What is a change order in construction?

A change order is a written amendment to an existing construction contract that documents an addition, deletion, or revision to the original scope of work, along with any adjustment to the contract price and the completion schedule. It becomes part of the contract once both the owner and contractor sign it.

Does a change order need to be signed before the work starts?

Yes, in almost every case. Most contracts require a signed change order before any extra work begins, and starting work on a verbal go-ahead is the single most common reason contractors do not get paid for changes. A signed change order is your proof that the owner authorized both the work and the added cost.

How do you price a change order?

The three common methods are a fixed lump sum, unit pricing (a set rate per unit installed), and time and materials with a not-to-exceed cap. The original contract usually specifies which method applies and whether the contractor can add a markup for overhead and profit, often in the 10 to 20 percent range.

Can a homeowner refuse to sign a change order?

Yes. An owner can decline a proposed change, which usually means the extra work simply is not performed. The dispute arises when a change is unavoidable, such as a code-required fix discovered mid-project. In that situation the contract terms, and any allowance or contingency language, govern who absorbs the cost.

What happens if there is no written change order?

Without a signed change order, the contractor is generally held to the original contract price and scope. Courts and arbitrators tend to side with the written agreement, so undocumented extras frequently go unpaid even when the work was clearly performed and the owner benefited from it.

Construction Change Order Template: What to Include

A practical guide to construction change orders. Covers what a change order is, required fields, pricing methods, signatures, and common mistakes to avoid.

On almost every construction project, something changes. The owner picks a more expensive tile, an inspector flags a code issue behind a wall, or a soil report comes back worse than the bid assumed. The work that handles those changes is the change order, and how you document it decides whether the extra work gets paid for or quietly eats your margin.

This guide explains what a change order is, every field a good one contains, how to price changes fairly, and the mistakes that send contractors to collections on work they already finished.

What Is a Change Order?

A change order is a written amendment to a signed construction contract. It records a change to the scope of work and adjusts the contract price and the schedule to match. Once the owner and contractor both sign it, the change order becomes part of the original contract and carries the same legal weight.

Change orders usually fall into one of three buckets:

Additive: new work the original contract did not include, such as adding a bathroom or upgrading the electrical panel.
Deductive: work removed from the original scope, which reduces the contract price.
Substitution: swapping one material or method for another, which can raise or lower the price depending on the choice.

The reason a separate document exists, rather than a verbal "sure, go ahead," is that the original contract priced a specific scope. The moment that scope moves, the price and timeline have to move with it in writing, or the two sides are operating off different versions of the deal.

Why Change Orders Matter

A change order protects both sides, but it protects the contractor most. The owner already has the leverage of holding the money. The contractor's protection is the paper trail.

For a contractor, a signed change order is the difference between billing for extra work and arguing about it. If a roof tear-off uncovers rotted decking that has to be replaced, the change order turns that surprise into an invoice instead of a loss.

Owners get something out of it too. A change order prevents bill shock, because the price and the schedule impact are agreed before the work happens. There are no five-figure surprises on the final invoice, and no fight later over whether anyone actually authorized the extra.

It also keeps the contract current. After three or four changes, the signed change orders plus the original agreement are the real record of what got built and what it cost.

What to Include in a Change Order

A change order does not need to be long, but it does need to be specific. Vague change orders cause as many disputes as missing ones. Every change order should contain the following.

1. Reference to the Original Contract

Name the project, the original contract date, and the parties. The change order amends a specific agreement, so it has to point at that agreement clearly. Include the property address and a contract or project number if you use one.

2. Change Order Number

Number them sequentially: CO-1, CO-2, CO-3. On a busy job this is the only way to keep the running total straight, and it matters when you reconcile the final contract sum.

3. Description of the Change

Describe the work in plain, concrete terms. "Additional electrical work" invites a fight. "Install one 20-amp dedicated circuit and outlet in the garage, including 40 feet of conduit and a breaker" does not. Specificity here is what stops a $400 change from being argued as a $1,200 one.

4. Reason for the Change

State why the change is happening: an owner request, a hidden condition discovered during demolition, a design revision, or a code or inspection requirement. The reason often determines who pays, so record it.

5. Price Adjustment

State the dollar amount the change adds to or subtracts from the contract. Then show the new total contract sum:

Original contract amount
Net change from prior change orders
This change order amount
New revised contract total

Carrying the running total prevents the math from drifting over a long project.

6. Schedule Adjustment

Most changes affect the timeline, and ignoring that is how contractors get hit with delay claims. State how many days the change adds to the completion date, or note explicitly that it adds none.

7. Signatures and Date

Both the owner and the contractor sign and date. No signature, no authorization. This is the field that turns the document from a proposal into an amendment.

How to Price a Change Order

There are three standard pricing methods, and the original contract usually dictates which one applies to changes.

