Construction Change Order: How it Works, Examples, and Legal Provisions

A construction change order documents an agreed modification to the work, contract sum, contract time or other contract terms. The project agreement determines who may request, price, review, authorize and sign a change; it also determines whether work may proceed before final agreement.

This guide explains common change-order types, documentation, pricing inputs, schedule review and approval controls for commercial construction owners. It does not replace the project’s contract.

What is a Change Order in Construction?

A construction change order is a document that specifies an amendment to the original contract between the owner and contractor (or a contractor and a subcontractor) and other project stakeholders (architect, engineer, etc.). 

It may document changes to scope, drawings, specifications, materials, compensation, milestones or contract time. The required form, signatures and authorization path come from the executed construction contract. Some contracts also distinguish agreed change orders from directives, minor changes, allowances, unit-price adjustments or time-and-material authorizations.

Construction change orders generally involve:

• Introducing additional work, known as additive change orders 
• Removing portions of scheduled work, known as deductive change orders, and 
• Substituting work to create the best possible result 

For example, if an owner decides to upgrade from standard cubicle partitions to glass partitions or when a contractor wants to substitute specified materials with alternatives due to availability issues, the contractor drafts a construction change order to formalize these adjustments. Depending on the size of the change, there may be alterations to the contract terms or amount. 

Change-Order Provisions in the Contract

Do not copy a generic clause without project-specific review. The agreement should be checked for:

• who has authority to request and approve a change;
• required notices, supporting records and submission deadlines;
• pricing methods, allowable markups, credits and time-impact requirements;
• whether disputed or emergency work may proceed before agreement; and
• the signatures or other evidence required for authorization.

Types of Construction Change Orders

In construction projects, change orders are official modifications to the original contract. They can arise from design changes, unforeseen site conditions, or even errors. Here are the three main types of change orders, each with its own cause and process:

1. Additive Change Order

These increase the project’s scope, cost, or timeline. For example, the scope of a tenant improvement project might change to include a new conference room or upgraded HVAC system. This requires adjusting budgets and schedules. An additive change order formalizes the added work and ensures everyone is aligned before moving forward.

2. Deductive Change Order

Deductive change orders reduce the scope or cost of the project. For example, in a commercial office build-out, the client may choose to eliminate custom millwork in break areas and opt for standard cabinetry instead, to stay within budget. This type adjusts the contract price downward and may speed up completion if work is reduced.

3. Substitution Change Order

A substitution change order involves swapping one material or method for another. For example, if a specified finish becomes unavailable, the contractor may propose an alternate for the design team and owner to review for performance, appearance, warranty, cost and schedule. A proposed substitution is not automatically approved or cost-neutral.

Four Common Change-Order Pricing Approaches

A change can be priced in several ways. The contract—not a generic rule—controls which method is permitted, what records are required and how overhead, profit, bonds, insurance, taxes, credits and schedule impacts are handled.

• Lump Sum

A fixed sum or lump sum change order contract is requested when the alteration in the work scope can be quantified with a firm price. Lump sum change orders can define adjustments in the cost, including direct and indirect costs, markup, and contractor’s profit. This results in an overall increase in the project expenses or adds credit to the contract value.

• Zero Cost

This type of change order does not affect the contracted price. It is used to document scope-of-work changes that may not affect the contract value but impact the project schedule. For example, the contractor suggests installing energy-efficient LED lighting instead of fluorescent fixtures (price remains the same), which can delay the project but help increase client satisfaction. 

• Time and Material (T&M)

A time and materials (T&M) contract for a change order occurs when the entire cost of the proposed change is unknown. Here, contractors track their time spent working on the alteration and costs associated with labor, materials, or equipment. The client can ask for a breakdown of these expenses to justify the construction change order costs. 

• Unit Price

When the agreement includes applicable unit prices, the team may calculate changed work from verified quantities and the stated unit-price basis. Confirm what labor, materials, equipment, markups and measurement rules the unit price includes before applying it. 

A hybrid approach combining time and materials (T&M) with a lump sum change order entails initially handling modifications on a T&M basis and then negotiating a fixed sum based on finished work. 

