Construction change orders can make or break your project’s budget and timeline. This comprehensive guide explains what a change order in construction is, how it affects contract specifications, and walks you through the complete change order process, and reveals insider tips from 20+ years of managing these critical contract modifications. Whether you’re studying for professional exams or managing real-world projects, mastering change order management is essential for every architecture professional.
This podcast is also available on YouTube, Spotify, and Apple Podcasts
The Inevitability of Change Order Management
If there’s one constant in construction, it’s chaos – and that’s where effective change order management becomes your secret weapon. After 20+ years in this industry, I’ve seen even the most meticulously planned projects thrown into disarray by a single unexpected field condition. That’s why understanding what change orders are and how to handle them properly is absolutely crucial.
I’ve lived and breathed change orders from virtually every perspective imaginable: approving handwritten change orders on residential projects, sweating through contractor change order requests at architecture firms, processing millions in change orders as an owner’s rep on government projects, and now teaching bewildered exam candidates how to master these concepts. Trust me when I say change orders construction professionals deal with will make or break your career – they’re unavoidable.
While real-world change order meaning and procedures vary widely across the industry, today we’re focusing on how formal construction change orders work according to AIA standards – exactly the way they’ll appear on your ARE and CDT exams. The change order definition might seem straightforward, but mastering the nuances can save your projects (and your sanity).
By the end of this post, you’ll understand:
- What change orders are and when they’re used
- The complete process from identification to implementation
- How change orders compare to other contract modifications
- Common errors and how to avoid them
- Strategies for exam success
So, What Is a Construction Change Order?
According to the American Institute of Architects, a change order is:
“a written instrument prepared by the Architect and signed by the Owner, Contractor, and Architect stating their agreement upon: 1) the change in the Work; 2) the amount of the adjustment in the Contract Sum; and 3) the extent of the adjustment in the Contract Time.”
In plain English:
A change order is a formal amendment to the original construction contract that changes the contracts dollar amount and/or the the contracts schedule. Changes orders all three main parties to agree.
Change orders can ONLY happen after the construction contract has been signed and executed. This distinguishes them from other types of modifications we’ll discuss later.
Key Characteristics
Change orders have several defining features:
- They require three-party agreement between owner, contractor, and architect
- They only occur after the construction contract is signed
- They modify scope, cost, time, or a combination of these elements
Types of Change Orders
Additive Change Orders increase the scope of work and typically the contract sum. For example, when an owner decides during construction to upgrade to premium finishes in the lobby after the construction contract has been signed.
Deductive Change Orders decrease the scope and typically reduce the contract sum. For instance, when an owner decides to eliminate custom millwork to save costs midway through a project.
The Golden Rule of Change Orders in Construction
Here’s the most important truth about construction change orders that I drill into every client and student: It will ALWAYS be more expensive to add or change something via change order than if it was included in the original contract.
Think of it like booking a flight – changing your ticket last minute costs significantly more than getting it right the first time. When the contractor change order form appears, you’re already at a disadvantage. Once the construction contract is signed, prices are locked in, teams are scheduled, and materials are ordered. Any disruption to that plan inevitably costs more.
On a university project I managed, adding a simple HVAC modification post-contract cost nearly three times what it would have during design. Why? The contractor had to bring specialists back to the site, open up finished ceilings, and work around other trades already in place.
This is why maintaining adequate construction contingency is critical – changes are inevitable, and they always cost more after the contract is signed.
This is the project manager’s golden rule of change order management – words I live by on every design and construction project, and advice that has saved my clients millions over my career.
The Construction Change Order Process
Let’s walk through the complete process from start to finish:
Step 1: Identification of need for change
The change order process begins when someone identifies a need for change. This could be the owner wanting something different (like those marble countertops they suddenly can’t live without), the contractor discovering an issue in the field, or the architect identifying a necessary design modification.
I once worked on a 1920s bungalow renovation where during demolition, the contractor discovered extensive termite damage to structural framing that wasn’t visible during bidding. The contractor practically sprinted to document this finding – and for good reason.
