What is a construction change order?

A construction change order simply refers to any change in the scope of work a contractor will be performing on a project. This can include anything from the change in a location of a window to selecting a different floor treatment.

What is the purpose of a change order in construction?

Using a construction change order template helps pros keep track of project changes that can affect the bottom line. If a client wants to choose a higher-cost tile, for example, you’ll be able to effectively and assuredly incorporate these higher expenses into your project budget with a detailed change order. More than a third of construction projects require at least one change order, so it’s important to have a change order process in place. And remember: always document change orders in writing versus relying on verbal agreements. Have your client review and sign each change order to make sure you’re completely covered and in agreement. 

Who should use a construction change order?

Anyone in construction who has issued a contract for their work should use a construction change order form template. Whether you’re a business owner, project manager or subcontractor, using a thoroughly detailed change order form will help you eliminate ambiguities and protect yourself in the event of disputes.

When do construction change orders typically occur?

If you were to visualize where construction change order process falls in a flowchart, you would see they are initiated after the initial contract has been signed by both parties (client and contractor) and after work on the project has started. A “change” order indicates a change that needs to be made to the original project contract and plan in order to accommodate a necessary revision. Any time a substantial amendment to the plan needs to be made, a change order should be issued.  

What are the types of change orders in construction?

Fixed price or lump sum contract change orders

These types of change orders will be paid by your client for a set price in full either before the work is done (advanced billing) or after the job is complete (arrears billing).

Cost-plus contract change orders

For a cost-plus change order, you’ll itemize your expenses at cost, then add a fixed markup price or percentage of cost to cover your time/labor and help ensure a profit. 

Time and materials contract change orders

As the name implies, these change orders explicitly list your time and materials costs for making the requested project revision.

Unit price contract change orders

In a unit price change order, each section of the job to be performed is given a unit price that represents the time/labor, materials and markup costs needed to complete that area of the project and provide a profit for your work.

AIA progress billing contract change orders

The American Institute of Architects (AIA) offers an extensive list of professional contracts you can use for change orders, including a progress billing contract. This type of change order contract is often used for large-scale projects and enables you to bill your client in stages throughout the duration of your project.

Read Construction Billing Methods to learn more about different billing and contract types or How to Price a Construction Job to know how to protect your margins.

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

It’s important to know the distinction between a construction change directive vs. change order. While a change order establishes a signed and agreed upon amendment to the original contract, a construction change directive or CCD can come from the client directly without a contractor signing and agreeing to the change. This is because the contractor is contractually obligated to perform the work of the client, as long as it is safe to do so. The downside of CCDs is that a contractor may not know the full expenses required before making the change, so carefully accounting for time, materials and markup costs during the work is imperative to remaining profitable.

What information is generally required on a change order form?

A typical residential construction change order form will consist of the following key elements:

Contact information

Add essential contact information to your change order form for both yourself as the contractor and the client. Make sure to always include full names, addresses, emails, and phone numbers to help make your change order legally viable.

Description of the planned work or change

Make your description of the changes to the project or work you’ll be performing as detailed as possible. Include direct costs for labor, materials and equipment (whether rented or owned), as well as indirect costs (like overhead expenses). And don’t forget about adding consequential costs, which account for business continuity expenses (such as shifting labor requirements and efficiency slowdowns) that result from implementing the change order request at that particular time. 

Price of the change 

Include the cost breakdown by each individual component (labor, all the required materials, etc.), as well as line item totals and the grand total. 

Signatures 

Every change order will include at least two signatures (yours and the client’s), but may also require additional signatures from decision-making stakeholders and subcontractors.

Dates 

Always include the date for when the change order has been signed, as well as the revised project completion date (if effected) as a result of the change.

How do you write a construction change order?

Use these steps as a guide to writing and completing your construction change order template:

1. Meet with all involved parties to define the change 

Whether by phone, video conference or in-person, meeting directly with your client will help minimize errors and clear up ambiguities.

2. Determine impacts on budget and schedule

No matter what they entail, change orders will always have some impact on your budget and schedule, so make sure to take the time to assess accordingly.

3. Select your construction change order template or build one from scratch

Use our free construction change order sample, adapt it or create your own.

4. List the amendments and the amount for each item within the change order

Be as detailed as possible when itemizing the requested changes to the project and the various associated costs.

5. Provide a detailed description outlining the reason for the change

Make sure to include the reason for making the change so this is well-documented.

6. Double check for accuracy

Your change order is essentially a contract amendment, so take time to review to ensure everything is correct.

7. Share with the client

Send your change order, then follow up with a text or phone call to keep your client up to speed and the project moving forward.

8. Obtain your client’s signature or further negotiate if needed

Always make sure you sign every change order and obtain a signature from your client.

9. Store your change order some place secure

Keep your physical and digital files in a safe place along with extra copies, external or cloud backup.

Tips for managing change order disputes

If a dispute comes up about your change order, here are a few tips for how to address it:

• Reference estimates or quotes to confirm if a change order is justified.
• Make sure to obtain a signed change order before changing the scope of work or doing any additional work.
• Collaborate on change orders with subcontractors to get their input on the time/labor required, materials and technical requirements to fulfill the change.
• Leverage the “Amendments” section of your original construction contract to address how you’ll manage change orders when they occur so you can set expectations up front.

While disputes can arise for any number of reasons, having a well-written change order contract will be crucial to your success.

How do you manage change orders in construction?

Keeping track of change orders can get complicated without a proper system in place. While DIY and manual methods can work, using the right business management software can save you time, hassle and make your change orders more secure. 

Software like Houzz Pro comes with cloud-based storage, so change orders are always backed up, up-to-date and easy to find. Using an all-in-one software also helps speed up your work by having files, estimates and contracts in one place, along with being able to quickly communicate through client dashboards and obtain e-signatures for approval. Make change orders even easier by minimizing calculation errors with software and using a built-in, construction change order form template you can use for every client.

How to avoid construction change orders altogether?

Though change orders can never be 100% avoided—due to things like weather or supply chain issues or even your client simply changing their mind—you can reduce the possibility of needing a change order with the right tools.

Visualization tools

Help clients see the big picture for your project and reduce changing course with powerful visualization tools like our 3D Floor Planner.

Takeoffs

Create more precise estimates from the start and help eliminate costly mistakes with digital takeoff software. Explore How to Do Construction Takeoffs to learn more.

Project collaboration software

Collaborate more effectively with your subcontractors and get their feedback on estimates before sending to the client with versatile project collaboration features.

Conclusion

With our construction change order form template and how-to guide, you’re ready to create change orders like a pro. If you want to take your business to the next level, start a free trial of Houzz Pro to leverage visualization tools, create faster takeoffs, improve project collaboration and more. Houzz Pro even has a feature to help you manage change orders!

Check out How to Do a Construction Invoice to keep reading and learn more about construction billing.