Construction Change Order Management: Best Practices Guide 2025
Master change order management to protect margins and maintain project timelines. Documentation, pricing, negotiation, and dispute prevention strategies.
Change orders are inevitable in construction—even the best-planned projects encounter unforeseen conditions, design modifications, or owner-requested changes. How you manage these changes directly impacts profitability and client relationships.
Quick Definition
A construction change order is a written modification to the original contract that adjusts scope, schedule, or price. Proper documentation and approval before proceeding protects all parties.
Understanding Change Orders
Change orders represent modifications to the original contract scope. They can increase or decrease the contract value and affect the completion schedule. Without proper change order management, contractors risk absorbing costs for work outside the original scope.
Additional work that increases contract value. Most common type—owner requests or unforeseen conditions.
Scope reductions that decrease contract value. Often for value engineering or budget constraints.
Schedule adjustment without cost change. Delays from weather, owner decisions, or third parties.
Types of Changes
| Source | Description | Typical Resolution |
|---|---|---|
| Owner-Directed | Owner requests changes to design or scope | Typically straightforward approval |
| Design Errors | Plans contain conflicts or omissions | Often contentious—liability questions |
| Unforeseen Conditions | Site conditions differ from documents | Differing site condition clauses apply |
| Code/Regulatory | Code changes or inspector requirements | Usually approved with documentation |
Documentation Requirements
Thorough documentation is the foundation of successful change order management:
- Written notice – Notify owner of changed conditions within contract timeframes
- Photos/video – Document conditions before and during changed work
- Daily logs – Record labor, equipment, and materials for force account work
- Cost backup – Invoices, timesheets, equipment logs supporting pricing
- Correspondence – Emails, RFIs, meeting notes related to the change
Critical Warning
Most construction contracts require written notice within specific timeframes (often 7-14 days) of discovering changed conditions. Missing these deadlines can forfeit your right to additional compensation.
Pricing Change Orders
Fixed price for defined scope:
- • Clear scope = easier approval
- • Risk/reward on contractor
- • Include contingency if uncertain
Actual costs plus markup:
- • Best for undefined scope
- • Requires detailed tracking
- • Owner may set not-to-exceed
| Category | Standard Range |
|---|---|
| Overhead & Profit (GC self-work) | 15-20% |
| GC markup on subcontractor work | 10-15% |
| Bond cost increase (if applicable) | 1-3% |
Negotiation Best Practices
- Present early – Submit change orders promptly, don't wait until project end
- Provide backup – Include documentation supporting your pricing
- Be reasonable – Fair pricing builds trust and speeds approval
- Separate issues – Don't bundle unrelated changes together
- Document agreements – Get written approval before proceeding
Avoiding Change Order Disputes
- • Review contract change provisions carefully
- • Issue timely written notices
- • Maintain contemporaneous records
- • Get written direction before proceeding
- • Communicate proactively with owner/architect
- • Proceeding without written approval
- • Missing notice deadlines
- • Insufficient documentation
- • Bundling too many changes together
- • Waiting until project end to negotiate
Win More Projects, Navigate Changes Better
The best defense against change order disputes starts with winning the right projects. ConstructionBids.ai helps you find opportunities matched to your capabilities.
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Should I proceed with changed work before approval?
Generally, no. Get written authorization before proceeding. If time-critical, document that you're proceeding under protest and reserve rights to compensation. Check your contract for "constructive change" provisions.
What if the owner refuses to issue a change order?
Follow the contract's dispute resolution process. Document your position, submit a formal claim if required, and continue performing base contract work. Consider mediation before litigation.
How do I price delay impacts?
Delay costs include extended general conditions (site supervision, trailers, insurance), equipment standby, and potentially home office overhead. Use daily rate calculations based on actual costs.
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