What to Know About Change Orders

Are Change Orders “Bad”?

One of the most common questions we hear from clients when reviewing a construction contract is: How do change orders work? Many people think a change order only means increased costs. However, that’s not always the case. To better understand the impact of change orders, we first need to clarify their function and significance during a construction project.

What Is the Purpose of a Change Order?

The purpose of a change order is to keep both parties informed of any changes in plans or terms of an agreement. Change orders document these changes formally, protecting both parties by setting clear expectations for the project’s scope, timeline, and payments.

What Does a Change Order Include?

A well-drafted change order typically includes:

• Date and Time of the change

• Scope of the work being added, removed, or altered

• Price adjustments associated with the change

• How this change will impact the project’s schedule

Common Types of Change Orders

Change orders can occur for various reasons and typically fall into three categories:

• Additive Change Order
  When additional work is added to the project, an additive change order is issued. This could include modifications or enhancements that weren’t part of the original scope.

• Deductive Change Order
  This type of change order is used when work is removed from the original project scope, either due to budget adjustments or changes in design preferences.

• Schedule Change Order
  If unexpected circumstances arise that cause project delays—such as weather conditions or material shortages—a schedule change order can be issued. This order updates the project timeline to reflect the new conditions.

The Downside of Not Using Change Orders

In the past, a verbal agreement or handshake might have sufficed, but in today’s world, comprehensive documentation is crucial. Having a clear change order process ensures smooth project management, maintains open communication, and prevents misunderstandings. Without a proper change order system in place, undocumented changes can lead to disputes, surprise costs, and project delays.

For example, in long-term projects, unrecorded changes can be forgotten or miscommunicated, causing significant issues at project closing. This can result in costly surprises for both parties.

What Should You Ask Contractors About Change Orders?

When discussing a project with a contractor, always ask about their change order process and request a sample. Understanding the process upfront will protect your investment and help prevent confusion. Ultimately, if a process isn’t followed, and a dispute arises, it can cost both parties time and money.

What We Recommend

We recommend partnering with a licensed contractor who values your time and understands the importance of an organized business system. At Premier Builders, we stay current with market trends and have implemented an electronic change order system. This allows all parties to review and sign change orders electronically, saving you time and providing direct access to all project documents. Our approach ensures that change orders are handled efficiently, keeping your project on track.

What’s Next?

If you have questions about change orders or would like to see a sample, please reach out to us at Premier Builders. We’re here to help you understand the process and protect your investment.