All posts

May 11, 2022

Managing change orders as a contractor


Table of Contents

Tired of paperwork?

In any field service business, time is of the essence. This is why it is so necessary to have a solid and up-to-date schedule for all your workers to ensure that all deadlines are met. However, while you can easily control the schedules and placements of your workers, one factor that is oftentimes very well out of the control of contractors is the minds of the clients.

Imagine a case where midway through a particular project, a client suddenly changes their mind about the style of boards they wanted. Because these new-style boards would need a week to be delivered, the project needed to be broken up and you ended up extending it longer than was planned. While this client was quite cooperative and willing to pay any extras for the costs that the contractor would incur owing to this change, not all clients will be this way. Now you’ve just discovered that you might have a potential problem with future clients.

So the question is:

How do you manage split-up projects? Do you charge extra if a client asks for a change and, as a result, the project that was supposed to be finished in less than 1 week gets delayed for 2 weeks? Is there a contractual term or policy for these circumstances that’ll make the extra charge reasonable or legitimate?

The first thing to know is if the change ordered by a client - if carried out correctly - can be completed with minimal risk and prompt payment of you, the contractor. Then this would be executed through the use of something called a change order. This means that your contracts should stipulate specific guidelines on how to process change orders.

When a Change Order Request (COR) is made by a client, the right legal response from you as a contractor should be a Change Order Proposal (COP). A COP is a contractor-generated document in response to a COR which states the adjustments necessary to the contract price and time, if any, as a result of a change in the work that was previously agreed upon. Once both contractor and client have agreed on the scope, price, and schedule of the changes, a formal, written change order is prepared and signed by all parties. Following this, you can safely proceed to perform the changed work.

Change orders are great because, for instance, you may discover that the project conditions will not allow you to complete the work for the price you initially agreed upon. Thus, contractors can also request change orders too, discuss the alterations, and get their client’s signature on it.

What to Include in Your Change Order Form

Your contracts should spell out the specific change order form to be used and how to submit it. Change order forms can be subjective depending on the type of business you run, but offers a general idea of what to include in your change order form.

Project and contact information of the parties

These include:

  • The contract number;

  • The client’s name and contact information;

  • The project name and address;

  • The contractor’s name and contact information; and

  • The change order number (in the event that multiple change orders have been submitted).

This information is important to tie the change to a specific contract, especially if you are doing business on a large commercial project or with the government.

Change dates

This includes the date the change order was completed and approved, and could also include the date the client first gave notice of or requested for the change and the date the change order was submitted for approval.

When making change orders, providing sufficient notice is very important. In some industries, notice is what makes or breaks the validity of a change order. For example, in construction contracts, failing to inform or follow the right notification process can cause a change order to be rejected or payment withheld.

Details of the work changes

This is a description of the work changes in detail. Everything here needs to be as specific as possible. Besides written descriptions, photos, drawings, and any other kind of evidence that can clearly demonstrate the reason for the change can be attached.

The updated schedule

The changes required may result in alterations to the previous schedule of the project. If so, then the form should include the number of days it will take to complete the change and the new date that the project will be concluded.

Having a good idea of what your typical project schedules are will help you to accurately provide new schedule information in a change order. The best way to get this is through the use of a time-tracking tool; this type of software will provide you with sufficient data for laying down accurate schedules both in your clients’ original contract and change orders as well.

In some cases, the change does not impact the project’s critical path, so a time extension may not be necessary. If so, then this can also be indicated.

Cost of the changes

When formulating a change order, you need to include any costs that are associated with the changes that the client requests. This includes a full breakdown of positive and negative charges, overhead, profits, tax, insurance, and any other extra costs associated with the change. The cost listed in the change order form will follow the same pricing format as the original contract.

This is a key aspect of the change order form as accuracy and comprehensiveness of the extra charges listed are what will guarantee you getting compensated for all the work you will be doing. The unit prices for everything from extra materials to labor, costs of any delays, and so on must be included. An important question many people ask is: How can you estimate the losses you may incur as a result of the delays caused by the change? 

The loss you as the contractor face is the additional hours that your labor force will have to work to cover the additional change(s), which may likely cut into the schedules of other projects or have you paying more over time (which means added labor costs). Thus, an effective time-tracking tool like Atto will prove extremely beneficial in enabling you to accurately calculate the extra charges incurred from the additional hours that your workers will be putting in, which will then be input into the change order.

The updated contract value

This specifically applies in a case where multiple change orders have been submitted. The updated contract value includes:

  • The original value of the first contract;

  • The value of all change orders (if there are any) which were approved in the past;

  • The cost of the current change order; and

  • The new proposed contract value.

With any split-up project, you are sure to encounter different clients. With a tool like Atto in your arsenal, you’ll seem professional and backed with accurate data to justify and mediate any change orders. This helps protect both you and the client from incurring extra unforeseen costs, where everything will be fair and rational.

What are you waiting for? Give Atto a try now.

Related Articles


7 tips that will help you manage contracted jobs successfully

Temporary employees are an important resource that every company has to utilize. To help you manage expectations, we have setup 7 tips to help you manage every situation.


When material costs go crazy, what can contractors do?

Over the past year, raw material prices have increased significantly. But, when costs increase unexpectedly, what do you do? Let's explore our options.