Change Order Construction: What It Is, How It Works, and Why It Matters

Managing construction projects involves striking a constant balance between budget, schedule, and client expectations. Even with airtight plans, unexpected conditions and evolving priorities make changes inevitable—this is where change orders come in. The difference between a smooth adjustment and a dispute often begins before the first change request, with a proactive risk review that tightens contract language and clarifies approval authority from the outset.

In this guide, we explain what a construction change order is, when it’s needed, who approves it, and the step-by-step process to manage it. You’ll also find real-world examples, best practices, and practical tips that keep documentation clear, costs transparent, and schedules on track.

What Is a Change Order in Construction?

A construction change order is a formal, written amendment to the original construction contract. It outlines modifications to the agreed scope of work, cost, or schedule. Essentially, it captures any change from what was initially promised in the contract.

Change orders are designed to protect both the contractor and the owner. Without them, projects risk becoming a series of informal promises that lead to budget overruns, missed deadlines, and disputes. By requiring formal documentation, change orders establish accountability and clarity.

Common Scenarios That Trigger a Change Order

• An owner requests upgraded finishes not in the original design.
• The architect identifies a drawing error that requires rework.
• Soil conditions differ from the original geotechnical report.
• A subcontractor encounters a material shortage, requiring substitutions.
• The municipality enforces a new code requirement mid-project.
• Unexpected hazardous materials (like asbestos) are discovered on-site.
• A client decides mid-project to add new features or expand square footage.

Every project has unique circumstances, and understanding the triggers helps project teams prepare for the inevitable. In all cases, the change order formally documents the modification to prevent misunderstandings later.

How Extra Work Differs from Additional Work in Construction

Many contractors confuse the terms extra work and additional work, but they carry different implications for contract management.

What Is Extra Work in Construction?

Extra work refers to tasks outside the scope of the original contract. For example, if the contract only covers building a warehouse and the owner later requests an attached office wing, that qualifies as extra work. These changes are typically not included in the original cost and require additional payment.

What Counts as Additional Work?

Additional work, on the other hand, is necessary to complete the original scope but may not have been clearly specified. For instance, if drawings omit necessary structural bracing but it is required for safety and compliance, that counts as additional work. Depending on the contract language, this work may or may not be considered billable.

Why This Distinction Affects Your Project’s Budget and Timeline

Extra work almost always results in additional payment and time extensions. Additional work may be considered part of the original contract obligations, creating disputes if not clearly defined. This distinction directly impacts cash flow, project scheduling, and trade contractor workload.

For example, if a contractor assumes additional work is billable while the owner believes it falls under the contract, conflict is inevitable. Detailed contracts and proactive communication resolve these issues before they derail progress.

Types of Construction Change Orders

Not all change orders are created equal. Contractors should be aware of the types that commonly arise.

Minor vs. Major Change Orders

• Minor change orders involve small adjustments that do not significantly impact budget or schedule. For instance, changing a type of paint finish or replacing one fixture with another of similar cost.
• Major change orders involve substantial modifications, often requiring new approvals and budget adjustments. These could include expanding the footprint of a building or reworking structural systems. Major change orders often delay completion and strain contractor resources.

Owner-Initiated vs. Contractor-Initiated

• Owner-initiated: Changes requested by the project owner, such as upgrades or design alterations. These are usually elective and often add cost.
• Contractor-initiated: Changes proposed by contractors, often due to site conditions, constructability issues, or material availability. These tend to be necessary rather than optional.

Cardinal Changes and Their Legal Implications

A cardinal change goes so far beyond the scope of the contract that it essentially creates a new project. Courts often view these as contract breaches rather than amendments, which can lead to termination of the original agreement and potential litigation. Cardinal changes are rare but carry serious legal weight.

Who Approves a Construction Change Order?

Approval authority depends on the contract, but several parties typically play a role.

Roles and Responsibilities: Contractor, Owner, Architect

• Contractor: Identifies need, submits proposal, and carries out the work once approved.
• Owner: Reviews and approves changes impacting scope, schedule, or budget.
• Architect/Engineer: Confirms design feasibility and ensures changes comply with building codes and safety requirements.

How Authority Is Defined in Your Contract

Contracts should clearly specify who has the authority to approve changes. For example, an architect may be allowed to approve minor design clarifications but not budget changes. On large projects, approval thresholds may be tiered, with owners only reviewing changes above a certain dollar amount.

Failing to define approval authority can lead to disputes and unauthorized work, which is one of the biggest sources of litigation in construction projects.

The Construction Change Order Process: Step-by-Step

A well-documented construction change order process minimizes disputes and delays.

Step 1: Identify the Need and Give Formal Notice

As soon as a change is identified, the contractor should provide written notice to the owner and architect. Timely notice is critical, as many contracts include deadlines for submitting change order requests. Missing these deadlines can forfeit the contractor’s right to claim additional costs.

