What Is a Change Order in Construction? A Guide for New General Contractors

Changes are part of every job. The difference between a job that makes money and one that breaks even is often how many of those changes actually get billed.

You can’t stop changes from happening. However, you can control whether you get paid for them.

What is a change order in construction?

A change order is a written amendment to a construction contract that changes the scope, price, or schedule after the contract is signed. Both the owner and the general contractor sign it, and it becomes part of the contract.

The GCs who protect their margin document every change the day it happens, price the time as well as the materials, and get a signature before the work starts.

Changes come from everywhere: a revised tenant layout, upgraded lobby finishes, an unforeseen condition, a design conflict, or an RFI answer that changes what gets built. (Here’s more on how RFIs, submittals, and specifications connect.) The source rarely decides whether you get paid. The paperwork does.

Change order vs. addendum vs. construction change directive

In the field, the lines blur. On paper, they don’t.

Here’s more on how a construction contract addendum works. If the work can’t wait, a written CCD beats a verbal “go ahead” every time.

Where changes cost GCs money

Undocumented changes

The super agrees to move a door in the field, the sub does it, and nobody writes it down. By the time it shows up on an invoice, no one remembers who approved it. Photos and daily logs are your proof (here’s how to build a construction photo documentation habit).

Verbal approvals

“Just go ahead, we’ll sort it out later” is how GCs end up eating the cost. If the approval lives in a text message or a hallway conversation, it’s hard to collect on.

Pricing that leaves out time

Sub quotes are easy to total. Extra days of supervision, equipment, and general conditions aren’t, and that’s where most of the margin goes. Changes also ripple into the schedule, which is why bulletproof construction scheduling and change management go hand in hand.

Changes that never hit the pay app

An approved change order that doesn’t make it into your schedule of values or your next pay app is money left on the table. Here’s how to manage your construction schedule of values so approved changes get billed on time.

The process, and where it breaks down

Most GCs know the steps. The margin slips in the handoffs between them.

1. 1. Identify and document. Breaks down when the field knows about a change days before the office does.

1. 1. Submit the change order request. Breaks down when the request waits on final pricing instead of going out right away.

1. 1. Price it. Breaks down when the number is the sub quote plus markup and nothing else.

1. 1. Review and negotiate. Breaks down when backup lives in five inboxes and nobody can find it.

1. 1. Approve and sign. Breaks down when the work starts first.

1. 1. Update downstream. Breaks down when the budget, subcontracts, and schedule of values don’t match.

1. 1. Bill it. Breaks down when an approved change misses the pay app cycle.

How to price to protect your margin

Change order price = (Direct costs + Time-related costs) × (1 + Overhead %) × (1 + Profit %)

Here’s how that looks when the tenant adds a partition wall with a door midway through a TI job:

If you price only the sub quote plus markup, you’d bill $8,400 × 1.10 × 1.05 = $9,702. That’s $2,841.30 left on the table on one change, before any markup caps in your contract.

Now multiply that across dozens of changes on every job. That’s where construction project management software earns its keep.

5 best practices for GCs that protect your margin

1. 1. Log it the day it happens. A dated daily log entry with photos ends most disputes before they start, even if pricing comes later.

1. 1. Price the time, not just the work. If a change pushes your finish date, ask for the days along with the dollars.

1. 1. No signature, no start. If the client can’t wait for pricing, get a CCD in writing.

1. 1. Flow changes down to your subs. Update subcontracts as soon as the client approves a change. Otherwise, mismatched scope turns into disputes at closeout. Changes often start upstream, too; see how submittals lead to change orders.

1. 1. Forecast pending changes, not just approved ones. Pending changes affect your cost to complete, estimate at completion, and construction WIP long before anyone signs.

Take control of construction changes before they take your margin

Changes will keep coming. The GCs who come out ahead treat every change order as part of the job, not a side conversation. They document it, price it fully, get it signed, and bill it.

That’s hard to do when changes live in email, spreadsheets, and text messages. Something always slips between the field and the office.

RedTeam is construction project management software born on the jobsite. For over 20 years, we’ve helped small to mid-sized general contractors simplify, automate, and standardize their work from preconstruction through closeout. Change orders, budgets, subcontracts, and pay apps all live in our one connected platform. As a result, an approved change flows straight to your subs, your cost reports, and your next pay app without anyone having to re-enter. Unlike enterprise construction software, every RedTeam customer gets full software functionality, as well as a dedicated implementation and customer success team.

That’s total project control. That’s RedTeam.

See how much margin your team can protect on every change

Every change you don’t bill is profit you earned and gave away. See how RedTeam helps your team track, price, and bill every change order.