Construction Change Order: Definition, Process, Examples & Costs

Construction projects rarely go exactly as planned. Unexpected site conditions, design revisions, owner requests, and supply chain disruptions can all force changes to the original scope of work. When that happens, a construction change order is the formal mechanism that keeps everyone aligned and protected.

A change order documents any modification to the original contract: what work is being added, removed, or substituted, how much it will cost, and whether the project timeline will shift.

Without one, contractors risk doing extra work they'll never get paid for, and owners risk losing visibility into where their budget is going.

This guide covers everything contractors, project managers, and owners need to know about construction change orders, including the different types, what triggers them, what to include in the form, how the approval process works, and how costs and markup are typically calculated.

 

What Is a Construction Change Order?

A construction change order is a formal, written amendment to an existing construction contract.  

It documents any agreed-upon modification to the original scope of work, whether that means adding new work, removing something from the plan, or substituting one material or method for another.

Along with the scope change, the document records any adjustment to the contract price and project schedule.

Change orders require sign-off from all parties involved, typically the owner, the general contractor, and the architect or engineer. That mutual approval is what separates a change order from an informal verbal agreement, and what makes it legally binding.

The American Institute of Architects (AIA) G701 form is the most widely used standard for construction change orders in the United States. Many contracts reference it directly, though some owners and GCs use their own proprietary templates.

 

The Three Types of Construction Change Orders

Construction change orders generally fall into three categories depending on how they affect the original contract scope and cost.

Additive Change Orders

Additive change orders increase the scope of work and typically raise the contract value. Examples include adding a window to a wall, upgrading finishes, or expanding the footprint of a structure. Even removing an existing element, like demolishing a wall that wasn't part of the original contract, counts as additive because it adds labor and cost.

Deductive Change Orders

Deductive change orders reduce the original scope of work and lower the contract value. A homeowner deciding to keep an existing wall to stay within budget, or an architect scaling back window sizes, would each trigger a deductive change order. Sometimes a deductive change is driven by site conditions that make part of the original design unfeasible.

Substitution Change Orders

Substitution change orders swap out a specified material, product, or method for an alternative. This type is especially common when supply chain disruptions make the originally specified material unavailable, or when a contractor proposes a value-engineered equivalent. Substitutions may be cost-neutral, additive, or deductive depending on the alternative chosen. 

 

Change Order vs. Construction Change Directive (CCD)

A construction change order and a construction change directive both modify the original scope of work, but they are used in different situations.

A change order reflects a mutual agreement between the owner, contractor, and often the architect or engineer on the scope, cost, and schedule impact of a change.

A construction change directive (CCD) is used when a change must proceed immediately even though the parties have not yet agreed on the final cost or schedule adjustments. The directive requires the contractor to perform the work while the financial terms are resolved later. 

Change Order vs CCD vs RFI

Several documents are used to manage scope changes in construction projects. While they are related, they serve different purposes. 

 

What Triggers a Construction Change Order?

Change orders don't appear out of nowhere. They're almost always the result of a specific event or condition that makes continuing under the original contract terms impossible or impractical.

These are the most common triggers.

Design Errors and Omissions

Architectural drawings and engineering plans are representations of an idea and sometimes that idea doesn't survive contact with reality. A structural detail may be missing, dimensions may conflict between trades, or a specification may be incomplete. When a contractor encounters a gap in the plans, a change order documents the correction and any associated cost.

Owner-Requested Changes

Owners frequently change their minds mid-project. They may want upgraded finishes, a layout adjustment, or an entirely new scope addition. These are among the most straightforward change orders to process because the request originates with the party who controls the budget.

Unforeseen Site Conditions

What's shown on a survey or geotechnical report doesn't always match what's underground. Contractors may encounter buried utilities, unstable soil, groundwater, or legacy materials like asbestos that weren't accounted for in the original contract. These conditions typically generate both a scope change and a schedule impact.

Supply Chain Disruptions

When a specified material becomes unavailable or delivery timelines shift significantly, a substitution change order documents the alternative and any difference in cost. This became especially common during and after the COVID-19 supply chain disruptions and remains a regular occurrence on larger projects.

Regulatory and Code Changes

If a jurisdiction updates its building code mid-project, or an inspector requires work that wasn't in the original plans, a change order captures the added scope. These are generally non-negotiable, the work has to happen regardless of whether everyone agrees on cost.

Requests for Information (RFIs)

RFIs (Requests for Information) are one of the most common precursors to a change order. When a contractor encounters something unclear in the plans or specifications — say, a bathroom drawing that doesn't specify moisture-resistant drywall — they submit an RFI asking for clarification. If the owner's response requires additional or different work than what was originally contracted, that response becomes the basis for a change order. The RFI itself is not a change order, but it creates the paper trail that supports one. 

 

Construction Change Order Example

Seeing how change orders appear in real projects helps clarify how the process works in practice.

