In construction, a change order is as inevitable as the sunrise. Despite the most meticulous planning, projects rarely go from blueprint to completion without a single adjustment. Whether it’s a client’s last-minute request, an unforeseen site condition, or a design flaw, a project will change. The way a general contractor handles these adjustments isn’t just a matter of administration; it’s an art form that directly impacts profitability, client relationships, and project success.
A poorly managed change order can lead to disputes, costly delays, and a breakdown of trust. However, a well-executed change order can be an opportunity to build a stronger client relationship, increase your profits, and showcase your professionalism.
What Is a Change Order?
At its core, a change order is a written agreement that modifies the original contract. It formalizes any change to the project’s scope, timeline, or cost. This can include:
- Adding or removing work. For example, a client decides they want to add a patio to their new home.
- Changing materials. The owner requests a different, more expensive type of flooring than what was originally specified.
- Adjusting the schedule. An unforeseen issue, like a permitting delay, requires an extension of the project timeline.
- Modifying the design. An architect issues a revised drawing that requires structural changes.
Simply put, if a change is not documented in a formal change order, it doesn’t officially exist.
The Cost of an Informal Approach
Many contractors make the mistake of handling changes informally, either through a verbal agreement or a quick email. This is a recipe for disaster.
- Financial Disputes: A verbal agreement is notoriously difficult to enforce. If a client disputes a cost you added for a change, you have no formal documentation to back up your claim.
- Miscommunication: Without a clear, written scope, a client might have a different expectation of what a change entails. This can lead to arguments and expensive rework.
- Eroded Profit Margins: Every change, no matter how small, adds administrative work, and often, unbilled costs. An informal change can seem minor at the time but will slowly eat away at your profit margin.
The 5-Step Process for a Professional Change Order
A professional change order process is transparent, consistent, and proactive. By following these steps, you protect your business and build client confidence.
Step 1: Document Everything in Writing ✍️
As soon as a change is discussed, begin documenting it. A Change Order Request (COR) is the first step. This document captures the initial request, notes the impact it may have on the project, and acts as a formal record of the conversation.
Step 2: Analyze the Impact
Before you present a cost to the client, you must thoroughly analyze the change’s impact on all aspects of the project. This is often more complex than it seems.
- Direct Costs: The cost of new materials and labor required for the change.
- Indirect Costs: The cost of administrative time, project management overhead, and any fees associated with revised permits or drawings.
- Schedule Impact: Does this change affect the project’s critical path? If so, you need to account for any additional time required and how it will affect subsequent subcontractors.
Step 3: Present a Clear Proposal
Once you have a complete analysis, create a detailed change order proposal for the client. This document should include:
- A clear, concise description of the change.
- An itemized breakdown of all costs (labor, materials, overhead, and profit).
- The exact adjustment to the project schedule.
- A clear statement that the work will only proceed after the client has signed and approved the document.
Present this information professionally and explain the “why” behind the costs and timeline adjustments.
Step 4: Secure a Signed Agreement ✅
This is the most crucial step. Never, under any circumstances, begin work on a change order until you have a signed agreement from the client. A signed change order is a legally binding document that protects both parties and is your only recourse in a dispute.
Step 5: Communicate & Integrate
Once the change order is signed, it’s essential to communicate the new plan to your entire project team and relevant subcontractors. The change must be formally integrated into your project schedule and budget. Use project management software to update your Gantt chart, material lists, and financial forecasts to reflect the new scope of work.
The Art of the Conversation
Beyond the paperwork, the “art” of the change order lies in your ability to communicate effectively.
- Be Proactive: Identify potential changes or issues as early as possible. If you see a potential conflict between the design and site conditions, raise it immediately with the client before it becomes a costly problem.
- Maintain Transparency: A client is more likely to accept a change order when they understand where the costs are coming from. Provide an itemized list and explain how each element contributes to the total cost.
- Manage Expectations: Be upfront about the potential for changes from the beginning of a project. Explain that while you’ve created a detailed plan, the nature of construction means unforeseen issues can arise. This primes the client to be more receptive to future change orders.
By treating change orders as a formal, professional process rather than an informal afterthought, you elevate your business. You protect your finances, ensure your projects stay on track, and transform a potential point of conflict into an opportunity to build a long-lasting, trusted relationship with your client.