Most construction contracts require notification within 5-10 days of discovery. I’ve seen contractors lose thousands by sitting on these issues too long and forfeiting their right to additional compensation. This is where the change order request process begins – with prompt, thorough documentation.
Step 2: Documentation and proposal (Change Order Request)
The contractor prepares a formal Change Order Request (COR) that documents the proposed change, its justification, and impacts. This isn’t just paperwork – it’s the contractor’s opportunity to get fully compensated for unexpected work.
A properly prepared change order form for construction must include:
- A crystal-clear description of what’s changing and why
- Specific references to affected drawings or specifications
- Supporting evidence like photos, field reports, or material samples
- Detailed cost breakdown and schedule impacts
For our termite damage example, a savvy contractor would submit a comprehensive change order request with high-resolution photos, a detailed sketch showing affected areas, itemized costs for demolition, treatment, and replacement of damaged framing, and a timeline showing the two-week schedule impact for specialized treatment. The more thorough the change order example they provide, the faster approval typically happens.
Step 3: Review and evaluation by architect
The architect reviews the change order request, considering three key questions:
- Is this change legitimate and outside the original scope?
- Are the proposed costs reasonable?
- Is the schedule impact justified?
For technical issues, the architect often coordinates with consultants – in our termite example, a structural engineer would verify the extent of damage and proposed solution.
Step 4: Negotiation between parties
This is where the real discussion happens about scope, cost, and schedule adjustments. There’s typically back-and-forth between parties to refine the proposal.
Common negotiation points include labor rates, material markups, overhead and profit percentages, and time extensions.
In our example, after discussion, the owner questions whether all framing needs replacement, the contractor explains the extent of damage, and they agree on a final price of $23,500 with a 10-day schedule extension.
Step 5: Formal documentation (AIA G701)
Once details are worked out, the architect prepares the official Change Order, typically using AIA G701 form.
Key exam point: The architect creates the change order with data provided by the contractor – not the other way around.
The change order includes project information, change order number, detailed description, cost breakdown, schedule impact, and references to supporting documents.
Step 6: Approval and signatures
The change order becomes official once all three parties sign it. Typically, the architect signs first, then the contractor, and the owner signs last.
Once signed, the change order has the same legal status as the original contract – it’s a binding modification.
Step 7: Implementation and tracking
The contractor implements the changed work while the project team maintains a detailed change order log – one of the most underrated tools in effective change order management.
A well-designed change order log tracks each order’s number, date, description, cost impact, schedule impact, and approval status. Similar to how construction submittals are tracked, this running document gives everyone a real-time, big-picture view of all changes, maintains history for potential disputes, and provides critical data for financial tracking.
Just as with the punch list process, maintaining detailed documentation throughout the change order process is essential for proper project closeout.
During a complex hospital renovation I managed, our change order log ballooned to over 200 entries. That detailed tracking was the only thing that prevented financial chaos when we needed to justify the final 12% budget increase to stakeholders. Never underestimate the power of meticulous change orders construction tracking!
Step 8: Schedule of Values update
Once approved, the contractor adds change order line items to the Schedule of Values.
The original Schedule of Values remains unchanged – new line items are added specifically for change order work. As the contractor completes change order work, they bill against these specific line items in monthly payment applications.
Change Orders vs. Other Contract Modifications
Change orders are just one type of contract modification. Here’s how they compare to others:
| Modification Type | When Used | Who Signs | Cost/Time Impact | When Issued |
|---|---|---|---|---|
| Change Orders (CO) | When all parties agree | Owner, Contractor, Architect | Can affect both | After contract signing |
| Construction Change Directives (CCD) | When work must proceed immediately | Owner and Architect only | Determined later | After contract signing |
| Architect’s Supplemental Instructions (ASI) | For minor changes | Architect only | None | After contract signing |
| Addenda | For bidding document changes | Architect (with owner approval) | Reflected in bids | Before contract signing |
Change orders may affect performance and payment construction bonds if they significantly increase the contract amount.
