Change Order
A change order is a formal written document modifying the original construction contract, detailing changes to scope, materials, price, or timeline.
Change orders formally document modifications to the original construction contract. They specify what's changing, why it's changing, the cost impact (added or deducted), and any schedule impact. Common reasons include owner-requested design changes, unforeseen conditions (hidden rot, outdated wiring), code requirement changes, or material substitutions. Proper change orders include detailed descriptions and are signed by both parties before work proceeds. They protect both owner and contractor by documenting agreed changes.
Why Documentation Matters
Verbal change agreements lead to disputes. Document everything: what changes, who requested it, cost impact with detailed pricing, and schedule impact. Review change orders carefully before signing—some contractors inflate change order pricing beyond their normal markup. Get multiple quotes for significant changes. Understand the difference between owner-initiated changes (you pay for design changes) and contractor-caused issues (within original contract price). Building contingency budget (10-15%) into original budget anticipates inevitable changes.
Common Change Order Scenarios
- Owner-requested upgrades: Higher-end finishes, layout modifications, added features
- Unforeseen conditions: Rot, structural issues, outdated systems discovered during demo
- Code compliance: Updates required to meet current codes when work is done
- Material substitutions: Specified material unavailable, alternative proposed
- Site conditions: Underground utilities, rock excavation, drainage issues
- All change orders should detail: description, reason, cost breakdown, schedule impact, signatures
Related Terms
Scope of Work
Scope of work is a detailed document specifying exactly what work will be performed, materials used, quality standards, and deliverables included in a construction project.
Contingency Budget
Contingency budget is money reserved beyond the estimated project cost to cover unexpected expenses, unforeseen conditions, and changes during construction.
Progress Payment
Progress payments are partial payments made throughout a project as work is completed and verified, following a predetermined draw schedule or completion milestones.