Understanding what is a change order in construction is essential for every architect, contractor, and project manager. Construction change orders are formal contract amendments that require agreement from all three parties, and they always cost more than getting it right in the original scope. This guide walks you through the complete change order process, types, costs, and proven management strategies.
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What Is a Change Order in Construction?
A construction change order is a formal, written amendment to an existing construction contract that changes the project’s scope, cost, schedule, or any combination of the three.
According to the American Institute of Architects (AIA), a change order is a written instrument prepared by the architect and signed by the owner, contractor, and architect. It documents their agreement on the change in work, the adjustment to the contract sum, and any adjustment to the contract time.
Here’s the key thing to remember.
A change order can ONLY happen after the construction contract has been signed and executed. If you’re still in the bidding phase, that’s a completely different document (more on that later).
The formal change order form used on most projects is the AIA G701, which standardizes how changes are documented across the industry.
Key Characteristics of Change Orders
Every construction change order shares a few defining features:
- They require three-party agreement between the owner, contractor, and architect
- They only occur after the construction contract is signed
- They modify the scope, cost, time, or a combination of these elements
- They use standardized forms like the AIA G701 change order form
- Once signed, they carry the same legal weight as the original contract
Types of Change Orders in Construction
Not all change orders look the same. Understanding the types of change orders in construction helps you handle each situation correctly.
Additive Change Orders
Additive change orders increase the scope of work and typically increase the contract sum.
For example, an owner decides during construction to upgrade all the lobby finishes from standard tile to natural stone. That’s an additive change order because you’re adding scope, materials, and labor costs that weren’t in the original contract.
Deductive Change Orders
A deductive change order decreases the scope and typically reduces the contract sum.
Let’s say the owner needs to cut costs midway through the project and decides to eliminate the custom millwork package from the second floor. That removal of work from the original scope gets documented as a deductive change order.
Don’t confuse deductive change orders with value engineering. Value engineering happens during the design phase to find cost savings before the contract is signed. A deductive change order happens after construction is underway.
No-Cost Change Orders
Sometimes a change order doesn’t affect the contract sum at all. These no-cost change orders typically involve swapping materials or methods where the cost difference is negligible, but the change still needs to be formally documented because the scope of work is different from what was originally contracted.
Watch out for the schedule though. If the replacement material costs the same but takes three extra weeks to ship, you still need a change order to adjust the contract time, even if the dollar amount is zero. A change that affects schedule but not cost is still a change order, not an ASI.
The Golden Rule: Change Orders Always Cost More
Here’s the most important truth about construction change orders that every professional needs to understand.
It will ALWAYS be more expensive to add or change something via a change order than if it was included in the original contract.
Think about it like booking a flight. Changing your ticket last minute costs significantly more than getting it right the first time.
Once the construction contract is signed, prices are locked in, crews are scheduled, and materials are ordered. Any disruption to that plan costs more because the contractor has to remobilize, reorder materials, potentially redo work, and reschedule subcontractors.
This is exactly why maintaining adequate construction contingency is so critical. Changes are inevitable, and they always cost more after the contract is signed. Smart project teams plan for this reality upfront.
How Much Do Change Orders Cost?
The change order fee structure varies by project, but most construction contracts allow the contractor to add overhead and profit markups on top of the direct cost of the changed work.
Typical contractor markup on change orders ranges from 15-25% for overhead and profit combined, though this varies by contract. The AIA A201 General Conditions establishes the framework for these negotiations.
Beyond the direct markup, change orders carry hidden costs too. There’s the administrative time to process the paperwork, potential schedule delays that ripple through the whole project, and the disruption cost of stopping or rerouting work that’s already in progress.
This is why experienced architects push hard for thorough design and documentation upfront. Every dollar spent getting the construction documents right saves multiples in avoided change orders later.
The Change Order Process: Step by Step
Let’s walk through the complete change order process in construction from start to finish. Understanding this sequence is critical for both professional practice and ARE exam preparation.
Step 1: Identify the Need for Change
The process begins when someone identifies that something needs to change. This could come from:
- The owner wanting something different than what was originally designed
- The contractor discovering an unexpected field condition during routine construction observation activities
- The architect identifying a necessary design modification or coordination issue
Your contract specifies the notification window, and missing it can be devastating. Under standard AIA contracts, the Claims notice period is 21 days from when the event is first recognized. Other contracts may be shorter. Either way, contractors can lose their right to additional compensation entirely by sitting on issues too long and missing the deadline.
Step 2: Submit a Proposal or Request
What happens next depends on who is initiating the change:
- If the Owner initiates the change: The architect issues a G709 Work Changes Proposal Request. This is NOT a change order. It’s simply asking the contractor for a price. Think of it as the owner saying, “How much would it cost if we upgraded X?” If the owner likes the number, then the process moves forward toward a change order.
