Construction Change Orders: What They Are, Why They Happen, How to Prevent Them
SheetIntel Team ·
A construction change order (CO) is a written amendment to the contract that modifies the scope, price, or schedule — after the contract is signed. On a typical commercial project, change orders add 10–35% to the original contract value.
Some change orders are legitimate — the owner redesigned a space, or an existing condition couldn't have been anticipated. But a significant portion trace directly to errors, omissions, and ambiguities in the construction documents that nobody caught before bidding.
This guide explains how change orders work, how they get priced, and how to prevent the preventable ones.
What Triggers a Construction Change Order
Owner-directed scope changes
The owner decides to add, remove, or modify scope after contract execution. This is the "legitimate" change order category — the design changed, the contract has to follow. Straightforward to price, though timing can affect other work.
Drawing errors and omissions
A scope item was on the drawings but priced incorrectly or not at all. A coordination conflict between structural and MEP requires field resolution. A detail referenced on the drawings doesn't exist in the issued set. These are the most expensive and most preventable category.
Unforeseen conditions
What was concealed when the contract was signed turns out to be different than shown. Soil conditions that differ from the geotechnical report. Hazardous materials discovered behind walls. Existing structural elements that block the routing shown on drawings. Some is truly unforeseeable; some could have been flagged with a thorough RFI before breaking ground.
Spec conflicts and substitutions
The specified product is discontinued, unavailable, or substituted for an approved equal with different installation requirements. Or the architect requires compliance with a spec section the GC didn't price. These are preventable with pre-bid spec review.
Scope gaps between trades
Work fell between trade scopes and no one owns it. The blocking for the TV mount, the tie-in between the condensate drain and the plumbing waste, the exterior grade at the building foundation. Interface work is the most common source of "who pays for this" disputes.
How Change Orders Are Priced
There's no universal method, but most commercial contracts use one of these approaches:
| Method | How It Works |
|---|---|
| Lump sum | GC prices the change and owner approves or negotiates. Most common. Protects both parties when scope is well-defined |
| Unit prices | Pre-established rates from the original bid for common change items (cost per CY of concrete, per LF of pipe). Fast to apply when quantities are the only variable |
| Time and materials (T&M) | Owner pays actual cost plus a markup (typically 15–20% overhead and profit). Used when scope can't be defined in advance. Requires detailed daily logs and receipts |
| Force account | Like T&M but with owner oversight of actual labor hours and materials on site. Used when there's a dispute about actual cost incurred |
What's included in a change order price: direct costs (labor, materials, equipment), subcontractor markups, GC overhead, GC fee/profit, and sometimes schedule impact costs (extended general conditions, acceleration premium).
Markup rates: Typical contract language allows the GC to mark up subcontractor change order costs by 5–10%. GC self-perform work is usually marked up at 15–20% overhead + 10% fee. Confirm your contract's markup caps before your first CO — some owners cap total markup at 10% regardless of tier.
How to Document a Change Order Claim
Undocumented change work is hard to recover. The moment you believe you're performing out-of-contract work, start the clock:
- 1.Issue a written notice immediately. Most contracts require written notice of a potential change within a defined window (typically 7–14 days of the triggering event). Missing this deadline can waive your right to compensation.
- 2.Keep daily logs if proceeding on T&M. Record labor hours, crew names, equipment, and materials daily. Have the owner's representative sign logs each day — an unsigned T&M log is worth less at settlement.
- 3.Submit a formal Proposed Change Order (PCO). Itemized cost breakdown with labor rates, material invoices, equipment rates, and markup. Reference the contract clause and the drawing/spec that triggered the change.
- 4.Track all changes in a change order log. PCO number, description, amount, status (pending / approved / disputed), and impact on schedule. The log is your claim documentation if the project goes to dispute.
Prevention: The Change Orders You Don't Have to Write
The most effective way to reduce change order exposure isn't better documentation — it's finding the problems before they become change orders.
The categories most preventable at the pre-bid stage:
- • Drawing/spec conflicts (material specified vs. shown)
- • Missing detail callouts (referenced sheet doesn't exist)
- • Trade coordination conflicts (structure vs. MEP)
- • Elevation conflicts (RCP vs. structural depth)
- • Scope gaps at trade interfaces
- • Missing specifications for called-out materials
- • Dimensions that don't add up
- • Ambiguous scope assignment between trades
- • Spec requirements that conflict with drawings
- • Division 01 requirements not shown on drawings
GCs who run thorough pre-bid plan reviews submit more RFIs before bid day and fewer change orders after. The math is simple: a 2-hour plan review that finds a $40,000 scope gap costs less than 0.5% of a $10M project in labor. The same gap found in the field costs 3–5× more to resolve.
Prevent change orders at the source:
Find the problems before they become change orders
SheetIntel reviews your plan set for trade conflicts, missing specs, elevation mismatches, and scope gaps — before you sign the contract. First review is free.
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