Construction Change Order Management Done Right
Change orders are inevitable. How a GC handles them determines whether they're a profit center, a margin protector, or a relationship destroyer. The mechanics matter — and so does the communication.
Identify changes early and document immediately
The day a change is identified, send written notification to the owner. Late notification is the #1 reason change orders get denied or reduced.
Price changes the same way you priced the base bid
Detailed line-item pricing with sub quotes, not lump sums. Apply the same overhead and fee percentages contractually specified.
Track potential change orders (PCOs) actively
PCO log with status (pending pricing, pending owner approval, approved, denied) reviewed weekly. Aged PCOs are a cash flow risk.
Negotiate, don't escalate
Most CO disputes are about scope interpretation, not malice. A clear conversation with the owner's rep usually resolves more than a formal claim letter.
Closeout discipline
All CO paperwork signed before final pay app. Loose ends at closeout become collections nightmares.
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Frequently asked questions
Why do change orders get denied?
The #1 reason is late notification. Send written notice the day a change is identified — not at the end of the project.
Should I price COs as lump sums?
No. Use detailed line-item pricing with sub quotes and apply the overhead and fee percentages specified in your contract.
What's a PCO log?
A potential change order log tracking pricing status, approval status, and dollar exposure. Review it weekly — aged PCOs are a cash flow risk.
Can I bill for unapproved change orders?
Generally no. Get the CO approved before performing the work whenever possible; if the schedule forces you to proceed, document the directive in writing.
Bottom line
Change order discipline protects margin and relationship. Process beats personality every time.
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