Change orders are a common yet often challenging aspect of construction projects. Whether due to design modifications, unforeseen site conditions, or client requests, managing change orders efficiently is crucial for keeping projects on track and within budget.

This guide explores everything you need to know about change orders, from their definition to best practices that ensure smooth project execution.

What is a Change Order?

A change order is a legal document that modifies the original construction contract by outlining adjustments to the project’s scope, cost, or timeline. It serves as a legally binding agreement that ensures all parties acknowledge and approve the modifications before implementation.

Most construction contracts include specific procedures for handling change orders, detailing how they should be requested, reviewed, and approved. Properly managing change orders is crucial, as they can impact project schedules, contractor responsibilities, and even payment terms.

Common Types of Change Orders

• Owner-Requested Changes – Clients may alter project specifications after construction has begun, requiring adjustments to design, materials, or scope.
• Unforeseen Conditions – Unexpected site conditions, such as hidden utilities or soil issues, may necessitate modifications.
• Design Modifications – Architects and engineers may revise plans to enhance functionality, aesthetics, or compliance with updated regulations.
• Errors & Omissions – Incomplete or inaccurate details in the original plans must be corrected to ensure project accuracy.

Understanding change orders enables project stakeholders to manage adjustments efficiently, minimizing disruptions and keeping construction on track.

The Change Order Process

1. Initiation

A change order usually begins when the project owner, contractor, or architect requests a change. For example, the Federal Acquisition Regulation’s ‘Changes clause’ allows the government to unilaterally modify construction contracts, ensuring contractors receive equitable adjustments when changes occur.

This request should be written down clearly, explaining what needs to be changed and why. The reason could be unexpected conditions, client requests, or design updates. A clear explanation helps everyone understand the need for the change and its potential impact on the project.

2. Documentation

Good documentation is key to preventing misunderstandings or disputes. A change order should include:

• Clear Description of the Change: Explain exactly what the change is, which part of the project is affected, and any adjustments needed.
• Updated Project Drawings: If the change involves a design update, provide updated drawings to show how the changes will look.
• Impact on Cost and Timeline: Explain how the change will affect the project’s budget and timeline. If the timeline changes, provide a new completion date.
• Approval Signatures: Make sure everyone involved, like the project owner and contractor, signs the change order to confirm they agree with the changes.

3. Approval & Implementation

After the change order is documented, it needs to be reviewed and approved by everyone involved in the project. This review ensures that everyone understands the change and agrees on the costs and schedule. Once approved, the contractor can begin making the changes.

The approval process may take some time if the change is significant. It’s important to make sure everyone is on the same page before moving forward.

Best Practices for Managing Change Orders

Handling change orders properly is important for keeping projects on track. Here are some best practices to help manage them effectively.

Maintain Clear Communication

Open and transparent communication among project owners, contractors, and subcontractors is crucial to avoid misunderstandings and delays. Clearly outline expectations and confirm all details in writing to ensure everyone is on the same page.

Implement a Standardized Process

A consistent and structured change order process is key to streamlining approvals and minimizing disruptions. Utilizing project management software like Builtfront allows for real-time tracking, making the process more efficient and transparent for all involved parties.

Plan for Contingencies

It’s important to include contingency budgets and time buffers in construction projects to accommodate unexpected change orders. This foresight helps safeguard profitability and ensures the project stays on track, even when changes occur.

Case Studies & Real-World Examples

Successful Change Order Management

A commercial developer faced potential project delays but turned things around by implementing a digital tracking system for change orders. This system allowed the project team to manage change requests quickly and efficiently.

By streamlining the approval process and providing real-time updates on cost changes, the developer was able to keep the project on schedule and within budget. This proactive approach ensured that every adjustment was documented and approved promptly, preventing delays and costly miscommunications.

Challenges Due to Poor Change Order Management

On the other hand, a residential construction project ran into significant issues because change orders were not properly documented or approved. Several changes were made without following the correct procedures, leading to confusion about costs and timelines.

This lack of oversight caused delays and budget overruns, ultimately straining the relationship between the contractor and the client. The project could have been completed on time and within budget if proper change order processes had been followed from the start.

The Change Order Workflow

A structured workflow ensures a smooth transition from request to execution. Below is a simplified flowchart illustrating the key steps:

Final Thoughts

Managing change orders effectively is key to keeping your construction projects on track, avoiding disputes, and protecting your bottom line. With the right practices in place and clear documentation, you can handle change orders smoothly and avoid unnecessary setbacks.

Using a tool like Builtfront can make a real difference. Our construction management software helps you stay organized, track changes in real time, and manage costs, all in one place.

Ready to see how it works? Try Builtfront for free today and take control of your change order process.