Change Orders: A Contractor's Guide to Getting Paid for Extra Work

What a Change Order Is and Why It Matters

A change order is a written document that modifies the original contract. It describes additional or different work, the cost impact, and the timeline adjustment. Both parties sign it before the work begins. That last part is critical: a change order signed after the work is done is not a change order — it's a negotiation you've already lost.

Without change orders, you're exposed to the most common contractor complaint: "I did extra work and the customer won't pay for it." The customer's defense is always the same — "I never agreed to that" or "I thought it was included." A signed change order eliminates both arguments. It's not bureaucracy. It's how you protect your revenue.

Anatomy of a Proper Change Order

Every change order should include these elements:

• Change order number: Sequential numbering (CO-001, CO-002) tied to the original contract number.
• Date: When the change was identified and documented.
• Description of changed work: Specific, detailed scope. Not "additional electrical work" but "install three additional 20-amp circuits in the garage with dedicated breakers, including all wiring, boxes, and outlets."
• Materials and labor breakdown: Itemized costs so the customer can see exactly what they're paying for.
• Cost impact: The total dollar amount being added to (or subtracted from) the contract.
• Timeline impact: How many additional days or weeks the change adds to the project schedule.
• Running contract total: The new total contract value after this change order.
• Signatures and date: Both the contractor and customer sign before work begins.

If your change order doesn't include all of these, it has gaps that a dispute can exploit.

When to Issue a Change Order

Issue a change order any time the work deviates from the original written scope. This includes:

• The customer requests additional work or different materials.
• Unforeseen conditions are discovered (rot behind walls, code violations in existing work, soil issues).
• Building inspectors require modifications not anticipated in the original scope.
• Material substitutions change the cost (whether up or down).
• The customer wants to remove work from the scope (a deductive change order).

The most important time to issue a change order is when the customer says something like "while you're here, could you also..." That phrase is the beginning of scope creep, and your response should be friendly but clear: "Absolutely, let me write that up as a change order so we're both on the same page about cost and timing."

How to Price Change Orders

Pricing change orders is where many contractors either leave money on the table or damage the customer relationship. Here's a fair approach:

• Use the same markup as the original contract. If your original bid used a 20% markup on materials and a specific labor rate, apply those same numbers to the change order. Consistency builds trust.
• Account for disruption. Change orders often require rescheduling, re-ordering materials, or reworking completed tasks. A reasonable disruption factor (10–15%) is standard in the industry and defensible if questioned.
• Show the math. An itemized change order is harder to dispute than a lump-sum number. Break out materials, labor hours, subcontractor costs, and markup separately.
• Be upfront about timeline costs. If the change adds a week to the project and your crew is committed elsewhere, that schedule impact has a real cost. Document it.

Never do the work first and price it later. That approach leads to sticker shock for the customer and disputes that could have been prevented with a five-minute conversation upfront.

Getting Customer Agreement Before Starting

The golden rule of change orders: no signature, no work. Present the change order in writing, walk the customer through it, answer their questions, and get their signature. If the customer wants to "think about it," pause the additional work until they decide. If they say "just do it, we'll sort out the paperwork later," explain politely that your policy requires written approval first — it protects both of you.

For smaller changes, a signed one-page document works fine. For complex changes, you may need a more detailed addendum. Either way, email a copy to the customer immediately after signing so both parties have a record. This documentation discipline is what separates professional contractors from those who end up in disputes over unpaid work.

Common Change Order Disputes and How to Prevent Them

Even with good documentation, disputes can arise. Here are the most common ones and how to prevent them:

• "I never approved that." Prevention: Always get a physical or electronic signature. Verbal approval is worthless in a dispute.
• "That should have been included in the original price." Prevention: Write an extremely detailed original scope. The more specific your contract, the clearer it is when something falls outside it.
• "The price is too high for what you did." Prevention: Itemize every change order. When the customer can see 6 hours of labor at $X/hour plus $Y in materials, the total feels justified.
• "You should have told me about this before starting." Prevention: Always present the change order before doing the work. Always. No exceptions.
• "I didn't realize how many change orders there would be." Prevention: Set expectations during the estimate phase. Tell the customer that changes may arise and explain your change order process upfront. No surprises.

A solid change order process protects your cash flow, strengthens customer trust, and creates the documentation trail that keeps you out of legal trouble. It's one of the simplest systems you can implement, and it pays for itself on the first project.

Set Up Your Change Order Process

If you don't have a change order template yet, create one today. Include all the elements listed above, format it cleanly, and keep blank copies on every job site and in your truck. Use a payment schedule that accounts for change orders so final payment reflects the actual work completed. And make sure your original contract includes a clause stating that all changes must be documented in writing — this gives you the contractual authority to require signatures before starting extra work.