The Change Order Process in Contracting

A change order is a formal, written amendment to an existing construction or service contract that modifies the original scope of work, adjusts the contract price, or revises the project schedule — or all three simultaneously. This page covers how change orders are defined, how they move through approval and execution, the scenarios that most commonly trigger them, and the decision boundaries that distinguish legitimate change orders from unauthorized scope creep. Understanding this process is essential for anyone reviewing how to read a contractor contract or evaluating contractor payment terms and schedules.

Definition and scope

A change order is a legally binding modification to a signed contract. It supplements — not replaces — the original agreement and must be executed by authorized parties on both sides before work under the changed scope begins. The American Institute of Architects (AIA), which publishes widely adopted standard contract documents including AIA Document A201-2017, defines a change order as "a written instrument prepared by the Architect and signed by the Owner, Contractor, and Architect" that establishes agreement on the change in work, the adjustment to the contract sum, and the adjustment to the contract time.

Scope matters. A change order applies to work that falls outside the contractor scope of work definition documented at contract execution. It is distinct from:

• A construction change directive (CCD): Used when Owner and Contractor cannot agree on price or time; the Owner directs the work to proceed while disputes are resolved separately.
• A request for information (RFI): A clarification mechanism that does not itself authorize any cost or schedule change.
• A field order: A minor written instruction that does not alter the contract sum or time.

These distinctions matter because conflating them is one of the most common sources of payment disputes in construction, as documented by the Construction Management Association of America (CMAA).

How it works

The change order process follows a structured sequence. Deviating from any step — particularly skipping written authorization — is a primary cause of contractor non-payment disputes.

1. Identification: A triggering event occurs. The contractor, owner, architect, or engineer identifies work that falls outside the original contract scope.
2. Request for proposal (RFP): The owner or architect issues a formal request asking the contractor to price the proposed change.
3. Contractor pricing: The contractor prepares a detailed cost breakdown — labor, materials, equipment, subcontractor costs, overhead, and markup. Overhead and markup structure is addressed in contractor markup and overhead explained.
4. Review and negotiation: The owner, architect, or construction manager reviews the submitted pricing. Disputes over unit rates, hours, or material costs are resolved in writing.
5. Written execution: All parties sign the change order document before affected work proceeds.
6. Contract update: The executed change order becomes part of the contract documents. The contract sum and schedule are adjusted accordingly.
7. Payment processing: The approved change order value flows into the next pay application under the revised contractor payment terms and schedules.

On federally funded projects, change orders on contracts exceeding $150,000 may require additional documentation and approvals under the Federal Acquisition Regulation (FAR), specifically FAR Part 43, which governs contract modifications in public sector work.

Common scenarios

Change orders arise from four broad categories of triggering conditions:

Owner-directed changes are the most straightforward — the owner requests additional work, upgraded materials, or a design revision after contract execution. These are unambiguous scope additions.

Unforeseen site conditions trigger a large percentage of construction change orders. Encountering subsurface rock, unknown utilities, contaminated soil, or hidden structural deterioration during renovation work creates conditions that could not reasonably have been included in the original bid. The contractor bid process explained page covers how bidders attempt to allocate this risk before contract execution.

Design errors and omissions occur when drawings or specifications issued at bid time are incomplete, inconsistent, or contain errors that require field correction. The cost allocation for these changes — whether borne by the designer's errors-and-omissions insurance, the owner, or the contractor — depends on contract language.

Regulatory and code changes arise when a building permit, inspection, or code compliance review reveals requirements not anticipated in the original design. Permit-related obligations are covered in contractor permit pulling responsibilities.

Decision boundaries

The central decision boundary in change order management is determining whether proposed work is genuinely outside the original contract scope or whether it was implicitly included. Contractors and owners routinely dispute this line.

A second critical boundary separates written change orders from oral authorizations. Oral instructions from an owner or architect to proceed with additional work, without a signed change order, expose the contractor to significant non-payment risk. Courts in most US jurisdictions enforce contract clauses requiring written modification, though some states recognize exceptions under theories of quantum meruit or oral modification — making the contractor-licensing-requirements-by-state context relevant to enforcement.

A third boundary involves timing: change orders submitted after the work is complete face much higher scrutiny and rejection rates than those processed before or during the work. The AIA A201 standard requires that claims for additional cost be made within 21 days of the event giving rise to the claim, a deadline that contractors operating without adequate contractor project management practices often miss.

The comparison between a properly executed change order and a construction change directive illustrates the stakes: a CCD forces the contractor to perform the work and recover costs through dispute resolution, whereas a fully signed change order provides immediate contractual protection for both price and schedule.