Thus, identifying the type of construction contract allows parties involved to determine a process for making changes to the project’s scope. 

When Do Construction Projects Need Change Orders? 

Change orders are common, but they are not a fixed percentage or a substitute for planning. Clear scope, existing-condition review, coordinated documents and timely owner decisions can reduce avoidable changes, while concealed conditions, agency requirements, availability, design development and owner requests may still require contract adjustments.

There are various reasons for a general contractor or an owner to request change orders during a construction project. Some of the major causes include:

• Difference in site conditions: Sometimes the job site conditions are different from those identified in the contract documents. For example, a slope that requires leveling, uncleared vegetation, etc. To accommodate these changes, changes to the original plans are necessary.
• Owner-requested changes: The owner or client may request design modifications to the original plans or specifications, such as incorporating or removing a fixture. They may also direct the contractor to make changes to the project’s budget or schedule. 
• Design errors or omissions: Construction change orders for design errors or omissions address defective or missing items or specifications mentioned in the original contract. 
• Material or equipment availability: If a construction material or equipment is unavailable due to supply chain issues or increased market prices, it may force the contractor to alter the originally planned resources. 
• Change in design standards: There may be an upgrade in design standards or an inspector may require additional work before approving building permits. 
• Delays in schedule: Due to unforeseen events like labor shortages, internal disputes, or extreme weather conditions, the project schedule may need significant modifications.
• Task sequencing: The owner or project team may need to advance or postpone work because of access, occupancy, procurement or operational constraints. The change process should document any resulting scope, cost or contract-time effect rather than assume that resequencing is cost-neutral.
• Incomplete estimating assumptions: If quantities, scope boundaries, escalation treatment or existing conditions were not clearly established, the team should compare the request with the bid documents and risk allocation. A price increase by itself does not automatically establish entitlement to a change.
• Scope gaps or bid qualifications: A proposal may contain exclusions, allowances, qualifications or a different interpretation of the documents. Review those items before award and compare any later request with the accepted scope and contract.
• Subcontractor or procurement constraints: Availability problems may require mitigation or a proposed substitution. They do not automatically change the contract price or time; responsibility and entitlement depend on the agreement and facts.
• Owner budget or financing decisions: An owner may elect to defer, delete or phase work. The resulting credit, remobilization, schedule or cancellation effects should be defined and handled under the agreement.

Regardless of the reasons behind issuing a change order, open dialogue between the owner and the construction company greatly helps to lessen the negative impacts of the adjustments on the project. 

What Should You Specify in a Change Order Form? 

Change-order records vary by contract, delivery method and project. A project-specific record commonly identifies the following, but the executed agreement controls the required fields and approvals: 

• The name, location, and original contract number of the project
• The name, address, and contact information of the project’s owner, contractor, and architect 
• The parties, project roles and authorized representatives identified by the agreement
• Change order number 
• Description of the requested change in comparison to the original contract or contractor bid 
• Justifying documentation such as construction drawings 
• The price of the requested change (breakdown of the costs as well as the total)
• Itemized subcontractor costs 
• A contractual statement specifying how the requested change impacts the project completion date, price, and payment terms 
• The approvals, signatures or other evidence of authorization required by the agreement
• The date for initial change order request, the creation of the official document, when it was signed by all necessary representatives (and other relevant third parties), and when the initial request was received by the counterparty 
• The revised contract amount upon approval and project completion date 

Because a signed change order may modify the contract, its scope, pricing, time impact, assumptions, exclusions and authorization should be accurate and reviewed under the agreement. Legal review may be appropriate for disputed, material or unclear changes.

The American Institute of Architects (AIA) provides the AIA G701 Change Order form, a standardized AIA form used within the applicable AIA contract framework; it does not by itself establish compliance or authorization.