Lump sum. A single fixed price for the change. Best when the scope is well defined and easy to estimate, such as adding a fixed list of materials and labor. The owner knows the exact cost up front.

Unit pricing. A set rate per unit installed, like a price per square foot of drywall or per linear foot of trim. Useful when the type of work is known but the quantity is not yet final. The contract lists the unit rates, and the change order applies them to the measured quantity.

Time and materials (T&M). The contractor bills actual labor hours and material costs, usually with an agreed markup. Best for unpredictable work, such as repairing hidden water damage, where nobody can estimate the scope until it is opened up. Always attach a not-to-exceed cap so the owner is not signing a blank check.

Whichever method applies, the contract should state whether the contractor can add overhead and profit to changes. A markup in the range of 10 to 20 percent on the cost of the change is common and reasonable, but it has to be written into the original contract or the owner can refuse it on the change order.

If your underlying agreement does not spell out how changes get priced, that is a gap worth fixing before the next project. A solid construction contract agreement sets the change-order pricing rules up front, so the method is already settled by the time a change comes up.

How to Write a Change Order: Step by Step

Step 1: Identify the change as early as possible. The moment you spot work that falls outside the contract, flag it. Do not let it pile up into a single mystery charge at the end of the job.

Step 2: Scope and price it before touching the work. Write the description, pick the pricing method, and calculate the cost and any schedule impact. Resist the urge to start "while you're in there."

Step 3: Put it in writing on a numbered change order. Use a consistent form so nothing gets dropped. Include every field above and the revised contract total.

Step 4: Get the owner's signature before starting. This is the step that protects your payment. A signature on a clear scope and price is your authorization to proceed and your proof later.

Step 5: Update your records and the contract sum. File the signed change order with the contract and update your running total so your final invoice matches the paper.

Step 6: Perform the work and bill it as agreed. Invoice against the signed change order using the same numbering, so the owner can tie each charge back to an authorization they signed.

Common Change Order Mistakes

Starting work on a verbal approval. This is the big one. An owner says "go ahead" over the phone, the contractor does the work, and then the owner disputes the bill. Without a signature, the contractor usually loses. Verbal approvals are not change orders.

Bundling several changes into one vague line. "Misc. extras, $6,000" is unenforceable and reads as padding. Break each change out with its own description and price.

Ignoring the schedule impact. Contractors often price the added cost and forget the added time, then get charged liquidated damages for finishing "late" when the change is what pushed the date.

Not capping time and materials work. Open-ended T&M with no ceiling terrifies owners and triggers disputes. Always set a not-to-exceed number.

Forgetting markup language in the base contract. If the original contract is silent on overhead and profit for changes, you may be stuck doing extra work at bare cost. Settle the markup rule before the job starts.

Letting changes accumulate unsigned. Some contractors keep working and plan to "paper it all later." Later, memories differ and signatures get harder to collect. Process each change as it happens.

Change Orders and Subcontractors

If you run subcontractors, a change to the prime contract often cascades down to them. When an owner-approved change adds work that a sub will perform, issue a matching change order to that subcontractor so your subcontractor agreement stays aligned with the prime contract. Otherwise you can end up owing a sub for extra work that the owner never agreed to pay you for, and absorbing the gap yourself.

When the numbers match top to bottom, you can pass the same cost up to the owner and down to the sub without eating the difference yourself.

Change Orders on Residential Projects

Residential remodels deserve a note, because many states regulate home improvement contracts tightly. Some require that any change to a home improvement contract be in writing and signed, and a few cap how a contractor can charge for changes or require specific disclosure language.

If you handle remodels, build change-order procedures into your base home improvement contract so they comply from the start. For larger renovations, the same discipline applies to phased payments: pairing change orders with a clear payment schedule keeps both the scope and the billing in sync as the job evolves.

Homeowners are also more sensitive to surprise costs than commercial clients, so the up-front, signed-before-work habit matters even more here. A two-minute conversation and a signature beats a collections call every time.

When You Need a Change Order

Use a change order any time the project deviates from the signed contract, including when you:

Add or remove work from the original scope
Substitute a different material, fixture, or finish than the one specified
Encounter a hidden condition, such as rot, mold, or a code violation, that requires extra work
Adjust the completion date for any reason tied to the work
Change the contract price for any reason

If you are unsure whether something qualifies, the safe answer is to write one. A change order you did not strictly need costs nothing. A change you performed without one can cost the whole margin on the job.

Related guides

Generate Your Change Order with Contractable

A change order is simple to write once you know the fields, but getting the pricing method, markup, and schedule language right for your specific job is where most disputes start. Contractable generates clear, signature-ready change orders tied to your original contract, with the right pricing structure and the running contract total already calculated. You do not need a lawyer or legal background to use it.