How to Price and Document a Construction Change Order

To price a change order, build it from the bottom up. Quantify the added or deleted work, price labor at your actual burdened rates, add material, equipment, and subcontractor costs, apply only the markup your contract allows, and price any schedule impact as its own line. Then back every number with documents: the directive or RFI that triggered the change, photos of the condition, quotes, and signed time-and-material tickets. A change order that shows its math gets approved faster, survives an owner's audit, and gets paid.

A quick definition before the details. A change order request (COR, sometimes called a proposed change order or PCO) is your proposal: it describes the change, prices it, and asks for approval. A change order is the executed document, signed by both parties, that modifies the contract's scope, price, or time. Most change order disputes come from work that proceeded on a COR that was never executed, or from a COR that could not show how its price was built.

This guide covers what goes into a change order price, a worked example, how to choose a pricing method, how fabricators and trade subcontractors should price changes after shop drawings are approved, the documentation that gets changes approved, and the mistakes that cost contractors money.

What Goes Into a Change Order Price

A complete change order price has more lines than most first drafts. Work through each of these and write "none" rather than skipping it, so reviewers can see you considered it.

Direct labor. Hours by trade multiplied by your burdened rate. The burdened rate includes wages plus payroll taxes, workers' compensation, liability insurance, and benefits, not just the hourly wage. If the change work is less productive than base-contract work (occupied space, finished areas, small quantities, overtime, remobilization), account for that in the hours and say why.

Material. Quantities from a takeoff, with a reasonable waste factor, plus freight and any applicable sales tax. Attach supplier quotes or invoices when you have them.

Equipment. Rented equipment at invoice cost; owned equipment at the rate your contract allows. Some contracts reference a published rate schedule, so check before you price.

Subcontractor and supplier costs. Each sub's own COR, with their backup attached. The owner may want to see that the sub's price is reasonable, so do not pass along a lump number with no detail.

Credits for deleted work. If the change removes work from the base contract, price the credit using the same method you use for additions. Owners notice when additions are priced generously and credits are priced thinly.

Design, detailing, and resubmittal costs. If the change forces revised shop drawings, engineering, calculations, or a new submittal, those hours are real costs.

Time-related costs. If the change extends the schedule, include extended general conditions: supervision, trailer and temporary facilities, equipment on standby, and insurance for the added duration. Show the schedule impact separately from the direct cost.

Markup. Overhead and profit at the rates and structure your contract specifies. Many contracts set different markups for self-performed and subcontracted work and limit how markup stacks through tiers. Some allow bond and insurance premiums as a separate line.

Worked Example: Pricing a Change Order Line by Line

Here is an illustrative example. The rates and percentages are placeholders to show the structure; use your own costs and the markup your contract actually allows.

The change: During a tenant improvement, the owner directs the addition of a dedicated 20A circuit and four duplex receptacles along a finished wall in an office, which requires fishing wire through existing walls and patching. The electrical subcontractor prices the work, and the GC adds the patch and paint.

Electrical subcontractor's COR:

Line	Basis	Amount
Labor	16 hrs x $90/hr burdened (fishing walls in finished space)	$1,440
Material	Wire, boxes, devices, breaker, per takeoff	$410
Equipment	None	$0
Subtotal		$1,850
Overhead and profit	15% per subcontract (example)	$278
Sub total		$2,128

GC's COR to the owner:

Line	Basis	Amount
Electrical subcontractor	Per attached sub COR	$2,128
GC markup on subcontracted work	5% per prime contract (example)	$106
Self-performed patch and paint	6 hrs x $75/hr burdened + $85 material	$535
GC markup on self-performed work	15% per prime contract (example)	$80
Schedule impact	None; work completed within existing sequence	$0
Total change order request		$2,849

Notice what makes this easy to approve: each line has a basis, the markup rates are tied to the contract, the sub's backup is attached, and the schedule impact is stated even though it is zero. If the owner questions the 16 hours, you can point to the working conditions described in the COR.

Choosing a Pricing Method

Your contract usually specifies how changes can be priced. Understanding the options helps you pick the right one and negotiate when there is a choice.

Lump sum. A fixed price for the defined change. Gives the owner cost certainty and rewards you for managing the work well. Use it only when the scope is clear enough to estimate; ambiguous lump-sum changes produce disputes.

Unit price. An agreed price per unit (linear feet of pipe, cubic yards of rock excavation, square feet of drywall) multiplied by the actual quantity installed. Best when the type of work is clear but the quantity is not. Many contracts include a unit price schedule for exactly this reason.

Time and materials (T&M). Actual labor, material, and equipment at agreed rates, plus markup. Appropriate when the scope cannot be defined in advance, such as unknown conditions behind a wall. Expect the owner to require daily signed T&M tickets.

Not-to-exceed (NTE). T&M billing with a cap. The owner pays actual cost up to the cap; you need approval to exceed it. A practical middle ground when the owner wants protection and the scope is still uncertain.

Cost plus a fixed fee. Actual cost plus a fixed dollar fee rather than a percentage, so the fee does not grow as costs rise. More common on larger, complex changes.

How Fabricators and Trade Subs Price Changes After Shop Drawings Are Approved

Changes that arrive after shop drawings are approved are some of the hardest to price, because the fabricator has already committed time and material to the approved design. This applies to structural and miscellaneous steel, precast, millwork and casework, trusses, curtain wall and storefront, fire sprinkler systems, and fabricated ductwork.