Construction Change Directives (CCD)
CCDs are directives issued when work must proceed immediately but parties haven’t agreed on terms.
CCDs require only owner and architect signatures; the contractor must perform the work. Every CCD eventually becomes a Change Order once cost and time details are worked out.
Think of a CCD like finding a water leak behind the wall during a kitchen renovation. You tell your contractor, “Start fixing this leak right now – we’ll figure out the exact cost later,” but we can’t let the house flood while we negotiate.
Architect’s Supplemental Instructions (ASI)
ASIs are architect-issued instructions for minor changes that don’t affect cost or time.
They cannot change cost or time and only require the architect’s signature. ASIs are binding on both owner and contractor.
An ASI is like telling movers “place the couch against the north wall instead of the south wall” during your move-in day. It doesn’t cost more or take longer – it’s just a clarification that falls within what was already agreed upon.
Addenda
Addenda are modifications made to bidding documents before the contract is signed.
They’re the only modification type that happens pre-contract. Addenda become part of the contract documents once the contract is signed and must be acknowledged by bidders in their proposals during the bidding process.
An addendum is like sending out a correction to wedding invitations before guests RSVP: “Please note: the ceremony will be outdoors, not in the ballroom as originally stated.” It updates information before commitments are finalized.
Choosing the Right Modification
Use this simple decision flowchart:
- Has the construction contract been signed yet?
- If NO: Use Addendum
- If YES: Continue to question 2
- Does the change affect cost or schedule?
- If NO: Use Architect’s Supplemental Instruction (ASI)
- If YES: Continue to question 3
- Do all parties agree on the change, cost, and schedule impacts?
- If YES: Use Change Order (CO)
- If NO: Use Construction Change Directive (CCD)
Stakeholder Perspectives on Change Orders
Understanding different viewpoints helps anticipate and prevent disputes:
Owner’s Perspective
Owners control the budget and naturally view change orders as threats to their bottom line. Public owners may have strict limitations on how much they can approve without additional board or council authorizations.
Owners consistently ask: “Is this change necessary, and am I getting good value?” They need clear explanations of why changes are needed and what they’ll get for their money.
Contractor’s Perspective
Change orders often represent both additional revenue and potentially better profit margins than original contract work. Contractors need timely approval so their cash flow isn’t disrupted while paying for changed work.
In public work with low-bid contracts, some contractors might deliberately bid low to win projects while planning to make actual profit through change orders – a dynamic that makes proper document review before bidding critical.
Architect’s Perspective
Architects often find themselves in the awkward position of both defending their documents and negotiating on behalf of the owner. They must ensure changes don’t compromise the design intent or create technical problems.
Architects must determine if requested changes are truly outside the contract scope or should have been included originally. The unstated architect perspective is often “Why didn’t anyone listen to me when I suggested this during design?”
Subcontractor’s Perspective
Subs typically have the tightest profit margins and least financial flexibility, so delays in approving change orders can seriously impact their business. Specialty subcontractors often must reschedule skilled labor already committed to other projects, creating a challenging domino effect.
Best Practices and Common Errors
Change Order Management Best Practices
After years in the trenches of construction change management, here are the practices I’ve seen separate the professionals from the amateurs:
- Thorough preconstruction phase planning: Invest time in comprehensive site investigation and detailed documentation before breaking ground – every dollar spent here saves ten in change orders later.
- Clear change order process protocols: Establish systems for timely notification, documentation, and approvals that everyone understands from day one.
- Standardized change order form usage: Consistently use industry-standard forms like AIA G701 change order documents rather than creating your own formats.
- Robust change order log maintenance: Implement detailed tracking systems that show running totals, approval status, and cumulative impacts across the project.
- Weekly change order process reviews: Make change order status a standing agenda item in every project meeting – what gets discussed regularly gets resolved promptly.
- Integrated quality management: Incorporate change order review into your overall quality control process to ensure changes don’t compromise design intent or code compliance.
Common Errors
- Not getting timely notifications: Most contracts require notification within days. Failure to provide timely notice can waive the right to additional compensation.
