Construction money, explained
Change order
A change order is a written, mutually signed amendment to a construction contract that changes the scope of work, the contract price, the schedule, or all three — formally documenting work that wasn't in the original agreement before it's performed.
Updated June 2026
What is a change order?
Almost no job finishes exactly as it was bid. The owner wants an upgrade, a hidden condition appears behind a wall, or the plans turn out to be wrong. A change order is how those modifications get added to the contract on paper: it describes the changed work, states the price adjustment (add or deduct), and notes any change to the completion date.
Critically, a change order is signed by both parties. That signature is what turns a verbal 'sure, go ahead' into an enforceable part of the contract. Performing extra work without a signed change order is one of the fastest ways for contractors to do work they never get paid for.
Why do change orders matter for getting paid?
Change orders are where margin quietly leaks out of a job. Unwritten changes — favors, on-the-fly upgrades, 'while you're here' additions — add real labor and material cost that never makes it onto an invoice. Documenting every change at the time it happens is the difference between getting paid for that work and absorbing it.
A good change order prices the change the same way you priced the original bid: cost of labor and materials plus your overhead and profit markup. It should be approved before the work is done, not negotiated after, when your leverage is gone and the cost is already sunk.
On contracts with a schedule of values, approved change orders roll into the contract sum, increasing the total you bill against. On AIA-style billing the G702 has dedicated lines for change orders so the adjusted contract sum is always visible.
How do you write a change order?
Keep it specific and in writing. Describe exactly what's changing, why, the added or deducted cost broken into labor and materials with markup applied, and any schedule impact. Reference the original contract, number it, and get both signatures before starting the work.
Speed and consistency are what make change orders actually get signed — if the process is slow or informal, they slip. Simple Contractor CRM supports this today: change orders are part of its construction billing alongside progress draws, deposits, and retainage, so a documented change adjusts the job's billing and the running margin you see, rather than living on a sticky note.
Worked example
Midway through a $80,000 kitchen remodel, the owner asks to add a wet bar. You price it like a mini-bid: $4,000 materials and $3,500 labor, then apply your standard 20% markup ($7,500 cost x 1.2), landing on a change-order price of $9,000.
Signed before work begins, that $9,000 raises the contract sum to $89,000 and is billed on your next progress draw. Done verbally with no markup, you'd have eaten the overhead and profit on $7,500 of extra work — a direct hit to the job's bottom line.
Frequently asked
- Do change orders need to be in writing?
- Yes, always. A signed written change order is what makes the change enforceable and ensures you get paid for it. Verbal change orders are a frequent source of payment disputes.
- Should I do the extra work before the change order is signed?
- No. Get the change order approved and signed first. Once the work is done your leverage to negotiate the price is gone and you risk not being paid at all.
- How do I price a change order?
- Price it like a small bid: labor plus materials, then apply your overhead-and-profit markup. Don't give away your margin just because the change feels small.
- How do change orders affect the contract sum?
- Approved change orders adjust the contract sum up or down. On a schedule of values or AIA G702, they're tracked as separate lines so the current adjusted total is always clear.
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