# What Is a Change Order?

A change order is a written, signed amendment to a construction or service contract that changes the agreed scope of work, price or schedule after the contract is signed. It records what is being added or removed, what it costs, and how it affects the completion date, so both sides agree before the extra work starts.

## Key takeaways

- A change order amends the original contract. It needs the changed work, the price change and the schedule impact, signed by both sides.
- Get it signed before the changed work starts. Verbal 'go ahead' changes are the most common source of unpaid extra work.
- Price change orders with full overhead and profit, not just materials and labor.
- Track every change order in a log tied to the job so the final invoice, job costing and lien rights all match.

## How does a change order work?

A change order starts when someone (the customer, the contractor, an inspector or a hidden condition) creates a need to change the work in the signed contract. The contractor writes up what changes, prices it, states any schedule impact, and both parties sign. The change order then becomes part of the contract, and the new contract total is the original price plus or minus all approved change orders.

In federal contracting the term has a narrow meaning: the Federal Acquisition Regulation defines a change order as a written order, signed by the contracting officer, directing the contractor to make a change the contract's Changes clause allows without the contractor's consent. In residential and light commercial work, a change order is almost always a mutual agreement signed by both the customer and the contractor.

## What should a change order include?

A change order should identify the original contract, describe the added or removed work in plain detail, give the dollar amount added or subtracted and the new contract total, state the effect on the schedule and payment terms, and carry both parties' signatures and the date. California's home improvement law, for example, makes a change order unenforceable against the homeowner unless it states the work, the price change and the effect on payments or completion date.

**Change order checklist**

| Field | Example |
| --- | --- |
| Change order number and date | CO #3, June 14 |
| Original contract reference | Kitchen remodel, contract dated May 2, $48,500 |
| Reason for change | Owner request / hidden condition / code requirement / design change |
| Description of the work | Add 4 LED under-cabinet lights on a new dedicated switch, left wall |
| Price change | +$1,180 |
| Running contract total | Original $48,500 + prior COs $2,240 + this CO $1,180 = $51,920 |
| Schedule impact | +1 working day; completion moves from June 28 to June 29 |
| Payment terms | Added to the next progress payment |
| Signatures | Owner and contractor, dated, before the work starts |

_Use the [change order template](https://www.brix.so/templates/change-order-template) for a ready-made form._

## How do you price a change order?

Price a change order the same way you priced the original job: direct costs (labor, materials, equipment, subcontractors) plus your overhead and profit. Many contractors also add a small charge for the disruption, because changes break up crew flow, add trips to the supply house and push other work. Pricing a change at bare cost means doing extra work for free.

**Change order price**

```
Price = (Labor + Materials + Equipment + Subcontractors) × (1 + Overhead %) × (1 + Profit %)
```

Where:
- Labor = hours × loaded labor rate (wages plus [labor burden](https://www.brix.so/learn/labor-burden))
- Overhead % = your [overhead](https://www.brix.so/learn/overhead) as a share of direct costs
- Profit % = your target profit on top

> **Worked example (illustrative numbers)**
>
> A remodeler is asked to add under-cabinet lighting mid-project. The electrical sub quotes $520. The remodeler's own crew needs 4 hours to open and patch the backsplash at a $55 loaded rate: $220. Materials are $110.
>
> Direct cost: $520 + $220 + $110 = $850.
>
> With 15% overhead: $850 × 1.15 = $977.50. With 10% profit: $977.50 × 1.10 = $1,075.25.
>
> The remodeler adds a $100 change-processing fee stated in the original contract, and rounds: **$1,180**. Pricing at the $850 cost would have meant losing about $330 on the change.

## How do you track change orders?

Track change orders in a log for each job that lists every change order's number, date, description, amount, status (pending, approved, rejected, invoiced) and schedule impact, with the running contract total. Tie each one to the job's costs so [job costing](https://www.brix.so/learn/job-costing) reflects the changed scope, and bill approved changes on the next invoice rather than at the end.

**Example change order log**

| CO # | Date | Description | Amount | Days | Status |
| --- | --- | --- | --- | --- | --- |
| 1 | May 20 | Relocate sink drain 18 in. (owner request) | +$1,640 | +1 | Approved, invoiced |
| 2 | May 29 | Replace rotted subfloor section (hidden condition) | +$600 | +0 | Approved |
| 3 | Jun 14 | Under-cabinet lighting (owner request) | +$1,180 | +1 | Pending signature |
|  |  | **Contract total if all approved** | **$51,920** | **+2** |  |

