10 Costly Change Order Mistakes Contractors Make (And How to Avoid Them)

Change orders are a normal part of construction projects. Whether caused by owner requests, design revisions, unforeseen conditions, or field conflicts, changes happen on nearly every job. However, poor change order management is one of the fastest ways for contractors to lose money, create disputes, and damage client relationships.

Many construction change order disputes are not caused by the change itself. Instead, they result from inadequate documentation, missed notice deadlines, unclear scope descriptions, or failure to properly account for schedule impacts and overhead costs.

The good news is that most change order mistakes are preventable. By understanding the most common pitfalls, contractors can protect their profit margins, preserve their legal rights, and improve project outcomes.

What Is a Construction Change Order?

A change order is a modification to the original construction contract that alters the scope of work, contract price, project schedule, or some combination of the three. Change orders may arise from owner-requested revisions, differing site conditions, design changes, code requirements, or unforeseen circumstances discovered during construction.

While change orders are common, they require careful management. A poorly handled change order can quickly turn profitable work into an expensive dispute.

Why Change Orders Become Expensive

Contractors often focus on pricing the additional labor and materials required for a change. However, the true cost of a change order frequently extends beyond direct costs and includes:

• Extended supervision and project management
• Additional equipment and mobilization expenses
• Schedule impacts and acceleration costs
• Administrative burdens
• Lost productivity
• Increased insurance and bond costs
• Delay and disruption claims

The following mistakes are among the most expensive errors contractors make when managing change orders.

1. Failing to Document the Change in Real Time

One of the most damaging mistakes a contractor can make is performing changed work without documenting it as it occurs. Verbal conversations and handshake agreements may seem sufficient at the time, but they often become problematic months later when memories differ and project records are incomplete.

For example, a mechanical subcontractor on a hospital renovation may be directed during a site walk to reroute ductwork around an unforeseen structural conflict. To keep the project moving, the subcontractor performs the work immediately but delays submitting a written change request. Weeks later, the owner disputes the scope and cost of the work.

Without contemporaneous photographs, daily reports, emails, or written directives, recovering those costs becomes significantly more difficult.

2. Starting Work Before Receiving Written Authorization

Contractors frequently feel pressure to maintain project schedules. Owners, architects, and project managers often encourage contractors to begin work with assurances that the paperwork will be finalized later.

Unfortunately, the paperwork does not always catch up.

A contractor may proceed with upgraded materials, revised layouts, or additional scope based solely on verbal instructions. If financing issues arise or project relationships deteriorate, the lack of written authorization becomes a major obstacle to payment.

Whenever possible, contractors should obtain a signed change order or written directive before beginning changed work.

3. Underpricing the Change Order Proposal

Many contractors unintentionally leave money on the table by pricing only the obvious direct costs associated with a change.

A complete change order proposal should account for:

• Labor
• Materials
• Equipment
• Supervision
• Remobilization
• Extended general conditions
• Overtime costs
• Administrative expenses
• Insurance adjustments
• Bond premium increases
• Profit

Failing to account for these costs can turn seemingly profitable change work into a financial loss.

4. Ignoring the Cumulative Impact of Multiple Changes

Individual changes may appear insignificant when viewed separately. However, dozens of changes over the life of a project can dramatically impact productivity, sequencing, and crew efficiency.

Frequent changes often require contractors to:

• Stop and restart work
• Reschedule subcontractors
• Remobilize crews
• Revise procurement schedules
• Perform work out of sequence

These disruptions create what is often referred to as cumulative impact or ripple-effect damages.

Contractors should carefully track the aggregate effect of multiple changes throughout the project rather than evaluating each change in isolation.

5. Failing to Identify Constructive Changes

Not every change arrives as a formal change order.

Sometimes an owner, architect, engineer, or inspector effectively changes the work through:

• Revised interpretations of specifications
• Enhanced inspection requirements
• Rejected submittals requiring higher standards
• Additional testing or quality control measures

These situations are commonly known as constructive changes.

Contractors who fail to recognize constructive changes often absorb substantial costs without realizing they may be entitled to additional compensation.

6. Missing Contractual Notice Deadlines

Many construction contracts contain strict notice requirements that apply to change order requests and claims.

Common notice periods include:

• 7 days
• 14 days
• 21 days

Failure to provide timely notice can result in an otherwise valid claim being denied entirely.

Contractors should review contract notice provisions before beginning work and establish internal procedures to ensure notices are submitted promptly whenever potential changes arise.

7. Poorly Defining the Scope of the Change

Vague change order language frequently leads to disputes.

Descriptions such as:

• "Additional framing as directed"
• "Mechanical revisions per field conditions"
• "Miscellaneous electrical changes"

provide little clarity regarding what work is included.

Instead, contractors should clearly define:

• Specific work included
• Specific work excluded
• Assumptions relied upon
• Drawings or documents referenced
• Schedule impacts
• Pricing methodology

Detailed scope descriptions reduce misunderstandings and protect both parties.

8. Neglecting Time Extensions

Many contractors focus exclusively on securing compensation while overlooking schedule impacts.

A change order that increases project scope often justifies additional time.

Failing to request schedule extensions can expose contractors to:

• Liquidated damages
• Acceleration costs
• Overtime expenses
• Schedule compression claims

Every change order should be evaluated for both cost and time impacts.

9. Using Inadequate Markup and Overhead Recovery

Not all change order work should be priced using a standard markup percentage.

Some changes require extensive coordination, permitting, engineering, supervision, or administrative effort. Small changes can sometimes create disproportionate overhead burdens.

Contractors should analyze whether contractual markup limitations adequately compensate them for:

• Project management time
• Administrative processing
• Engineering review
• Procurement efforts
• Utility coordination
• Multiple mobilizations

Simply applying a standard markup may not fully recover actual costs.

10. Failing to Preserve Delay and Disruption Evidence

Even when contractors properly identify and document changes, they often fail to maintain the evidence necessary to support delay and disruption claims.

Important records include:

• Updated CPM schedules
• Daily reports
• Labor tracking
• Equipment logs
• Productivity records
• Cost reports
• Project correspondence

Without sufficient documentation, proving delay damages, lost productivity, or extended overhead becomes significantly more difficult if a dispute arises.

Best Practices for Change Order Management

Successful contractors treat change order management as a core business function rather than an administrative afterthought.

To reduce disputes and improve profitability:

• Obtain written authorization whenever possible.
• Submit notice within contractual deadlines.
• Maintain detailed daily reports and photographs.
• Track labor and costs separately for changed work.
• Evaluate schedule impacts immediately.
• Request time extensions when appropriate.
• Preserve emails, directives, and project communications.
• Price changes to include overhead, supervision, and profit.
• Clearly define the scope of every change order.
• Monitor cumulative impacts throughout the project.

A disciplined change order process can significantly improve project outcomes and protect contractor margins.

Final Thoughts

Change orders are not inherently problematic. In fact, they are a normal and expected part of complex construction projects.

What makes change orders expensive is poor management.

Contractors who document changes in real time, secure written authorization, preserve notice rights, properly price their work, and maintain strong project records are far more likely to avoid disputes and recover the compensation they deserve.

Those who fail to do so often discover that profitable projects can quickly become expensive lessons.

Effective change order management is not simply about paperwork—it is about protecting your rights, preserving your margins, and ensuring that additional work results in additional compensation.

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