- If the Contractor initiates the change: The contractor submits a formal Change Order Request (COR), typically for things like unexpected field conditions, unforeseen site issues, or conflicts discovered during construction.
Either way, a properly prepared request includes:
- A clear description of what’s changing and why
- Specific references to affected drawings or specification sections
- Supporting evidence like photos, field reports, or RFI responses
- A detailed cost breakdown showing labor, materials, equipment, and markups
- A schedule impact assessment showing any time extensions needed
Step 3: Architect Review and Evaluation
The architect reviews the request and evaluates three key questions:
- Is this change legitimate and outside the original scope of work?
- Are the proposed costs reasonable for the work described?
- Is the schedule impact justified based on the scope of the change?
For technical issues, the architect often coordinates with structural, mechanical, or other consultants to verify the proposed solution works with all the building systems.
Step 4: Negotiation Between Parties
This is where real discussion happens between the owner, contractor, and architect about scope, cost, and schedule adjustments.
Common negotiation points include labor rates, material markups, overhead and profit percentages, and time extensions. There’s usually back-and-forth before everyone agrees on the final numbers.
Every contractor proposal should start with proper documentation and clear justification. Vague or unsupported requests slow down the entire process.
Step 5: Formal Documentation Using the AIA G701
Once all parties agree on the details, the architect prepares the official change order, typically using the AIA G701 change order form.
Key point for exam candidates: The architect creates the change order document using information provided by the contractor. The contractor does NOT prepare the change order form. This is a commonly tested concept on the Construction & Evaluation (CE) exam.
The G701 form documents three things:
- The specific change in the work
- The adjustment to the contract sum (up or down)
- The adjustment to the contract time (if any)
Step 6: Approval and Signatures
The change order becomes legally binding once all three parties sign it.
While the order can vary by project, the standard flow is: The architect signs to recommend approval, the contractor signs to accept the price and schedule, and the owner signs last to authorize the payment. Until the owner signs, it’s not a valid contract modification.
Once signed, the change order has the same legal force as the original construction contract. It’s not a suggestion or a handshake deal. It’s a binding contract modification.
Step 7: Implementation and Change Order Log Tracking
The contractor implements the changed work while the project team maintains a detailed change order log.
A change order log is one of the most underrated tools in construction project management. It works similarly to a construction submittal log in that both track critical project information flowing between parties.
A well-maintained change order log tracks:
- Each change order’s number, date, and description
- The cost impact (additive or deductive)
- The schedule impact and current approval status
- A running total of all approved changes against the original contract sum
Maintaining an accurate change order log is essential because it gives the entire project team a clear picture of where the budget stands and how the scope has evolved from the original contract.
Step 8: Schedule of Values Update
Once a change order is approved, the contractor adds new line items to the Schedule of Values for the changed work.
The original Schedule of Values stays as-is. New line items are added specifically for change order work so everyone can track original scope versus changed scope when reviewing payment applications.
Change Orders vs Other Contract Modifications
Change orders are just one type of contract modification in construction. Understanding when to use each type is critical for both practice and exam success.
| Modification Type | When Used | Who Signs | Cost/Time Impact |
|---|---|---|---|
| Change Order | When all parties agree | Owner, Contractor, Architect | Can affect both |
| Construction Change Directive (CCD) | Work must proceed immediately | Owner and Architect only | Determined later |
| Architect’s Supplemental Instructions (ASI) | Minor changes only | Architect only | None allowed |
| Addendum | Before contract signing | Architect (with owner approval) | Reflected in bids |
Construction Change Directive vs Change Order
A Construction Change Directive (CCD) is issued when work must proceed immediately but the parties haven’t agreed on cost and time impacts yet.
The biggest difference? A change order requires all three signatures. A CCD only requires the owner and architect’s signatures. The contractor’s agreement on price isn’t needed because the whole point of a CCD is to keep work moving while the details get worked out.
Think of it like finding a burst pipe during renovation. You tell your contractor, “Start fixing this right now. We’ll figure out the exact cost later.” That’s a CCD.
Every CCD eventually becomes a change order once the cost and time details are negotiated and agreed upon. It’s a temporary tool, not a final document.
Exam trap to watch for: What happens if the parties can’t agree on the final cost of a CCD? In that case, the architect determines the cost based on reasonable expenditures and documentation. If the contractor still disagrees with the architect’s determination, the dispute moves into the Claims process under AIA A201 Article 15. This CCD-to-claim path is a favorite test question.
Architect’s Supplemental Instructions (ASI)
An ASI is an architect-issued instruction for minor changes that do not affect cost or time.
This is the simplest modification type because it only requires the architect’s signature. No owner approval. No contractor agreement.