## Change orders by trade

**Where change orders come from in each trade**

| Trade | Common change order triggers | Tip |
| --- | --- | --- |
| General contracting and remodeling | Owner upgrades, hidden rot or mold, design changes | Put an allowance and change-order process in the original contract |
| Roofing | Rotted decking found after tear-off, extra layers, added flashing or vents | Quote a per-sheet decking price in the contract so the change is pre-agreed |
| Electrical | Panel upgrade required by inspector, added circuits, fixture changes | Note code-driven changes as such; customers accept them more easily |
| Plumbing | Line found in worse shape on camera, fixture upgrades, relocations | Show the camera footage with the change order |
| HVAC | Ductwork modifications, electrical upgrades, equipment upgrades | Offer good-better-best upgrades before the install, not mid-job |
| Landscaping and hardscape | Added plantings, grade changes, drainage, material swaps | Price material swaps per square foot in advance |
| Painting | Extra rooms, drywall repair, color changes after first coat | State coats and surfaces in the [scope of work](https://www.brix.so/learn/scope-of-work) |

## Change order vs. change directive vs. allowance

- **Change order:** both parties agree on the change, the price and the time. Signed by both.
- **Change directive:** the owner (or general contractor) directs the change before the price is agreed, so work isn't held up. Price is settled later. More common on commercial jobs with AIA-style contracts.
- **Allowance:** a budget written into the original contract for items not chosen yet (tile, fixtures). Going over the allowance is billed as a change; coming in under is a credit.

## Common change order mistakes

- **Doing the work first and writing it up later.** The customer's memory of a 'small favor' will not match your invoice.
- **Pricing at cost.** Overhead doesn't stop while your crew does extra work.
- **Vague descriptions.** 'Extra electrical' invites a dispute. Say what, where and how many.
- **Ignoring time.** If a change adds days, write it down, or the delay becomes your fault.
- **Billing all changes at the end.** Bill approved changes with the next payment, while the value is fresh.
- **Not tracking pending changes.** Unsigned changes are unpaid risk sitting on the job.

BRIX builds quotes on site and turns approved work into invoices, then chases unpaid ones automatically. Invoices and payments sync to QuickBooks so changed scope shows up in the books, not just on paper.

- [Quotes and estimates](https://www.brix.so/features/quotes-estimates): Builds accurate quotes on site and follows up on every open estimate.
- [Invoicing and payments](https://www.brix.so/features/invoicing-payments): Turns finished jobs into invoices and politely chases unpaid ones until the money is in your account.
- [QuickBooks sync](https://www.brix.so/integrations/quickbooks): Syncs customers, invoices and payments with QuickBooks so the books match the jobs.

## Frequently asked questions

### Does a change order need to be signed?

It should be. A signed change order is your proof that the customer agreed to the extra work and price, and some state home improvement laws limit what you can enforce without one. Get the signature, or at least a written approval, before the changed work starts.

### Who pays for a change order?

Whoever requested or caused the change usually pays. Owner-requested upgrades and owner design changes are paid by the owner; hidden conditions are typically the owner's cost if the contract says so. Changes caused by contractor errors are normally absorbed by the contractor.

### Can a contractor charge more without a change order?

Charging for extra work without a signed change order is risky. The customer can dispute the charge, and some states make unsigned or incomplete change orders unenforceable, though courts may still allow recovery for the value of work performed. Avoid the fight by writing it down first.

### How much markup should be on a change order?

Use the same overhead and profit you used on the original job, and consider a disruption or processing charge stated in your contract. Changes are often more expensive per hour than planned work because they interrupt the schedule. See [markup vs. margin](https://www.brix.so/learn/markup-vs-margin) to set the numbers right.

### What is a negative change order?

A negative or deductive change order removes work from the contract and reduces the price. Credit the actual cost saved plus the related markup, not the full price of the item, since some costs like mobilization are already spent.

### What is change order tracking?

Change order tracking is keeping a log of every change order on a job: its number, description, amount, schedule impact and status. It makes sure approved changes get invoiced, pending ones get signed, and the final contract total matches what you bill.

## Related

- [Change Order Template](https://www.brix.so/templates/change-order-template)
- [What Is a Scope of Work?](https://www.brix.so/learn/scope-of-work)
- [What Is a Work Order?](https://www.brix.so/learn/work-order)
- [What Is a Punch List?](https://www.brix.so/learn/punch-list)
- [What Is Job Costing?](https://www.brix.so/learn/job-costing)
- [What Is Progress Billing?](https://www.brix.so/learn/progress-billing)
- [Markup vs. Margin: What's the Difference?](https://www.brix.so/learn/markup-vs-margin)
- [What Is a Mechanic's Lien?](https://www.brix.so/learn/mechanics-lien)
- [Contractor estimating software that quotes on site and chases every open estimate](https://www.brix.so/features/quotes-estimates)
- [Scheduling and Dispatch Software That Puts the Right Crew on Every Job](https://www.brix.so/features/scheduling-dispatch)

## Sources

- [Federal Acquisition Regulation 2.101, definition of 'change order'](https://www.acquisition.gov/far/2.101) (checked 2026-10-12)
- [California Business and Professions Code § 7159.6 (extra work and change orders)](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=7159.6) (checked 2026-10-12)

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Written by BRIX Editorial Team. Last updated 2026-10-12. General information, not tax, legal or financial advice.
Canonical: https://www.brix.so/learn/change-order