How to Write a Construction Change Order (With a Simple Process)
A construction change order is a written, signed amendment to your building contract that documents a change in scope, price, or schedule. To write one, describe exactly what is changing, show the cost (or credit), state the effect on the schedule, and get the client’s signature and payment before any work starts. That’s it. The hard part isn’t the form. It’s having the discipline to use it every single time.
Change orders are where a lot of builders quietly lose their profit and their client relationships in the same motion. So let’s fix both.
What should a construction change order include?
Every change order, whether it’s a $40,000 pool or a relocated hose bib, should carry the same eight pieces of information:
A sequential number and date. CO #1, CO #2, and so on. Gaps in the numbering are a red flag later.
Project and contract reference. Address, client names, and the date of the original agreement.
A plain-English description of the change. What is being added, removed, or substituted, and what it replaces. Vague descriptions are the number one source of disputes.
The reason for the change. Client request, unforeseen condition, design error, code requirement.
The price. Cost, your markup, and the total, shown as an addition or a credit.
The schedule impact. Number of days added. Write “0 days” if there are none. Never leave it blank.
The revised contract total. So nobody is surprised at the final draw.
Signatures and payment terms. Both parties sign, and the payment terms are stated right on the form.
How do you price a change order?
Price it the way you priced the house: real cost plus your normal markup. Then add the things builders forget.
Administrative time. Somebody has to get bids, revise drawings, update the schedule, and call four trades. That’s not free. Many builders charge a flat administrative fee per change order for this reason.
Ripple costs. Moving a wall after rough-in touches the framer, electrician, plumber, HVAC, and drywall. Price all of them.
Time. Extra days carry overhead: supervision, interest, insurance, portable toilets. If the change adds two weeks, those two weeks cost you money.
Credits deserve the same care. When a client deletes something, you credit the cost, but most builders don’t credit the full markup, because the planning work was already done. Whatever your policy is, put it in the contract before the project starts.
What is the right change order process?
Capture the request in writing the day it comes up. A text message thread doesn’t count as a system.
Stop. No work proceeds on the change until it’s approved. This is the step everyone skips.
Price it with real numbers from your trades, including schedule impact.
Present it to the client with a deadline to decide, so the job doesn’t stall.
Get the signature and collect payment before the work is performed. Don’t run change orders like a bar tab that gets settled at the end. That’s when clients are tired, out of money, and looking for things to negotiate.
Log it. Update the change order log, the budget, and the schedule, and send the client the new running total.
Should you write a change order when the cost is zero?
Yes. Any deviation from the signed plans and specs gets documented, even when you aren’t charging for it. It protects you if there’s ever a disagreement, and it reminds the client that everything follows a process. I wrote a whole piece on this: Happy Client Hack: Zero Cost Change Orders.
How do you keep change orders from wrecking the client relationship?
Almost all change order fights are expectation problems, not math problems. Three things prevent most of them:
Explain the process before the contract is signed. Clients who know the rules up front rarely argue with them later.
Give clients a contingency for their own changes. See Client Contingency.
Be consistent. The first time you “just take care of it in the field,” you’ve created a precedent you’ll be arguing against for the rest of the build.
Frequently asked questions
Is a verbal change order binding?
It depends on your contract and your state, and it’s a miserable thing to try to prove. Most well-written construction contracts require changes to be in writing and signed by both parties. Follow your contract and you never have to find out. This isn’t legal advice, so have your attorney review your contract language.
Who pays for a change order?
Whoever caused the change. Client-requested changes and upgrades are paid by the client. Builder errors are paid by the builder. Unforeseen conditions are handled however your contract says they are, which is why your contract should say.
When should a change order be paid?
At signing, before the work is performed. Rolling change orders into the final payment puts your profit in the one payment clients are most likely to hold back.
What’s the difference between a change order and an allowance overage?
An allowance is a budget placeholder for a selection that hasn’t been made yet. A change order modifies the agreed scope. When a selection exceeds its allowance, the overage should still be documented and signed the same way.
BTW, if you’d rather not start from a blank page, grab our Custom Home Change Order Template (it comes with a guide to the whole system) over at the Building Optimal Shop, where you can check out the rest of our swag to build a better business. Proceeds go to benefit, Exponencialistas, my non-profit investing in entrepreneurs transforming their communities in Latin America.