Change Order

A formal written modification to a construction contract that alters the scope of work, contract price, or project schedule, executed after the original contract is signed.

What is a Change Order?

A change order is a written document that modifies the terms of an existing construction contract. Change orders formally authorize changes to the scope of work, adjust the contract price (either increasing or decreasing it), and/or modify the project schedule. They are a standard part of the construction process, as it is virtually impossible to anticipate every condition and decision before construction begins.

Common Reasons for Change Orders

Change orders arise from: owner-requested changes to the design or scope, unforeseen site conditions (such as unexpected soil conditions or hidden utilities), errors or omissions in the construction documents, code compliance issues discovered during construction, material substitutions, and coordination conflicts between trades. Some change orders are straightforward; others involve significant negotiation over cost and time impacts.

Change Order Process

The typical process involves: the contractor submits a change order request (COR) describing the proposed change, justification, cost impact, and schedule impact; the owner (or owner's representative) reviews and negotiates the request; once agreed upon, both parties sign a formal change order that amends the contract. Until a change order is executed, the contractor should not perform the changed work unless authorized by a construction change directive.

Managing Change Order Risk

Change orders are a significant source of budget and schedule risk on construction projects. Strategies for managing change order exposure include thorough design documentation, constructability review during the design phase, appropriate contract contingencies, clear change order procedures in the contract, and timely decision-making by the owner.