- Verbal approvals without documentation: Even with the best intentions, memories differ and personnel change. Follow up verbal discussions with written confirmation.
- Incomplete change order information: Missing critical details delays approval. Use standard forms that require all information.
- Not tracking cumulative impacts: Individual changes might seem minor, but their cumulative effect can be significant. Maintain running totals in your change order log.
- Ignoring contract requirements: Pay attention to specific contract stipulations about markup percentages, notification timeframes, and required documentation.
- Not considering liability implications: Not documenting changes properly can lead to increased professional liability exposure and insurance claims.
Understanding Change Orders for Professional Development
It’s important to understand how change orders work both for professional practice and for your development as an architect. As you study construction contract administration, you’ll need to understand:
- The roles of different parties in preparing and signing documents
- When each modification type is appropriate to use
- Which forms are used for different scenarios
- The proper sequence of the change order process
Critical concepts to master for your professional development include:
- Three-party agreement requirements for change orders
- When change orders can be used (only post-contract)
- Document preparation responsibilities
- Process sequence
- Signature requirements for each modification type
Common Misconceptions About Change Orders
After coaching many architectural professionals through this material, I’ve seen people misunderstand these same change order-related issues again and again:
- Timing confusion: Remember that change orders in construction can ONLY happen after the contract is signed. Before contract signing? That’s an addendum vs change order situation – always use Addenda pre-contract.
- Signature requirements: It’s essential to understand who needs to sign each document type:
- Change Order (CO) = Owner, Contractor, Architect (all three must sign)
- Construction Change Directive (CCD) = Owner, Architect (no contractor signature)
- ASI = Architect only (simplest approval process)
- ASI limitations: ASIs cannot be used for anything that affects cost or time – this is a common misunderstanding that can lead to contract disputes.
- Document preparation responsibility: The architect prepares the AIA change order form, not the contractor (despite the contractor providing the supporting data).
- CCD vs Change Order confusion: Remember that construction change directive vs change order comes down to agreement. CCDs don’t mean “free work” – they’re a way to keep work moving while negotiations continue, and they eventually convert into a change order.
Understanding the relationship between drawings and specifications is critical for properly evaluating change order requests.
When studying for the ARE or CDT, you might encounter questions about which document type is appropriate in various scenarios. For example, a question might describe a situation where work needs to begin immediately but the parties haven’t reached an agreement on cost. In this case, the appropriate answer would be to use a Construction Change Directive rather than a Change Order, since agreement hasn’t been reached yet but work must proceed.
Conclusion: Mastering the Change Order Process
Now you understand what a change order is in construction: a formal contract amendment requiring three-party agreement that adjusts both contract time and money when scope changes. These critical documents follow a structured change order process in construction from identification to implementation, with each stakeholder bringing their own perspective and priorities.
Remember the project manager’s golden rule that I learned the hard way: changes after contract signing ALWAYS cost more and take longer than if they were in the original scope. Effective change order management in construction hinges on prompt documentation, clear communication, and systemic tracking.
I’ve seen million-dollar projects saved and destroyed by how their teams handled change orders construction challenges. The difference between success and failure often comes down to this: decide early, document thoroughly, and manage change orders proactively.
In my decades of experience, I’ve found that change isn’t just inevitable in construction—it’s guaranteed. The truly successful professionals aren’t the ones who avoid changes (impossible!), but those who develop robust systems to manage the change order meaning, documentation, and execution effectively. Master this process, and you’ll distinguish yourself in this industry immediately.
Ready to take your construction change order knowledge from confused to confident?
Download our free 2-page change order study notes at the top of this page – a handy reference that summarizes the key points about construction change orders.
Looking to master construction documentation concepts for the ARE? Check out our comprehensive ARE 101 Courses where we break down every aspect of the change order form, process, and management in detail with real-world examples.
Not taking the ARE, but want to learn more about Construction Administration? Our CDT 101 course covers everything you need to know about construction contract administration, contractor change order procedures, and how to handle even the most complex construction change order situations.