Step 2: Document Scope, Costs, and Schedule Impact

Prepare a detailed description of the change, with supporting documentation on costs and schedule adjustments. This may include subcontractor quotes, material pricing, or labor estimates. The more detailed the documentation, the easier it is to justify the change.

Step 3: Submit the Change Order for Review

Submit the formal change order request to the designated authority as specified in the contract. If your team manages approvals in Procore, use the Procore integration to route the CO, attach backups (subs’ quotes, takeoffs, schedules), and sync status to cost codes and budget logs in real-time.

Step 4: Negotiate and Reach Agreement

Both parties negotiate terms, considering cost, timeline, and constructability. The negotiation may involve several iterations before consensus is reached. Strong communication skills and transparency are key here.

Step 5: Final Approval and Implementation

Once signed, the change order becomes binding and is implemented. The contractor proceeds with the revised scope of work, updating all schedules and budgets accordingly. Trade contractors are then issued updated work orders to reflect the changes.

What Every Construction Change Order Should Include

A complete change order ensures all parties are aligned. It should never be vague or leave room for interpretation.

Project Details and Contact Info

Clearly identify the project name, location, and contract number, along with contact details for all parties.

Scope of Work and Specifications

Document exactly what is changing in the scope. Include drawings, specifications, and any clarifications.

Schedule Adjustments and Milestones

Show revised timelines or milestone dates, including both delays and accelerations.

Cost Changes and Budget Revisions

Outline the exact dollar impact of the change. Break down labor, materials, equipment, and overhead. Transparency helps maintain trust.

Updated Contract Value

Reflect the new total contract value after the change, ensuring accounting and billing remain accurate.

Signatures and Authorization

Ensure all required parties sign off to validate the order. Without signatures, disputes can arise over whether the change was authorized.

Best Practices for Managing Change Orders

Change orders can derail a project if not managed properly. These best practices help ensure clarity and protection as you create your change orders:

Start with Clear Contract Language

Use detailed contracts that anticipate potential changes. Tools like Risk Review can help you identify gaps in language before issues arise.

Keep Detailed Records and Communication Logs

Maintain accurate logs of communications, approvals, and field changes. Detailed records often serve as evidence in disputes and can determine who is responsible for costs.

Use Standardized Templates and Approval Forms

Adopting templates reduces confusion and keeps processes consistent across projects. Platforms that include Project Playbooks make it easier to standardize.

Train Project Teams on Change Protocols

Ensure both contractors and trade contractors understand how to properly request, document, and process changes. Training prevents delays and reduces risk.

Leverage Technology for Change Order Management

Construction management software can track change orders, automate approvals, and link changes to budgets and schedules in real time. This level of visibility helps project managers keep control over their projects.

Real-World Examples of Change Orders Done Right (and Wrong)

Below are two brief scenarios that show how disciplined change order practices prevent disputes, and how skipping the process creates costly problems.

Successful Example 

On a hospital renovation, unforeseen asbestos was discovered. The contractor immediately documented the scope, provided cost details, and worked with the owner to approve a change order. Because the process was followed correctly, delays were minimized.

Failed Example

A commercial office project experienced owner-requested upgrades without signed approvals. The contractor proceeded informally, but when invoices were submitted, the owner disputed them. The lack of a documented change order led to arbitration and strained business relationships.

These examples highlight why proper change order management is not optional, it is essential.

Conclusion: Making Change Orders Work for Your Project

Change orders are an unavoidable part of construction. The difference between smooth project execution and costly disputes often comes down to documentation, communication, and proactive management. By understanding the change order construction process, project teams can protect their budgets, avoid legal disputes, and keep owners satisfied.

Want to simplify your change order process and protect your bottom line? Sign up for a demo at Document Crunch.

FAQs About Change Order in Construction

What Is a Change Order in Construction?

It is a written amendment to the original contract outlining changes to scope, cost, or schedule.

What Is the Most Common Reason for Change Orders in Construction?

Design changes and errors in plans are the leading causes, followed closely by unforeseen site conditions like poor soil or hidden utilities.

What Is the Difference Between a Change Order and T&M?

Change orders are formal contract amendments, while T&M (time and materials) is a billing method used for uncertain scopes. T&M may be used for smaller, undefined changes, but change orders formally adjust the contract.

Who Pays for a Change Order in Construction?

Typically, the owner pays if the change was initiated by them or required due to unforeseen conditions. However, poorly drafted contracts can shift costs onto contractors, which is why careful contract review is essential.

What Is the Difference Between a PO and a Change Order?

A purchase order authorizes procurement of goods, while a change order modifies a construction contract. They serve different but complementary purposes in project management.

How Much Does a Builder Charge for a Change Order?

Charges vary, but contractors usually include labor, materials, overhead, and profit in their pricing. Some also add administrative fees for processing the order. Owners should expect costs to increase by 10–20% when design changes are requested mid-project.