Examples of Change Order Scenarios During a Construction Project 

The correct document depends on the contract and facts. Common commercial scenarios include:

• Owner-requested scope: The owner adds a conference room or changes an approved finish after the original scope is established.
• Existing conditions: Authorized demolition exposes a condition that differs from available documents and requires design-team direction.
• Agency or landlord direction: A reviewing authority or landlord requires a documented revision to the approved project approach.
• Material or equipment availability: A specified item becomes unavailable and the team evaluates a proposed substitution, including cost, time and performance implications.
• Owner-equipment coordination: Revised vendor criteria change power, plumbing, structural support, clearances or delivery sequencing.

An RFI, proposal request, architect’s instruction or field observation is not automatically a change order. The contract determines when the issue becomes an authorized contract modification.

Commercial Owner Change-Order Review Worksheet

Start by identifying the record that triggered the issue, then review scope, cost, time, authority and final reconciliation as separate decision gates. A complete review should make both the proposed change and the unchanged contract scope visible.

Download the Commercial Change-Order Owner Review Worksheet (PDF)

Do Not Treat Every Record as an Executed Change Order

For example, ConsensusDocs separates its agreed change order, interim directive and RFI documents. AIA-based projects make similar distinctions among a change order, Construction Change Directive and Architect’s Supplemental Instruction. Other agreements use different names and authority structures.

Steps to a Smooth Change Order Process 

A potential change should move through defined decision gates rather than jump directly from discussion to field work. The contract determines notice, authority, pricing, schedule analysis and whether any work may proceed before final agreement. The six-gate sequence below is an owner review framework, not a universal contractual procedure.

Step 1 – Review the Contract and Project Specifications 

The first and foremost step you should take before proceeding with the change order process is to thoroughly examine your contract and project plan. 

Review the executed contract for the change procedure, notice deadlines, documentation, pricing basis, schedule analysis, authority and required approvals. If the agreement is silent or unclear, obtain project-specific professional guidance rather than relying on an online template.

Next, have a clear understanding of your construction plans and specifications. Identify any vague information or errors in the scope of the project that should be rectified. This will help avoid expensive, surprise construction change orders later. If needed, clarify your doubts from clients, architects, engineers, or subcontractors regarding the work details. 

Step 2 – Discuss the Change with Stakeholders 

Contractual agreements require modifications due to various reasons including owner-initiated changes, material supply issues, design errors, unsuitable site conditions, and others. 

The participants identified by the agreement should review the proposed scope, cost and time effects. Discussion improves alignment, but contractual approval must come from the parties with designated authority.

Step 3 – Define the Scope and Request a Supported Proposal

Identify the added work, deleted work, credits, unchanged scope and referenced drawings or specifications before asking for price. The proposal should use the record and terminology required by the agreement and should clearly state:

• the initiating record and reason for the proposed change;
• the exact added and deleted scope;
• cost backup, credits and contract-allowed markups;
• schedule activities, procurement and requested contract-time effect;
• assumptions, exclusions, validity and unresolved information; and
• the current status – requested, proposed, directed or approved.

A request for pricing or a contractor proposal is not automatically authorization to proceed.

Step 4 – Reconcile Scope, Cost and Time

The designated reviewers should compare the proposal with the contract, current documents and an independent understanding of the work. Resolve quantity, rate, credit, markup, design-responsibility and schedule differences without allowing an agreed price to obscure an unresolved scope assumption.

If the parties do not agree, document the open items and follow the agreement’s directive, notice, reservation-of-rights and dispute procedures. Agreement by project participants who lack contractual authority is not a substitute for the required authorization.

Step 5 – Obtain the Contract-Required Authorization

Confirm the correct document, version and authorized signers. In an agreed change order, the approved record should state the scope, contract-sum or GMP adjustment, contract-time adjustment, assumptions, exhibits and effective date. If the agreement permits an interim directive or emergency instruction, preserve the required cost and time records while final terms remain unresolved.

Do not treat an RFI response, meeting note, email discussion, proposal request or unsigned proposal as approval unless the executed agreement expressly gives that record and sender authority.

Step 6 – Update the Log and Reconcile Controlling Records

Record the approved change in the project change log, then update the contract sum or GMP, committed costs, contract time, current schedule, drawings, specifications, field direction and invoice or pay-application coding as applicable. Keep the supporting record according to the project’s document-retention policy and professional advice; do not rely on a universal online retention period.