Example: Unexpected Utility Lines

During the excavation phase of a commercial construction project, the contractor discovers an unmarked utility line running through the planned foundation area. Because the original drawings did not account for this obstruction, the foundation layout must be modified.

The contractor submits a construction change order documenting:

• the revised scope of work
• the additional labor and materials required to reroute the foundation
• the schedule adjustment needed to complete the modification

Once approved by the owner and project stakeholders, the change order becomes part of the contract and the project proceeds under the updated scope and budget. 

 

What Should a Construction Change Order Include?

A well-documented change order protects everyone on the project. Incomplete or vague submissions slow down approvals, create disputes, and complicate billing.  

Most construction contracts will reference a specific form or process, the AIA G701 is the most common standard, but regardless of the template used, every change order should contain the following elements.

Project and Change Order Identifiers

Each change order needs a unique tracking number tied to the project. A common format is the project number followed by a sequential order number. For example, project 24134 would produce change orders 24134.001, 24134.002, and so on. This makes it easy to track status, ensure nothing falls through the cracks, and maintain a clean audit trail throughout the project.

Contact Information

Include the full contact details for every party involved in the change: the owner, the general contractor, the architect or engineer, and any relevant subcontractors or trade contractors. The more complete this information, the faster approvals move, no one should have to stop work to look up a phone number or email address.

Key Dates

Two dates matter most. The notification date is when the owner was first informed a change order might be coming — important because many contracts set deadlines for how quickly potential changes must be flagged. The submission date is when the completed change order was formally delivered for review. Missing contractual notice deadlines can delay approval or result in penalties, so these dates should be documented carefully.

Description of Work

This is the core of the document. It should clearly describe what work is being added, removed, or substituted, and why. If the change order follows an RFI, reference the RFI number, but don't rely on it to tell the full story. Each change order should be self-explanatory on its own. 
One change order per scope item is the best practice. Bundling multiple changes under a single order number complicates tracking, billing, and partial completions.

Schedule Impact

Not every change order affects the timeline, but when it does, the impact needs to be documented explicitly. If the change touches the project's critical path, provide start and end dates for the affected work and show clearly how the overall schedule shifts. Owners may push back on schedule extensions, but having the documentation makes the case.

Cost Breakdown

Change order pricing should follow the same format as the original contract. In addition to direct costs (labor, materials, and equipment), the breakdown should include overhead, profit, taxes, insurance, and any other administrative expenses tied to the change. If unit pricing was used in the original contract, apply the same method here.

Updated Contract Value

Every change order should close with a running contract total. Present it as a simple progression: original contract amount, plus or minus all previously approved change orders, plus or minus the current change order, equals the new contract total. This gives owners and project managers an immediate picture of where the budget stands. 

 

How Does the Construction Change Order Process Work?

Even when a change order is well documented, it still has to move through an approval process before work begins. Understanding each step helps contractors avoid delays, protect their payments, and maintain clean project records.

Step 1: Identify the Change

The process begins the moment someone recognizes that the original scope of work can no longer be executed as contracted. This could come from the contractor, the owner, the architect, or an inspector. The key is identifying it early. The longer a potential change goes undocumented, the harder it becomes to establish cost and schedule impacts.

Step 2: Notify the Owner

Most contracts require written notice within a specific timeframe once a change is identified. Missing that window can forfeit the contractor's right to additional compensation, even if the change was legitimate. A brief written notification, even before the full change order is prepared, satisfies the contractual requirement and keeps the project moving.

Step 3: Document the Change

Once notice is given, the contractor prepares the formal change order document. This means describing the scope change, calculating the cost impact, assessing the schedule impact, and gathering any supporting materials such as photos, drawings, or RFI responses. Thorough documentation at this stage is what prevents disputes later.

Step 4: Submit for Review

The completed change order is submitted to the owner or their designated representative, typically the project manager or architect. Contracts usually specify how submission must happen, whether by email, certified mail, or through a project management platform, and how long the owner has to respond.

Step 5: Review and Negotiate

The owner reviews the change order with their team. Cost and schedule impacts are the most common points of negotiation. Contractors should be prepared to justify their pricing with backup documentation and to discuss alternatives if the owner pushes back on scope or cost.

Step 6: Approve and Execute

Once all parties reach agreement, the change order is signed by the owner, contractor, and architect or engineer. Work on the change should not begin until signatures are in place. Starting work without an approved change order is one of the most common sources of payment disputes in construction.

Step 7: Update the Contract

The signed change order becomes part of the contract. The project budget and schedule are updated to reflect the change, and the new contract value is recorded. All future change orders should reference the updated totals.

 

Change Order Costs & Markup

Change orders rarely affect scope alone. Most also impact the project budget. When additional work is introduced, contractors must account not only for the direct costs of labor and materials, but also for the administrative and operational effort required to execute the change.

Understanding how change order pricing works helps owners evaluate proposals and helps contractors justify their costs during negotiations.

