Change Order Pricing: How to Price Construction Change Orders Correctly

Change orders are the most common source of profit loss and disputes in construction. Pricing them correctly is essential for maintaining margins and avoiding conflicts.

What Is a Change Order?

A change order is a formal amendment to the construction contract that modifies the scope, schedule, or contract sum. Changes can be requested by:

• The owner (design changes, scope additions)
• The architect (clarifications, substitutions)
• The contractor (constructability issues, value engineering)
• Field conditions (differing site conditions, concealed conditions)

Components of a Change Order Price

1. Direct Costs

Direct costs of the changed work:

• Material quantities at current market prices
• Labor hours at applicable wage rates
• Equipment rental or ownership costs
• Subcontractor quotes for affected trades

2. Impact Costs

Impact costs are often overlooked but represent real expenses:

• Productivity loss — Crew disruption, learning curve, stacking of trades
• Schedule delay — Extended general conditions, overtime premiums
• Mobilization/demobilization — Remobilizing crews and equipment
• Ripple effect — Modification to adjacent work not directly changed

3. Overhead and Profit

Add applicable markups:

• Field overhead — Extended supervision, site trailer, temporary utilities
• Home office overhead — Project management, accounting support
• Profit margin — Standard fee on the change order value

Total Cost Approach

For change orders involving extensive impact, a total-cost approach may be more appropriate:

• Document actual costs incurred (timecards, invoices, receipts)
• Deduct the original budget for the unchanged scope
• Present the net additional cost plus agreed markup

Documenting Change Orders

Always document changes with:

• Written directive or change order request from the owner/architect
• Detailed cost breakdown showing quantities, rates, and extensions
• Schedule impact analysis showing delay days
• Photographs of the changed conditions

At F&K Estimatings, we prepare forensic change order pricing for contractors pursuing equitable adjustments. Contact us for change order audit and pricing support.