Change Order

What Is a Change Order?

In construction, a change order is an amendment to an existing construction contract that modifies the original terms of the agreement. A change order is necessary when contractors, owners, or the design team propose changes to the design, schedule, pricing, or scope of work.

Change orders can be initiated by any party involved in the construction project, including the owner, general contractor, design team, or subcontractors. Before the change is accepted, all project stakeholders must approve the proposed changes.

Stakeholders might submit change orders for a number of reasons, including the availability of materials, correction of errors and omissions in the original plans, regulatory changes, unforeseen conditions, or design modifications from the owner or design team. 

What Is the Process for Creating a Change Order

In most cases, the original contract will include guidelines for submitting and executing change orders during the construction project. However, the change order process usually follows a similar series of steps, which are:

1. Identify a necessary change to the original project plans – In the early stages of construction, new information is being shared across the project team via submittals and requests for information (RFIs). At this stage, a subcontractor, the general contractor, or a member of the design team may identify a reason to change the project’s original timeline, design, or cost based on the new information.
2. Create a change order request – Often, the owner or general contractor will have a defined template or piece of software that they use to manage change orders. In these cases, a form or platform for submitting the change order requests may already exist. In any case, the change order requests will contain several important pieces of information, including the contract number, the project name and address, the change order number, the owner’s name and contact information, the general contractor’s name and contact information, the name and contact information of the stakeholder submitting the request, and a detailed summary of the change itself. 
3. Review, discuss, and negotiate details of the plan changes – Usually, once a stakeholder submits a change order request, the general contractor will verify its necessity before sharing it with the design team, owner, and any other important stakeholders that should be involved. At this point, these parties will review the request and discuss or sometimes negotiate the changes to the schedule, costs, and design. 
4. Approve the changes – Once the change order request has been approved, then a formal change order is created to be signed by the owner, general contractor, and important members of the design team. After it is signed, the change order is added to the project contract documents and serves as an official amendment to the original agreement.
5. Implement the changes –  After changes are approved, the project team can begin to implement the changes. Because a change order can affect nearly any aspect of the project, the impact will vary. Implementing changes can involve updating the schedule, hiring new subcontractors, ordering new materials, paying additional costs, or making updates to the designs.

Examples of Change Orders

To demonstrate the variety of project modifications that a change order might address, here are several examples of real situations where a change order is necessary:

• Materials substitution due to availability constraints – During an apartment building construction project, specific materials planned for use in the roofing or siding of the building are unavailable due to supply chain disruptions. If the project timeline cannot be realistically adjusted to wait for the materials to become available, the design team will issue a change order to substitute the original materials with a different, available alternative. In this case, there may be no changes to the cost or schedule but only to the materials and design. 
• Correction of errors and omissions in the original plans – Midway through an office building project, one of the team members discovers that a section of the building will need to be redesigned to comply with safety regulations. The team member submits a change order request, and the design team, general contractor, and owner will review it. In this situation, these stakeholders are likely to discuss these changes in depth to determine the plan updates that must be made and who is responsible for the costs associated with the changes. In the case where the design team was negligent, they may be responsible for the new costs.
• Regulatory changes during the project – During the construction of a hospital building, new fire-safety regulations are introduced and enacted by the local government. The regulations require additional alarms and sprinkler systems to be installed on the ground level of the building. Because the original plans did not include the additional sprinklers and alarms, a change order is necessary to incorporate them into the plans. A change order of this nature will impact both the cost and schedule, and it will likely be the owner’s responsibility to pay for the changes.
• Unforeseen conditions – During the excavation process for the foundation of a commercial building, the subcontracting team found that the soil beneath the surface was not suitable to support the structure, even though early site survey results indicated otherwise. The soft earth may need to be removed or even replaced before building the foundation. This will require a change to the plans for the foundation, and will likely have an impact on the project timeline and cost as well—most likely at the expense of the owner.
• Design modifications from the owner or design team – Because of budget constraints during the construction of a hotel, the owner decides to eliminate some of the nonessential exterior design elements to reduce costs. In order to eliminate items from the plan, the owner must submit a change order request, and the project team must review and approve the updates, which should reduce the cost and shorten the project timeline.