How to Handle Change Orders

What counts as a change order

A change order is a written amendment to your contract that changes the scope, the price or the schedule, approved by the customer before the work it covers. If the work you're about to do isn't the work the customer signed for, or it will finish on a different date, it needs one.

Changes come from four places, and every trade sees all four:

Fixing your own mistake, or doing an item your scope of work already includes, isn't a change order: it's your cost. If you do a small extra for free, write "no charge" on the job record so a favor doesn't become an expectation.

Set the rules in the contract first

The change-order process starts at signing, not on the day something changes. Put three things in every contract or signed estimate:

1. A change-order clause: changes are written up, priced and approved before the work, and the clause names which approvals count.
2. A hidden-conditions clause: the price assumes what you could see, and anything different gets shown and priced before you continue, except steps to make it safe.
3. Prices for the changes your trade sees most, so a find becomes a count instead of a negotiation.

Example: Hypothetical wording to adapt with your lawyer: "Any change to the work, price or schedule will be written up as a numbered change order showing the change, its price or credit, and its effect on the schedule and payments. We won't start changed work until you approve it by signature or by a reply from the phone number or email address in this contract. Our price assumes the conditions we could see at our site visit. If we find hidden damage or different conditions, we'll stop work there, show you photos and price it before we continue. If a condition is unsafe, we may make it safe first (for example, by shutting off water or power, or tarping an open roof) and bill that work at this contract's rates."

Check your state's rules

Contract rules for home improvement work vary by state. California is one state that spells it out: on a home improvement contract, a change to the price or the scope must be made with a written change order signed by the customer and the contractor before the change, describing the extra work or change, the cost added or subtracted, and the effect on the schedule of progress payments ¹. Ask your state's contractor licensing board, attorney general or consumer protection agency whether your state has rules for changes: what a change order must include, who signs it and when, and whether a text or email approval counts. Have a lawyer review your clause once, then reuse it on every job.

Pre-price the changes you can predict

See the per-sheet decking allowance in the roofing estimate guide and the conditions schedule in how to write an electrical estimate.

The process on site, step by step

Run the same steps for every change, small or large:

1. Stop before the changed work. Secure what you're doing, but start nothing outside the contract. If something is unsafe, make it safe and no more: shut off the water, de-energize the circuit, tarp the roof.
2. Document it: a wide photo for where, a close-up for what, plus measurements or counts. Photograph hidden conditions before you open anything further.
3. Explain it in plain words: what you found or what the customer asked for, why it matters, and the options, including leaving it alone if that's safe and allowed.
4. Price it from the contract's unit prices, or the way you price any job. If you can't price the fix until you see more, price the next step: opening up and assessing, on time and materials with a cap.
5. Write the change order with the fields listed below.
6. Get written approval before you start. If the customer says yes out loud, send the written version and wait for the reply.
7. Update what the change touches: the schedule, the material order, the crew, the permit if permitted work changes (ask your building department whether it needs a revision), and any lender or insurer paying for the job.
8. File it with the job and flag it for the next invoice.

Know who can approve

Name the approver in the contract, normally the person who signs it. On rentals, HOA and commercial jobs, get the approver's name and dollar limit in writing up front, since a property manager may need the owner or the board for bigger changes. Under a general contractor, follow your subcontract's change process and get the superintendent's signature on a change order or time-and-material ticket the day the extra work happens.

On an insurance job, items the adjuster missed go through the homeowner's claim as a documented supplement request, while upgrades the homeowner chooses are a change order with you. Check your state insurance department's rules on how far a contractor may take part in a claim.

How to price a change order

Price a change like a small job of its own, at the same margin as the rest of the work. Changes often cost more to deliver than their size suggests: an extra supply run, a reshuffled day, crew time waiting on an answer, sometimes a permit revision and another inspection. Don't discount because you're already there, and don't inflate because the customer can't easily switch contractors mid-job.

Build it the usual way: materials, labor at your loaded cost, equipment and disposal, then price to your target margin. Markup and margin aren't the same number; markup vs margin explains why a markup equal to your margin target falls short.

Example: During a furnace and AC replacement, the homeowner asks for a return in a back bedroom that never gets comfortable. Duct, boot, grille and fittings cost you $150. Two techs need 1.5 hours each: 3 labor hours at a loaded $50 per hour, or $150. Direct cost: $300. For a 40% gross margin, price it at $300 ÷ 0.60 = $500. A 40% markup instead gives $420: a 28.6% margin and $80 less for the same work. All figures are made up.

Fixed price, unit price or time and materials

• Fixed price when you can see the whole change. It's the easiest to approve and to invoice.
• Unit price when the contract already set one. Only the count is open, so photograph and count each unit before it's covered.
• Time and materials with a cap when you can't see how far the problem goes. Bill actual hours and materials up to a not-to-exceed amount, and get a new approval before you pass it.

Example: Replacing a shower valve, a plumber finds corroded drain and vent piping behind the wall, and how far it runs won't be clear until more wall comes off. The change order: open the wall and replace corroded piping as needed at $120 per hour plus materials at price-list rates, not to exceed $900 without further written approval. The work takes 4 hours and $280 of materials: 4 × $120 = $480, plus $280, is $760, under the cap. Before passing $900, the plumber would have stopped to ask again. Figures are made up.

