Our platform does it all in one place—estimates, change orders, invoices, and payments.
Ready to stop losing money on project changes? Schedule a free demo today!
