What Is Change Order?
A change order is the document that records an agreed-upon modification to a job's original scope, price, or schedule. When additional work is discovered during a job, or when a client requests something outside the original estimate, a change order captures that change in writing before the additional work begins. Both the contractor and the client acknowledge the change, which protects both parties.
Why It Matters to Contractors
Without documented change orders, contractors routinely absorb the cost of added scope. The client remembers the original price; the contractor remembers every extra hour and every additional part. Change orders create a written record that both parties agree to before extra work proceeds, protecting the contractor's margin and giving the client clear visibility into what is changing and why the price is adjusting.
How It Works
When additional scope is identified, the contractor prepares a change order describing the additional work, the added cost, and any impact on the timeline. The client reviews and approves it before the extra work begins. The approved change order is then added to the job record and reflected in the final invoice. On large projects with multiple scope changes, each change order is numbered and tracked separately so there is a clear history of every modification.
An electrical contractor is roughing in a basement renovation when the client asks to add two circuits that were not in the original scope. The contractor prepares a change order for four additional hours of labor and the materials needed for the two circuits. The client approves it before the work starts. The final invoice reflects the original scope plus the approved change order total.
Change Order vs. Estimate
An estimate is prepared before any work begins and represents the contractor's best projection of the total job cost. A change order is issued after a job is already underway, to document a specific modification to what was already agreed. A project can have multiple change orders over its lifetime as scope evolves. The estimate sets the baseline; change orders document the deviations from it.
How Contractors Track This
Change orders are tracked in work order or project management software. Each change order links to the original job, records who approved it and when, and adds to the billable total. Without a system, change orders are often discussed verbally and forgotten, which is one of the most common places where contractor margin disappears on larger jobs.
Related Terms
Frequently Asked Questions
Is a change order legally binding?
A signed or electronically approved change order is generally considered a binding modification to the original contract. The specifics depend on the original contract language and your state's laws. Most contractors treat any client approval of a change order as authorization to proceed and to bill for the additional work. For large or complex projects, having a lawyer review your change order process and contract language is worthwhile.
What should a change order include?
A complete change order includes a description of the additional or modified work, the reason for the change, the adjusted cost, any impact on the project timeline, and a place for both parties to acknowledge approval. Numbering each change order sequentially makes it easy to track how the original scope has evolved over the life of a project.
How do contractors price change orders?
Most contractors price change orders the same way they price the original job: labor hours times their labor rate, plus materials with markup applied. Some contractors use a slightly higher markup on change order work to account for the disruption and administrative overhead involved. The key is to calculate the cost before starting the additional work rather than trying to reconstruct it afterward.
Can a client refuse to pay for change order work?
A client can dispute any invoice, but a signed or approved change order significantly strengthens the contractor's position. If a client verbally asks for additional work and the contractor performs it without a written change order, the contractor may have difficulty billing for it. Written change orders, even simple ones, protect both parties by creating clarity before work proceeds.