A fabricator's change price at this stage typically includes:

Re-detailing and engineering. Hours to revise shop drawings, and any connection design or calculations (for example, hydraulic calculations for a sprinkler layout change).
Resubmittal and review. Time to prepare the revised submittal and the schedule time lost while it is reviewed again.
Material already purchased or cut. Restocking fees, scrap value, or the full cost of material that can no longer be used.
Rework of fabricated pieces. Shop labor to modify or remake pieces already built.
Shop schedule disruption. Lost production slot, re-sequencing, overtime, or expediting to hold the delivery date.
Field impacts. Changes to delivery, erection sequence, or installation labor.

A few practices help fabricators and trade subs get these changes approved:

State fabrication status on the COR. For example: "As of 10/5, pieces B-12 through B-18 are fabricated; material for B-19 through B-30 is purchased but not cut." This shows the reviewer why cost depends on timing.
Reference the approved submittal. Cite the shop drawing number and revision that was approved, and the date, so it is clear the change came after approval.
Ask for direction quickly and in writing. Cost usually grows every day fabrication continues on the old design. If you need to stop work on affected pieces, say so in writing and ask for confirmation.
Price the resubmittal cycle. If a revised submittal is required, show the review time in your schedule impact.

Documentation That Gets a Change Order Approved

The most common reason contractors lose change order disputes is not that the work was unjustified; it is that they could not prove it later. Assemble this backup for every change.

The trigger. The owner's written directive, the RFI and its response, the ASI or bulletin, or the documentation of the unforeseen condition. Reference the number on the COR ("per RFI-032").
Photos with dates and locations. Before, during, and after. Photograph the existing condition before any change work begins.
Daily reports that name the change. If a crew spent four hours on change work, the daily report should say so under that change number, not just "general work."
Quotes and invoices. Supplier and subcontractor quotes, and invoices once work is done.
Signed T&M tickets. For T&M or NTE work, daily tickets listing workers, hours, equipment, and material, signed by the owner's representative if the contract requires it.
Notices. Copies of any written notice your contract requires. Many contracts set a deadline for notice after you identify a potential change, and missing it can jeopardize recovery regardless of merit.
Schedule backup. For time extensions, a schedule fragment or narrative showing how the change affects the critical path.

From Identified Change to Executed Change Order

The steps, in order:

Identify the change before the work proceeds. Train superintendents and foremen to flag potential changes early.
Give notice in the form and timeframe the contract requires.
Document the basis: the trigger, affected documents, and existing conditions.
Price it using the components above and the contract's pricing method.
Submit the COR with pricing, schedule impact, and backup, and request a response date.
Review and negotiate. Answer questions and provide backup. Keep a record of comments and revisions.
Execute the change order with signatures from both parties before starting the work, or document written authorization to proceed if the work cannot wait.
Track actual cost against the approved amount, and update the budget, schedule, and pay application schedule of values.

Residential Change Orders

The same principles apply on residential work, with a few differences. Homeowners are rarely familiar with change order procedures, so explain the process at contract signing. Put every change in writing with the price, the effect on the schedule, and the payment terms, and get the homeowner's signature before starting. Many states regulate home improvement contracts and some have specific requirements for written changes, so check the rules where you work.

Common Change Order Pricing Mistakes

Using raw wages instead of burdened rates. Leaving out taxes, insurance, and benefits understates labor cost on every change.

Ignoring time. A change that adds days to the schedule has cost beyond the direct work. Price it or at least reserve the right to claim it.

Signing away delay and cumulative impacts. Some change order forms include "full and final" language that waives future claims related to the change. Read it before signing, and if the time impact is not yet known, add a reservation of rights where the contract allows.

Pricing after the work is done. Negotiating after the fact removes your leverage and invites disputes. Price and get approval first whenever possible.

Stacking markup the contract does not allow. If the contract limits markup on subcontracted work or through tiers, follow it. A COR with incorrect markup invites a line-by-line audit of everything else.

Lumping unrelated changes together. One change per COR keeps approvals moving. A combined COR stalls on its most contested item.

Frequently Asked Questions

What markup is standard on a change order?
There is no universal standard. The contract usually sets allowable overhead and profit, often with different rates for self-performed and subcontracted work, and public contracts frequently specify them. The markup allowed on changes may be different from the markup you carried in your original bid, so check before you price.

What if work starts before the change order is approved?
You risk not being paid for it. Some contracts state that unauthorized work is performed at the contractor's risk. If the work is urgent, get written authorization to proceed (even an email from the owner's representative), photograph existing conditions, track costs separately from day one, and submit the COR immediately.

How should subcontractors handle change orders?
Subcontractor changes flow upstream. The sub submits a COR to the GC with backup; the GC reviews it, adds its allowed markup, and includes it in the GC's COR to the owner. Subcontractors should give notice to the GC within the subcontract's timeframe, which is often shorter than the prime contract's so the GC can meet its own deadline.

Should a change order include a time extension?
If the change affects the schedule, yes. Request the time in the same COR and show why. If you cannot determine the time impact yet, say so and reserve the right to request it once it is known, as your contract allows.

Can a change order reduce the contract price?
Yes. A deductive change order (a credit) removes scope and reduces the price. It needs the same documentation and approval as an addition.

Tracking Change Orders Across the Job

Once a change order is priced and submitted, it still needs to be tracked through approval and billing. Our free change order log template (Excel) gives you columns for status, amounts, and approval dates, with totals you can use at pay application time.

If you want the pricing backup, approvals, and history in one place, AECify's change order management software captures scope, cost, and schedule impact in a structured record, links each change to the RFIs, photos, and documents that triggered it, routes it for approval with timestamps, and keeps the running contract value current as changes are approved. For the questions that often start a change, see our guide on how to write an RFI.