Credits for work you take out

A change that lowers the price still needs a change order, because it changes what the customer gets. Credit the price of the removed work, minus what you've already spent and can't recover, such as special-order material or opened product, and say what the customer gives up.

Example: A detailer quoted a two-step paint correction as 8 hours of polishing at $100 per hour. Paint depth readings on the hood and roof come back thinner than on the rest of the car, so the detailer recommends a one-step polish on those panels to preserve clear coat. That saves 2 hours: a $200 credit, with a note that some deeper scratches there will remain. The customer signs before the polisher touches the paint. Figures are made up.

What to put on the change order

Keep it to one page, but fill in every field. Each one settles an argument before it starts:

Example: The bedroom return from the pricing example, written up:

• Change order 1, [customer name and job address], under the contract signed May 20.
• Reason: customer request.
• Work: add one return in the back bedroom: ceiling grille and box, insulated flexible duct to the return plenum, sealed at both ends.
• Price: $500, fixed.
• Contract total: original $12,000, earlier changes $0, this change $500, new total $12,500.
• Schedule: about 1.5 hours on install day; completion date unchanged.
• Payment: with the final invoice.
• Approval: customer's signature or text reply, dated and timed, before the crew starts.

Don't skip the schedule line: a panel upgrade found at a solar site survey can add a permit revision and a utility appointment. And when only the date moves, as when the customer pushes back the start, write a no-cost change order so a late finish isn't pinned on you.

Get the approval in writing

Make each request specific enough that a one-word reply approves something definite: the change order number, the work, the price and the schedule effect. Three conversations come up on almost every job.

The customer asks for more. Price it before you start, even when it's small.

Example: A pressure washing crew is finishing a $450 house wash when the homeowner asks about the back patio. "Happy to. The patio isn't on today's quote, so here's the price first: it's about 400 square feet, $100 at our flatwork rate of 25 cents a square foot, for a new total of $550. I'll text you change order 1 now. Reply YES and we'll wash it before we pack up." Figures are made up.

You find a hidden condition and the customer isn't home. Send the photos, the count and the price together.

Example: A roofer's text: "Hi [customer], it's [name] from [company]. With the old shingles off, we found 6 sheets of soft decking (photos attached, each one marked). Your contract includes 2 sheets, and extra sheets are $100 each installed, so the other 4 add $400. The finish date doesn't change, and the open area is tarped while we wait. Reply YES to approve change order 1, or call me at [number]." Figures are made up.

The customer says no. Respect it, finish the contracted work, and get the refusal in writing.

Example: A plumber replacing a water heater finds the main shutoff valve badly corroded, and the customer won't replace it now. The plumber's text: "Understood. We'll finish the water heater as contracted and leave the main shutoff as it is. For your records: we showed you photos of the corrosion, the valve may not close fully or could start leaking, and our warranty covers today's work, not the existing valve. Please reply OK so we both have this in writing."

If the declined fix is one the job can't pass inspection without, or one you consider unsafe to work around, stop and talk before going further; your contract should say what happens then, because a failed final inspection can hold up your last payment.

When a customer approves out loud, text it back before the crew starts: "You approved change order 2: [work] for [price], [schedule effect]. Reply YES to confirm."

When you disagree about what's included

Most change-order fights are scope fights: the customer thinks the work was included, and you don't. Settle them with the paper:

• Read the scope and exclusions together. If the contract clearly excludes the work, show the customer the line.
• If the contract is silent or vague and the customer's reading is reasonable, consider doing the work at cost or at no charge, and fix your template.
• If it's in your scope, it isn't a change. Do it.
• Before you stop work over a disputed change, talk to a lawyer: walking off can create a bigger dispute than the change itself.

Invoice each change order on its own line

Give every approved change order its own invoice line: its number, a short description, and how and when it was approved. An unexplained total above the contract invites a dispute; separate lines show the customer they approved every dollar. Show credits as negative lines, and end with a summary: original contract, approved changes, revised total, payments received and balance due.

Example: A panel replacement sold at $4,000 with a $1,000 deposit. The inspector requires added protection on 2 circuits, which the contract priced at $100 each, and the customer drops an exterior outlet worth $150. The final invoice:

Line	Amount
Original contract	$4,000
Change order 1: added protection on 2 circuits at $100 each, approved by text	$200
Change order 2: exterior outlet removed, credit, approved by signature	-$150
Revised contract total	$4,050
Deposit received	-$1,000
Balance due	$3,050

All figures are made up.

Some situations need more than a line:

• Large changes and special-order material. Put payment terms on the change order, such as part due at approval, so you aren't financing the upgrade. Check any limits your state puts on upfront payments first.
• Financed jobs. A loan covers the amount the lender approved, so a change needs the lender's approval for a new amount, or the customer pays the difference directly. The solar invoicing guide covers this for panel upgrades found after the site survey.
• Lien waivers. Before you sign one, check whether it would cover change-order work you haven't been paid for yet, and ask a lawyer if it does.
• Unpaid change orders. An approved change order that goes unpaid is an overdue invoice like any other; how to collect overdue invoices covers reminders, payment plans and next steps.

Keep a change-order log

For each job, list every change order's number, date, description, amount, status (sent, approved or declined), who approved it and how, and the invoice it was billed on. The log answers "what did we agree to?" in seconds, including in a payment dispute.

Then compare each change's actual cost with its price, the way you check the whole job against its estimate. If changes keep landing under your target margin, your change pricing is too low or work is starting before it's priced.