But here’s the critical limitation: an ASI absolutely cannot change the contract sum or contract time. If a change affects money or schedule in any way, it needs to be a change order or CCD instead. This is one of the most commonly tested distinctions on the ARE.
Addendum vs Change Order
An addendum is a modification made to the bidding documents before the construction contract is signed during the bidding process.
This is a critical distinction. Addenda happen before the contract. Change orders happen after. If you remember nothing else from this entire post, remember that timing difference.
Addenda are issued by the architect (with the owner’s approval) and become part of the contract documents that contractors include in their bids. The cost of addenda changes gets absorbed into the bid prices rather than being a separate change order fee.
Choosing the Right Contract Modification
Use this decision process to pick the right document every time:
The Modification Decision Tree
Question 1: Has the construction contract been signed yet?
- NO → Use an Addendum
- YES → Go to Question 2
Question 2: Does the change affect cost or schedule?
- NO → Use an ASI (Architect’s Supplemental Instructions)
- YES → Go to Question 3
Question 3: Do all parties agree on the change, cost, and schedule impacts?
- YES → Use a Change Order
- NO → Use a CCD (Construction Change Directive)
This decision tree is exam gold. If you see a question about which modification type to use, run through these three questions and you’ll get the right answer almost every time.
Change Order Clauses in Construction Contracts
Most construction contracts include specific change order clause language that governs how changes are handled. Understanding these clauses is essential for effective contract administration.
Typical change order clauses in construction contracts define:
- Time limits for notification of potential changes (21 days under standard AIA contracts, though custom contracts may differ)
- Required documentation that must accompany any change order request
- Approval procedures and signature requirements
- Markup percentages allowed for overhead and profit on changed work
- Dispute resolution procedures for contested changes
- Authorization limits defining who can approve changes at different dollar thresholds
Pay close attention to the notification deadlines. Missing a contractual deadline for submitting a change order request is one of the most expensive mistakes a contractor can make. The contract language typically states that failure to provide timely notice constitutes a waiver of the right to additional compensation.
Change Order Management Best Practices
After 20+ years in this industry, here are the construction change order management strategies that actually work.
Prevention Strategies
The best change order is the one you never have to write.
- Invest in thorough preconstruction phase planning with comprehensive site investigation and due diligence
- Establish clear change order process protocols that everyone understands from day one
- Create detailed, well-coordinated contract documents that avoid common specification writing errors and reduce the ambiguity that leads to disputes
Documentation Best Practices
- Use standardized forms consistently. The AIA G701 exists for a reason. Using it every time creates consistency and reduces errors.
- Maintain a robust change order log from day one, not after problems start piling up
- Make change order status a standing agenda item in every weekly project meeting
- Document everything in writing. Verbal approvals without written confirmation are a recipe for professional liability exposure
Quality and Compliance Integration
- Incorporate change order review into your overall quality assurance and quality control process
- Verify that changes don’t compromise design intent or code compliance, particularly for critical life safety systems like means of egress requirements
- Coordinate changes with the relationship between drawings and specifications to make sure nothing falls through the cracks
Common Change Order Mistakes to Avoid
Timing and Documentation Mistakes
Missing notification deadlines is the number one mistake. Your contract specifies how long you have to submit notice, and under standard AIA contracts, the Claims notice window is 21 days. Miss that window and you could lose the right to additional compensation entirely.
Verbal approvals without documentation are the second biggest problem. “The owner told me on site to go ahead” doesn’t hold up when there’s a cost dispute three months later. Always follow up verbal conversations with written confirmation.
Incomplete change order requests slow everything down. When a contractor submits a request without detailed cost breakdowns, supporting photos, or specification references, the architect has to send it back. That delays the approval and pushes back the schedule.
Financial and Process Errors
Not tracking cumulative impacts is a silent budget killer. Individual change orders might seem minor, but they add up fast. A project with twenty $5,000 change orders just blew through $100,000 of contingency. The change order log is your early warning system.
Ignoring contract requirements for markup percentages and change order procedures creates disputes. The contract language is there for a reason. Follow it.
Performing changed work before getting a signed change order is risky. Contractors sometimes start work on a verbal “go ahead” without formal documentation. If the cost negotiation goes sideways later, that’s a recipe for a construction claim or dispute.
Change Orders on the ARE and CDT Exams
Construction change order concepts appear across multiple ARE exam divisions, particularly on the Construction & Evaluation (CE), Practice Management (PcM), and Project Management (PjM) exams.
These concepts are also heavily tested on the CDT certification exam since construction document management is core to that credential.
Exam Traps and Rules to Memorize
- The “Who Signs” Trap: An ASI only requires the architect’s signature. A CCD needs the owner and architect. A change order needs all three. Know which document needs which signatures.
- The “Timing” Rule: Addenda = pre-contract. Change orders = post-contract. This timeline distinction gets tested constantly.