Pending requests, directives and executed changes should remain visibly separate. The log should show status, responsibility, decision deadlines, approved values and unresolved credits so that the project team is not working from conflicting information.

Worked Commercial Change-Order Example

Assume demolition in an occupied office tenant-improvement project reveals that an existing duct conflicts with a newly approved conference-room partition. The design team confirms a revised routing concept. The contractor submits a proposal, but no change has yet been authorized.

The review is incomplete if the proposal shows only a total. The owner needs enough scope, credit, cost and schedule information to understand what is being changed, what remains unchanged and which decision is time-sensitive.

What I Look for Before an Owner Signs

From a project-management standpoint, I want the field condition, design response, price backup and schedule logic to tell the same story. If the drawing describes one scope, the subcontractor quote describes another and the change log shows a third status, signature does not solve the coordination problem. First reconcile the records; then use the authorization path in the agreement.

– Rami Tawasha, Civil Engineer and Senior Project Manager, Constructive Solutions

How to Estimate Change Orders in Construction

A defensible change-order proposal connects quantities, rates, records and schedule effects to a clearly described scope. The contract controls allowable costs and markups. A practical review normally addresses the following categories.

1. Added and Deleted Direct Work

• labor classifications, hours, wage rates and contract-allowed burdens;
• material quantities, supplier quotations, delivery, storage and applicable credits;
• owned or rented equipment and the supporting rate basis;
• subcontractor proposals, lower-tier support and deleted-work credits; and
• design, testing, permits or vendor work only when assigned and compensable under the agreement.

2. Indirect and Contract-Allowed Additions

Field supervision, temporary facilities, extended conditions, bonds, insurance, taxes, overhead and profit should not be added from an internet rule of thumb. Identify the contractual basis, calculation method and supporting records for each item.

3. Schedule and Sequence Effects

State whether the change affects procurement, access, shutdowns, inspections, milestones or critical-path work. A requested time adjustment should distinguish the added work’s duration from its effect on contract completion and should follow the schedule-analysis requirements in the agreement.

4. Assumptions, Exclusions and Validity

Record drawing references, site assumptions, proposal validity, escalation treatment, working hours, access, owner-furnished items and exclusions. This lets reviewers see what would change if an assumption proves incorrect.

5. Reconciliation and Approval

Compare the proposal with the owner or design team’s independent review, resolve scope gaps, document agreed cost and time effects, and obtain the authorization required by the contract before proceeding—unless the agreement provides another written direction for the specific circumstance.

Selecting a Change-Order Workflow or Software

A shared platform can improve visibility, but software does not create contractual authority or repair an undefined scope. Select the workflow by the records, permissions and approval controls the project actually needs rather than by the length of a vendor feature list.

Before rollout, test the workflow with the project’s contract procedure and responsibility matrix. Confirm who may create, review, direct, approve, reject and close a change, and decide which record remains authoritative if an integration fails.

Directives, Minor Changes and Disputes

Not every project uses the same document family. Under AIA-based agreements, a change order, a Construction Change Directive and an Architect’s Supplemental Instruction can serve different functions. Other contracts use different names and authority structures.

Agreed Change Order

AIA’s G701 change-order resource describes a form for changes agreed by the owner, contractor and architect, including adjustments to contract sum and contract time. That description applies only when the project uses the relevant AIA documents and has not modified them in a way that changes the process.

Construction Change Directive

A Construction Change Directive is not a general right to force any requested work on any contractor. Whether a directive is authorized, who may issue it, how work is priced and how disagreement is preserved depend on the executed agreement. Under the relevant AIA framework, an agreed adjustment arising from a directive is later recorded by change order.

Architect’s Supplemental Instruction

An Architect’s Supplemental Instruction may document a minor change in projects using the applicable AIA documents. The project team must still determine whether the instruction affects cost, time or scope and follow the contract if it does.

