A change order is a written, signed amendment to your construction contract that adjusts the scope, the price, the schedule, or all three — and the fastest way for a small contractor to lose money is to do changed or extra work on a verbal "go ahead" and never paper it. A change generally isn't enforceable until it's documented and signed by the parties, so undocumented changes are the work you did for free. This guide covers what a change order must contain, the process for getting one signed, and how to keep changes from quietly eroding your margin.
What a change order actually is
Every project deviates from its original drawings and contract. The owner decides to upgrade a finish, a hidden condition turns up behind a wall, an RFI answer changes how something gets built, or a design error has to be corrected. Each of those is a change — and the instrument that turns it into a paid, contractual reality is the change order.
A change order modifies the original agreement on one or more of three axes:
- Scope — what work is added, deleted, or altered.
- Price — the cost of that change, added to or subtracted from the contract sum.
- Time — any extension (or reduction) to the schedule the change requires.
The key word is written. A handshake and a "we'll true it up later" is not a change order. Until the change is documented and signed by the owner (and, on architect-administered jobs, acknowledged by the architect), you're carrying the risk: if the relationship sours or the owner's memory differs from yours, the burden is on you to prove there was ever an agreement at all.
The vocabulary: PCO, COR, and CO
Larger jobs distinguish a few stages, and it's worth knowing the terms even on a small project:
- Change Order Request (COR) or Potential Change Order (PCO) — the initial notice and proposal. It says "here's a change, here's roughly what it does to cost and time," and asks for direction. A COR is typically initiated by a sub or contractor seeking approval; a PCO is often the GC's internal draft of a pending change.
- Change Order (CO) — the approved, priced, signed delta. This is the enforceable document that actually amends the contract and flows into your billing.
The discipline is to never skip from "the owner mentioned a change" to "we did the work." There should always be a documented request and a signed approval in between.
What a change order must contain
A change order is a contract amendment, so it needs to stand on its own. At minimum:
- Project and contract identification — project name, the contract it amends, and the parties.
- A sequential change order number and date. Number them in order; the number is how everyone tracks the running total.
- A clear description of the change — exactly what work is added, removed, or modified, with enough specificity that there's no argument later about what was covered.
- The reason for the change — owner request, design clarification, differing site condition, RFI response, code requirement. This matters for entitlement (who pays).
- A cost breakdown — direct costs (labor, materials, equipment) plus any allowed markup for overhead and profit, deductions itemized, and the net effect on the contract sum.
- The schedule impact — added or deducted days, if any. Silence on time is often read as "no time extension," so state it explicitly even when the answer is zero.
- Signature blocks for the owner and contractor (and the architect where the contract requires it). The change order is not effective until it's signed.
The change order process, start to finish
1. Identify the change and give notice promptly. Most contracts require written notice of a change (and especially of a potential cost or time impact) within a set number of days. Miss the notice window and you can waive your right to recover — notice is often a hard contractual gate, not a courtesy. 2. Price it. Build the cost from direct labor, material, and equipment, apply the contractually allowed markup, and account for any schedule impact. Tie the pricing back to your cost codes so the change is trackable against the budget. 3. Submit the request (COR/PCO) to the owner or architect for direction. 4. Negotiate and get it signed. Resolve scope and price questions, then get signatures from every required party. Do not start the work on a verbal approval if you can avoid it — and if you genuinely can't wait, get the direction in writing (an email confirming the instruction) before you proceed. 5. Roll it into the contract and the billing. Once signed, the change order updates your contract sum. On your next pay application, the net of approved change orders appears on G702 Line 2 (net change by change orders), which adjusts your Contract Sum to Date — and you can bill the changed work like any other line.
Why changes quietly erode margin
Change orders are where small contractors most often bleed profit, and it's rarely one big miss — it's the accumulation of small ones:
- Doing the work first, papering it later. The single biggest leak. The work gets done because the foreman didn't want to hold up the crew, and the paperwork never catches up.
- Under-pricing the real cost. Forgetting the ripple effects — the rework, the resequencing, the crew you pulled off other work, the small schedule hit — and pricing only the obvious labor and material.
- Letting changes drift out of sync with the budget. If an approved change order updates the contract but never propagates to the budget and the schedule of values, your job-cost picture is wrong, and you can over- or under-bill without realizing it.
- No running total. Without a clean log of every PCO, COR, and signed CO, nobody can answer "how much change is pending, and how much is approved?" — and that number is exactly what tells you whether the job is still the job you bid.
The fix is process, not heroics: capture every change as a request, price it against your cost codes, get the signature before the work where you possibly can, and keep the contract, budget, and billing in lockstep.
A cleaner way to manage change
Tracked in a spreadsheet, change orders drift — the signed CO that never made it into the budget, the pending COR nobody priced, the contract sum that no longer matches reality. Jobsite manages change orders against the contract and the budget together: approving a change order atomically updates the contract's value and propagates to every touched budget line in one transaction, so the numbers can't drift apart — and it can draft the change-order narrative from the request for you. See how Jobsite's financials work →
FAQ
Is a verbal change order binding?
Generally no — and that's the trap. Most construction contracts require changes to be in writing and signed to be enforceable, so changed or extra work done on a verbal "go ahead" is work you may never be paid for. If you truly can't wait for a signed change order, at least get the owner's or architect's direction in writing (a confirming email) before you proceed, and follow up with a formal change order.
What is the difference between a change order request and a change order?
A change order request (COR) — or potential change order (PCO) — is the proposal: it identifies the change and estimates its cost and schedule impact, and asks for direction. A change order (CO) is the approved, priced, signed amendment that actually modifies the contract. The request comes first; the change order is what makes it enforceable and billable.
What should a change order include?
Project and contract identification, a sequential number and date, a clear description of the changed work, the reason for the change, a cost breakdown (labor, materials, equipment, and allowed markup), the schedule impact in days, and signature blocks for the owner and contractor (and the architect where required). It isn't effective until it's signed by the required parties.
How do change orders affect my pay application?
Once a change order is signed, its net value updates your contract sum. On the AIA G702, the net of all approved change orders appears on Line 2 (net change by change orders), which adjusts your Contract Sum to Date on Line 3. From there you bill the changed work like any other schedule-of-values line. If a change order isn't reflected on Line 2, everything downstream on the pay app is wrong.
Can I get paid for extra work without a signed change order?
It's risky. Without a signed change order you're relying on contract provisions, written direction, or — worst case — a dispute over an implied agreement, and the burden is on you to prove the owner authorized the work and agreed to pay for it. Document the change, give timely written notice of any cost or schedule impact, and get the signature before the work whenever you can.
See how Jobsite handles this in practice: Project management on the platform →
About the author
The Jobsite Editorial Team — Construction safety & OSHA compliance
The Jobsite Editorial Team writes the safety and compliance library behind Jobsite, the construction safety, OSHA compliance, and training platform for contractors. Every article starts from the primary regulatory text — the CFR section itself, not a summary of it — and is fact-checked against that source before it publishes, so what you read here is what the standard actually requires of small and mid-size contractors in the field.