Direct Costs

The first component of a change order price is the direct cost of performing the additional work. These typically include:

• Labor required to complete the revised scope
• Materials needed for the change
• Equipment rentals or additional tools
• Subcontractor work associated with the modification

If the change involves removing previously planned work, these costs may be deducted instead of added.

Indirect Costs

Beyond the direct work itself, change orders often introduce indirect project costs. These can include:

• Project management time
• Additional supervision on site
• Administrative processing of the change order
• Extended equipment rentals or site overhead

Indirect costs are especially common when the change impacts the project schedule or disrupts workflow between trades.

Contractor Markup

Most construction contracts allow contractors to apply a markup to change orders. This markup covers overhead and profit associated with managing and executing the change.

Typical markup ranges between 10% and 25%, depending on contract terms, project complexity, and the level of coordination required.

In many cases, the contract will specify the exact markup percentage allowed for change orders.

Schedule Impacts and Cost Escalation

When a change order affects the project schedule, the financial impact can extend beyond the direct scope change. Delays may increase labor costs, extend equipment rentals, and raise overall site overhead.

For this reason, contractors typically include both cost adjustments and schedule adjustments within the same change order proposal. 

 

How to Avoid Change Order Disputes

Change orders are one of the most common sources of conflict in construction projects. Disputes often arise when scope changes are poorly documented, approval procedures are skipped, or costs are not clearly justified.

While some disagreements are unavoidable, following a few best practices can significantly reduce the risk of disputes.

Document Changes Early

The earlier a potential change is identified and documented, the easier it is to evaluate its cost and schedule impact. Waiting until the work is already underway often creates confusion about what was part of the original contract and what was not.

Submitting early documentation also helps contractors comply with notice requirements written into many construction contracts.

Follow the Contract Notice Requirements

Most construction contracts specify how and when change order notifications must be submitted. Missing those deadlines can prevent a contractor from recovering additional costs, even if the change was legitimate.

Contractors should review the contract language carefully and provide written notice as soon as a change becomes likely.

Avoid Verbal Agreements

Informal agreements made during jobsite conversations can easily lead to misunderstandings later. A contractor may assume a change was approved while the owner believes it was only a discussion.

For this reason, work related to a change order should not begin until the modification has been documented and formally approved.

Keep One Change per Order

Bundling multiple scope changes into a single change order may seem efficient, but it often complicates tracking and billing. If one part of the change is approved while another is disputed, separating them becomes difficult.

Submitting one change order per scope modification keeps documentation clear and simplifies financial tracking.

Maintain a Clear Paper Trail

RFIs, drawings, photos, and inspection reports all help explain why a change was necessary. Keeping these documents attached to the change order provides transparency and strengthens the contractor’s case if questions arise later. 

 

FAQ: Construction Change Orders

What is a construction change order?

A construction change order is a written amendment to a construction contract that modifies the original scope of work. It documents any additions, removals, or substitutions to the project along with the associated cost and schedule adjustments. Change orders must typically be approved by the owner, contractor, and sometimes the architect or engineer before the work proceeds.

What causes change orders in construction projects?

Change orders are usually triggered by design errors, owner-requested changes, unforeseen site conditions, supply chain disruptions, or updates to building codes. Requests for Information (RFIs) can also lead to change orders when clarification results in additional or different work.

Who approves a construction change order?

In most projects, change orders require approval from the project owner and the contractor. Depending on the contract structure, the architect or engineer may also need to review and sign the change order before it becomes part of the contract.

What is the difference between a change order and a construction change directive?

A change order reflects a mutual agreement between the parties on the scope, cost, and schedule impact of a change. A construction change directive (CCD), on the other hand, instructs the contractor to proceed with a change even if the final cost or schedule adjustment has not yet been agreed upon.

Can a contractor refuse a change order?

A contractor may refuse a proposed change order if the parties cannot agree on the scope, cost, or schedule impact. However, if the owner issues a construction change directive under the contract terms, the contractor may be required to proceed with the work while the financial details are resolved later.

Do change orders increase project costs?

Many change orders increase project costs because they add labor, materials, or schedule impacts. However, deductive change orders can reduce the total contract value when work is removed from the original scope. 

 

Construction Projects Still Need Jobsite Safety and Access Control

Change orders often introduce new work areas, additional crews, or revised site layouts. When that happens, contractors may also need to adjust how the jobsite is secured and organized.

Temporary fencing, access gates, and crowd control equipment are commonly used to separate active work zones, protect workers and pedestrians, and keep projects compliant with local safety requirements.

SONCO supplies temporary fencing, barriers, and other jobsite safety equipment used across construction sites throughout the United States.

Whether you're expanding a work zone, adjusting site access, or responding to new safety requirements during a project change, having the right equipment on hand helps crews adapt quickly.

Explore our temporary fencing and construction safety products to see how contractors secure changing jobsites.