What Is a Change Order in Construction?
A change order is a written amendment to a construction contract, signed by the owner and the contractor, that changes the scope of work, the contract price, the contract time, or some combination of the three. It is the formal way to add work, remove work, or adjust the terms after the contract is signed. On projects that use AIA contract documents, the standard form is the AIA G701 Change Order, and the architect usually signs it as well.
Change orders are not a sign that something went wrong. Almost every commercial project has some, because no set of drawings anticipates every condition in the field and owners sometimes decide they want something different. What separates a well-run project from a painful one is not whether change orders happen, but how they are requested, priced, documented, and approved. This guide is written for owners, developers, and tenants on commercial projects who want to understand the process before they are in the middle of it.
The Five Most Common Causes of Change Orders
Most change orders trace back to one of five causes.
Owner-requested changes. The owner adds scope, upgrades a finish, moves a wall, or changes equipment after pricing. These are the most controllable changes, because the owner decides whether to make them.
Design errors and omissions. A detail is missing, two drawings conflict, or a system was not coordinated with the structure. The fix is usually unavoidable, and the question becomes who pays for it under the contract.
Unforeseen site conditions. Poor soil, buried debris, unknown utilities, or, in a remodel, damaged framing and old work that does not match the record drawings. Many contracts treat concealed conditions as a basis for adjusting price and time.
Code and inspector requirements. A plan reviewer or field inspector requires something that was not in the permit set. This is common on commercial remodeling and ADA retrofit work, where altering one area can trigger upgrades elsewhere.
Supply and availability. A specified product is discontinued or delayed, and a substitution changes cost or schedule.
How a Change Order Moves From Request to Signature
The path is similar on most commercial contracts, even when the forms differ.
First, someone identifies the change. The owner may request it, the architect may issue a revised drawing or a proposal request, or the contractor may submit a request for information when field conditions do not match the documents. Second, the contractor prices it and states the schedule impact, usually in a change order request or proposal with a breakdown of labor, material, equipment, subcontractor cost, and markup. Third, the owner and architect review the price, ask questions, and negotiate if needed. Fourth, the parties sign the change order, and the contract sum and contract time are formally adjusted.
The rule that protects everyone is simple: changed work should not proceed without written authorization. When work has to start before the price is settled, for example to avoid stopping the job, the contract should provide a way to direct it in writing, which is covered below. Clear procedures are part of the broader discipline described in our commercial construction project management guide.
What a Complete Change Order Should Include
A change order is a contract document, so it should be complete enough that someone reading it a year later understands exactly what changed and why. At a minimum it should identify the project and the contract, give the change a number and a date, and describe the changed work in plain terms with references to the revised drawings, specification sections, or requests for information that define it.
It should then state the money: the original contract sum, the net total of previously approved change orders, the amount of this change, and the new contract sum. It should do the same for time: the original contract time or completion date, the adjustment from this change, and the new date. When a change has no cost or time effect, the document should say zero rather than leave the field blank.
Finally, it should carry the signatures of everyone the contract requires, typically the owner, the contractor, and on AIA-based contracts the architect, and attach the pricing backup. Owners should be cautious about change orders that reserve the right to claim more time or money later for the same change. A signed change order is normally meant to settle that change in full, and language that leaves it open should be negotiated before signing.
How Change Orders Are Priced
Contracts usually allow change orders to be priced in one of three ways. A lump sum is a fixed price for the defined change, agreed before the work is done. Unit prices apply rates already in the contract, such as a price per cubic yard of excavation or per square foot of drywall, to the measured quantity. Time and materials, sometimes called cost plus, pays actual labor, material, and equipment costs plus an agreed markup, with daily tickets signed in the field.
Whatever the method, the contract should say how much markup is allowed for overhead and profit, whether the general contractor can mark up subcontractor work, and how bond and insurance costs are handled. Owners should expect a breakdown, not a single number. A credible change order shows quantities, rates, and the source of each cost, and a credit change for deleted work should be priced with the same care as an add.
Pricing changes early, while alternatives are still open, is where an owner has the most leverage. A value engineering review before construction often prevents the expensive changes that come from redesigning in the field.
Change Orders, Change Directives, and Allowances: Know the Difference
Three related tools are often confused.
A change order is agreed by both parties and adjusts price and time in one signed document.
A construction change directive, the AIA G714 form on AIA-based contracts, lets the owner and architect direct a change before the price is agreed. The contractor proceeds, keeps detailed cost records, and the adjustment is settled afterward. It keeps the job moving when waiting for agreement would cost more than the change itself.