When the Parties Disagree

Preserve notices, daily records, RFIs, drawings, quotations, labor and equipment records, schedule analyses, meeting minutes and reservation-of-rights communications required by the contract. Do not rely on this guide to determine entitlement, waiver, damages, dispute procedure or whether work must proceed. Those questions require the executed documents and, when appropriate, legal advice.

Best Practices for Managing Change Orders

A disciplined change process improves visibility and decision quality. It cannot guarantee that a project will avoid cost, time or dispute impacts, but it can make the basis of each decision easier to review and administer.

1. Establish a Change Order Policy Upfront

From the start of the project, ensure your construction contract includes a clearly defined change order procedure. This should outline how changes are identified, documented, approved, and incorporated into the project. A clear policy minimizes confusion and ensures consistency across all parties.

2. Use the Form and Status Structure Required by the Agreement

Use the project’s adopted document family and any agreed exhibit or workflow. Standard forms can improve consistency, but the team must still verify project-specific modifications, authority, notice, cost, time and signature requirements.

3. Maintain Thorough Documentation

Every proposed change should be backed by solid construction project documentation, including drawings, emails, RFIs (Requests for Information), site photos, and meeting minutes. These records serve as evidence in case of disputes and support accountability throughout the change order process.

4. Communicate Early and Often

As soon as a potential change is identified, communicate it to all stakeholders. Delayed communication often leads to unauthorized work or misunderstandings. Regular project meetings should include a review of pending and approved construction contract changes.

5. Configure Technology Around Contract Authority

Use a shared log, clear status labels, revision history and role-based permissions. Test the handoff from field record to proposal, authorization, budget, schedule and invoice coding. A platform notification is not contractual approval unless the agreement and configured authority make it so.

6. Plan for Contingencies

Establish owner-held contingency based on scope maturity, existing-condition uncertainty, market conditions, procurement and the project’s risk review. Do not treat contingency as permission to perform unapproved work or as a universal percentage.

These controls cannot eliminate changes or guarantee cost and schedule outcomes. They can make scope, authority, price, time and status easier for the project team to review and reconcile.

Owner’s Change-Order Review Checklist

• Is the changed scope clear and tied to current drawings, specifications or field information?
• Does the request identify why the change is needed and who initiated it?
• Are added work, deleted work, credits, markups and supporting records visible?
• Are schedule and milestone effects stated separately from cost?
• Are assumptions, exclusions, proposal validity and outstanding decisions documented?
• Has the person with contractual authority approved the correct document?

Constructive Solutions is a San Francisco Bay Area commercial general contractor. Our preconstruction services emphasize defined assumptions, budget basis, decision tracking and schedule coordination. Review our documented commercial projects or discuss project fit with the team.

FAQs

Who manages construction change orders?

The contract and project organization determine responsibility. An owner representative, architect, construction manager, contractor or project manager may administer part of the process, but only designated parties have authority to approve contract changes.

What is an acceptable change-order percentage?

There is no universal acceptable percentage for change frequency, value, contingency or markup. Compare each request with the contract, approved scope, supporting records and project-specific risk allocation.

Is an RFI a change order?

Usually not. An RFI requests clarification or information. The response may reveal or direct a scope, cost or time effect that must then follow the contract’s change procedure.

What percentage of projects have change orders?

Rates vary by project type, study method and the definition of a change. A generic industry percentage is not useful for pricing or approving a specific project.

What is an ASI in construction?

In projects using the applicable AIA documents, an Architect’s Supplemental Instruction may document a minor change. The team must evaluate whether it affects cost, time or scope and use the contract’s change procedure when it does.

What is the construction change process?

A typical process identifies the issue, checks contractual notice and authority, defines scope, prices added and deleted work, evaluates time impact, resolves assumptions, obtains required approval and records the result. The executed agreement controls the actual sequence.

What is the difference between a change order and T&M?

A change order modifies or records a contract change. Time and materials is a pricing or recordkeeping method that may be used for changed work when the contract authorizes it.

Relevant Resources:

• Commercial Preconstruction Services
• Construction Scheduling Guide
• Construction Contract Types