Key Takeaways
- Evaluate COs on necessity, cost, schedule, and cumulative effect.
- CO markups average 30-50%—negotiate using contract unit costs.
- Negotiate schedule alongside cost.
- Complete documentation with signatures before work begins.
Change orders are inevitable but manageable through structured processes.
CO Evaluation Framework
Evaluate across: Necessity (safety/code?), Cost Reasonableness (vs. contract unit costs), Schedule Impact (critical path?), Cumulative Effect (approaching 10%?).
Negotiation Strategies
CO markups average 30-50% vs. 15-25% for bid work. Counter with contract unit costs, request itemized breakdowns, negotiate credits for deleted scope, bundle multiple small changes.
Documentation Requirements
Every CO requires: description, reason, itemized cost impact, schedule impact, both signatures before work begins, and running cumulative total.
Key Takeaways
- ✓Evaluate COs on necessity, cost, schedule, and cumulative effect.
- ✓CO markups average 30-50%—negotiate using contract unit costs.
- ✓Negotiate schedule alongside cost.
- ✓Complete documentation with signatures before work begins.
Sources
- AIA Document G701 — Change Order(2025-01-15)
- NAHB Remodeling Change Management Guide(2025-01-15)
Common Mistakes to Avoid
Approving change orders verbally without written documentation
Consequence: No record of scope, cost, or schedule changes; disputes arise about what was approved and at what price
Correction: Require written change orders signed by both parties before any additional work begins, documenting scope, cost, and schedule changes
Allowing contractor to perform change order work before price approval
Consequence: Contractor completes work then presents inflated pricing with no leverage for negotiation since work is done
Correction: Require price agreement and written approval before any change order work begins; include this requirement in the original contract
Test Your Knowledge
1.What percentage of original contract value in cumulative change orders signals a management problem?
2.What must a change order document before work begins?