Nearly every contractor who loses money on change orders loses it in the same place, and it is not the invoice. It is the moment on site when somebody says "yeah, we can do that" and work starts before anyone has written down what "that" is or what it costs.

By the time the job reaches closeout, the argument is no longer about price. It is about whether the change was ever authorised at all — and the party without documentation loses that argument regardless of who was right.

This is a process for closing that gap. None of it is complicated. All of it is boring, which is exactly why it gets skipped.

Where change order money actually leaks

There are five leak points, and most contractors have at least three of them:

  1. Verbal approvals. The owner nods at a walkthrough. The superintendent tells the crew to proceed. Nothing is written. Six weeks later the owner remembers the conversation differently, and honestly may not be lying — they just heard "we can look at that" where you said "we can do that."
  2. Work performed before pricing. Once the work is done, you have lost your leverage. You are now asking to be paid for something the owner already has, and the negotiation starts from their number rather than yours.
  3. Missed indirect costs. The direct labour and materials get priced. The two weeks of added general conditions, the extra supervision, the schedule impact and the crew you had to hold over do not.
  4. Bundled change orders. Fifteen small changes are grouped into one request at the end of the month. It now looks enormous, it gets scrutinised line by line, and things that would have sailed through individually get contested.
  5. No schedule impact claimed. Cost gets adjusted, time does not. Then the job runs late, the owner points at the original completion date, and you are absorbing liquidated damages for delays you did not cause.

The process

1. Log it the day it comes up

Every potential change gets a number and a dated entry the day it surfaces — whether it originated from the owner, an RFI answer, a design conflict, an unforeseen site condition or a code official. Log it even when you think it will come to nothing. A change log with entries that were later voided costs you nothing; a change that was never logged costs you the work.

The entry needs four things at this stage: date raised, who raised it, a one-line description, and the source document if there is one (RFI number, sketch, email, inspection notice).

2. Determine whether it is actually a change

Compare the requested work against the contract documents — drawings, specifications, scope of work and inclusions. The honest question is whether a reasonable contractor reading the original documents would have priced this work. If yes, it is not a change and claiming it damages your credibility on the changes that are real. If no, proceed.

This step protects you in both directions. Contractors who claim everything get treated as adversarial and have every request contested. Contractors who claim nothing until it is unignorable train owners to expect free work.

3. Price it before anyone touches it

The pricing needs to cover more than the obvious:

  • Direct labour at loaded rates, not base wage — burden, payroll tax, workers' comp and benefits included
  • Materials at current pricing, not the rate you carried at bid six months ago
  • Equipment — rental, mobilisation, or your own equipment at an agreed rate
  • Subcontractor quotes, in writing, with the same scope clarity you are demanding from yourself
  • Indirect and general conditions — supervision, temporary facilities, extended site overhead if the change adds duration
  • Overhead and profit at your contract's agreed markup, applied correctly to each category
  • Schedule impact — days added, and whether they extend the critical path

If your contract specifies markup percentages for change work, use them. If it does not, that is worth fixing in the next contract.

4. Decide the pricing method deliberately

Three options, and the right one depends on how well the scope is defined:

  • Lump sum — scope is clear, quantities are knowable. You carry the risk and price accordingly. Cleanest for the owner, best for you when you understand the work.
  • Unit rate — scope is clear but quantity is not. Agree the rate per unit now, measure the actual quantity as you go. Common for excavation, rock removal and remediation.
  • Time and materials — scope genuinely cannot be defined yet. Requires daily signed tickets and an agreed rate schedule, and owners resist it because they cannot see the ceiling. Offer a not-to-exceed cap to make it acceptable.

Never let a change default to T&M through inaction. If you are doing T&M, that should be a decision both parties made on purpose.

5. Get it approved in writing before work starts

This is the step that matters, and the one under the most pressure to skip. The crew is on site. The owner is standing right there. Waiting feels obstructive.

Written approval does not have to mean a formal document with wet signatures. An emailed acceptance of a written scope and price is enforceable in most jurisdictions and takes ninety seconds. What it must contain:

  • Change order number and the job it belongs to
  • A scope description specific enough that a stranger could tell whether it was completed
  • The price and the pricing method
  • Schedule impact in days — including "zero days" where that is the case, because silence gets read as zero later anyway
  • Revised contract sum and revised completion date
  • Dated acceptance from someone with authority to bind the owner

That last point is worth checking early. On commercial work, the person on site is frequently not the person who can authorise spending. Find out at kickoff who can, and get changes to them.

If work genuinely cannot wait — a safety issue, or a condition that will get worse — document the direction to proceed in writing, note that pricing follows, and send it the same day. A contemporaneous email saying "per your direction this morning we are proceeding with X, pricing to follow" is a great deal better than nothing, and its value comes entirely from being sent that day rather than reconstructed later.

6. Track it through to payment

An approved change order is not money. It is money once it has been billed and collected. Track each one through its full lifecycle — raised, priced, submitted, approved, in progress, complete, billed, paid — and review the ones that have stalled every week. Change orders that sit "approved" but unbilled for two months are a cashflow problem you created yourself.

7. Reconcile the contract sum every month

Original contract value, plus approved changes, equals current contract value. That number should agree with your billing schedule, your budget and the owner's records every single month. Reconciling monthly turns a disagreement into a five-minute conversation. Reconciling at closeout turns it into a dispute.

What to check monthly

Four numbers tell you whether the process is working:

  • Average days from raised to approved. Rising means your requests are unclear, or they are going to someone without authority.
  • Value of work performed without written approval. This should be zero. It will not be zero. Knowing the number is how it gets smaller.
  • Approved but unbilled. Money you have earned and not asked for.
  • Change orders as a percentage of contract value. Consistently high across jobs points at estimating or scope definition, not at difficult owners.

Doing this in BuilderSolve

Change orders in BuilderSolve carry the financial impact calculation, the client approval workflow and a complete audit trail, and approved scope imports directly into both the schedule and the budget — so the revised contract sum and the revised completion date update together rather than one being remembered and the other forgotten.

See how change orders work →