An allowance is a sum carried in the contract for an item that is not fully defined at bid time, such as a finish selection or a fixture package. When the final selection is made, the difference between the allowance and the real cost is settled, often by change order. Tenants see a related idea in leases: the tenant improvement allowance is money the landlord contributes, and it interacts with the construction budget in similar ways.
Minor changes in the work, such as small field adjustments that do not change cost or time, can often be handled by the architect without a change order, if the contract allows it.
How to Keep Change Orders Under Control: A Checklist
Owners cannot eliminate change orders, but they can reduce the avoidable ones and keep the rest fair.
- Finish the design before you bid. Incomplete drawings are the largest single source of change orders. Pricing a coordinated set costs less than redesigning during construction.
- Investigate existing conditions. On remodels and tenant work, pay for an above-ceiling survey, utility locates, and selective demolition before bidding, so hidden conditions are found while they are cheap to solve.
- Write the change procedure into the contract. Define the forms, the pricing methods, the allowed markups, the response times, and who has authority to sign.
- Carry a contingency. Hold an owner contingency for real unknowns, separate from the contract price, and track it openly.
- Decide fast. A change that waits weeks for a decision often costs more in delay than in work. Set a review turnaround and keep it.
- Keep a change log. Track every request, proposal, approval, and rejection with dates and amounts, and review it at every owner meeting.
- Choose a contractor who prices openly. Ask bidders how they handle changes, and ask to see a sample change order breakdown from a past project.
What Change Orders Do to the Schedule
Cost gets the attention, but time is often the bigger effect. A change can add days directly, by adding work on the critical path, or indirectly, by holding up the trades that follow it. A small change to a kitchen hood, for example, can delay the fire suppression inspection, which delays the health inspection, which delays opening. Every change order should state its effect on contract time, even when the answer is zero days, so the schedule and the contract stay in agreement.
For retail and restaurant owners working against a lease commencement or a grand opening date, that is why the decision speed in the checklist matters so much. Our step-by-step guides to the restaurant construction process and the restaurant remodel process show where changes most often affect opening dates, and our comparison of ground-up construction and tenant finish-out explains how project type changes that exposure.
When an Owner and a Contractor Disagree About a Change
Disagreements usually fall into two kinds: whether something is a change at all, and what it should cost. The first is a scope question, answered by the drawings, the specifications, and the contract language. The second is a pricing question, answered by the agreed pricing method and the backup.
The practical steps are the same in both cases. Keep working on undisputed work, put the disagreement in writing promptly, follow the notice requirements in the contract, and keep records: photos, daily reports, and cost tickets. Many contracts require written notice of a claim within a set number of days, and missing that window can waive rights. A construction change directive can keep the job moving while the price is settled. If the parties still cannot agree, the contract’s dispute resolution clause decides what comes next. This article is general information, not legal advice; owners with a real dispute should involve their attorney.
The best protection is choosing a builder who documents conditions before acting and prices changes transparently. Our buyer’s guide to picking a commercial general contractor covers the questions to ask, and our commercial construction services page explains how Sword Construction structures contracts on ground-up, retail, restaurant, and remodel work.
Frequently Asked Questions
What is a change order in construction?
A change order is a written amendment to a construction contract, signed by the owner and the contractor, that changes the scope of work, the contract price, the contract time, or a combination of them after the contract is signed.
Who pays for a change order?
It depends on the cause and the contract. Owner-requested changes are normally paid by the owner. Design errors, concealed conditions, and code requirements are allocated by the contract terms, which is why the change procedure and responsibilities should be written clearly before the job starts.
Can a contractor refuse a change order?
Most commercial contracts allow the owner to order changes within the general scope of the work. A contractor can dispute the price or time, and the contract usually provides a mechanism, such as a construction change directive, to keep work moving while that is resolved.
What is the difference between a change order and a change directive?
A change order is agreed by both parties before it is signed and adjusts price and time together. A construction change directive lets the owner direct the work before the price is agreed, with the adjustment settled afterward from cost records.
How can owners reduce change orders?
Finish and coordinate the design before bidding, investigate existing conditions on remodels, write a clear change procedure into the contract, carry a separate contingency, and make decisions quickly when changes come up.
Want Clear Pricing Before the First Change Comes Up?
Send us your drawings, the site, and your target opening date. We provide detailed pre-construction pricing and a written change procedure on commercial projects across the states we serve.
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