- The “Who Prepares It” Trap: The architect prepares the change order form, NOT the contractor. The contractor provides the cost information, but the architect creates the document.
- The ASI Limitation: ASIs absolutely cannot affect cost or time. If a question describes a change that impacts money or schedule, ASI is the wrong answer.
- The CCD Path: If parties can’t agree on a CCD’s final cost, the architect determines it. If the contractor still disagrees, it becomes a Claim under Article 15.
- The G701 Form: Know that the AIA G701 is the standard change order form and what information it documents.
Understanding the complementary relationship between drawings and specifications is also critical for properly evaluating change order requests on the exam.
Frequently Asked Questions About Construction Change Orders
What is a change order?
A change order is a formal, written amendment to an existing construction contract that modifies the scope of work, the contract sum, and/or the contract time. It requires agreement and signatures from all three parties: the owner, the contractor, and the architect.
What does a change order look like?
The standard change order form used in the construction industry is the AIA G701. It’s a one-page document that identifies the project, lists the specific change in work, states the adjustment to the contract sum, states any adjustment to the contract time, and includes signature lines for all three parties.
Who prepares the change order?
The architect prepares the change order document using cost and scope information provided by the contractor. This is a critical distinction. While the contractor initiates the request and provides the pricing, it’s the architect’s responsibility to prepare the formal change order form.
What is a deductive change order?
A deductive change order removes scope from the original contract, typically reducing the contract sum. Common examples include eliminating finishes, reducing square footage, or removing building systems to bring a project back within budget during construction.
What is the difference between a change order and a construction change directive?
A change order requires agreement from all three parties (owner, contractor, architect) before work proceeds. A construction change directive (CCD) only requires the owner and architect’s signatures, allowing work to begin immediately while cost and time negotiations continue. Every CCD eventually gets converted into a change order.
What is the difference between an addendum and a change order?
Timing is the key difference. An addendum modifies the construction documents during the bidding phase, before the contract is signed. A change order modifies the contract after it’s been signed and executed. They serve similar purposes but occur at completely different points in the project timeline.
What is an ASI in construction?
An Architect’s Supplemental Instruction (ASI) is a document issued by the architect for minor changes that do not affect the contract sum or contract time. It only requires the architect’s signature. If a change impacts cost or schedule in any way, an ASI is the wrong tool and a change order or CCD should be used instead.
How much do change orders typically cost?
Beyond the direct cost of the changed work itself, contractors typically add 15-25% in overhead and profit markups on change order work. Change orders also carry indirect costs including administrative processing time, potential schedule delays, and disruption to ongoing work sequences. This is why changes during construction are always more expensive than including the work in the original contract.
What is a change order log?
A change order log is a tracking document that records every change order on a project, including its number, date, description, cost impact, schedule impact, and approval status. It provides a running total of all modifications against the original contract sum and serves as an audit trail for the project.
Can a contractor refuse a change order?
A contractor can dispute the terms of a proposed change (particularly the cost and time), but most construction contracts require the contractor to proceed with the work under a Construction Change Directive while the disagreement is resolved. The contract’s dispute resolution provisions govern what happens when parties can’t agree.
What is a change order clause?
A change order clause is the section of a construction contract that defines how changes will be handled. It typically specifies notification deadlines, required documentation, approval procedures, allowed markups, and dispute resolution methods. Understanding these clauses is essential for proper contract administration.
Master the Change Order Process
Now you understand what is a change order in construction: a formal contract amendment requiring three-party agreement that adjusts the contract sum and time when scope changes after the contract is signed.
The golden rule is worth repeating: changes after contract signing ALWAYS cost more and take longer than if they were in the original scope.
Effective change order management comes down to three things:
- Prompt documentation so nothing falls through the cracks
- Clear communication between all parties
- Systematic tracking with a detailed change order log
In my 20+ years in this industry, change isn’t just inevitable in construction. It’s guaranteed. The professionals who build successful careers aren’t the ones who avoid changes (that’s impossible). They’re the ones who develop solid systems to manage the process effectively.
Master this process, and you’ll set yourself apart immediately.
Change orders don’t have to be overwhelming. When you understand the G701 workflow and the A201 General Conditions, what feels like chaos becomes a manageable, repeatable process. If you want to master the entire construction administration system and crush the CE division of the ARE, we’ve got you covered.
Our Construction & Evaluation 101 (CE 101) course breaks down every aspect of the change order process with detailed examples, practice questions, and real-world scenarios that prepare you for both the exam and professional practice.
Preparing for the CDT certification? Our CDT 101 course covers change orders, contract modifications, and the complete construction document lifecycle from start to finish.
Ready for comprehensive ARE preparation? Explore our ARE 101 courses with detailed coverage of construction administration and contract management across every exam division.
