How to Use This Guide
If you're drowning in change orders right now: Jump to Section 5: Emergency Triage, you need immediate tactical guidance.
If you're in pre-construction: Read Sections 1-4 first, then use Section 8 to set up your contract protections before signing anything.
If you're mid-project and suspicious: Go to Section 6: Warning Signs to see if your contractor is heading toward financial trouble.
This guide answers the 44 most common questions owners ask about change orders. It's organized to give you both the strategic understanding AND the tactical tools you need to protect your investment.
Bonus Resources: This guide includes references to 10 downloadable appendixes with ready-to-use templates, spreadsheets, and checklists. Look for the 📎 icon throughout.
Section 1: The Foundation - Understanding Change Orders
What exactly is a change order?
On paper, a change order is simple: the plan changed, so the cost and schedule change.
In reality, change orders are the primary source of friction, litigation, and heartburn on job sites. They're where projects blow budgets, relationships fracture, and owners feel powerless.
The Three Responsibility Buckets
Every change order falls into one of three categories:
- Owner RequestYou changed your mind.The owner pays. No dispute.
- Unforeseen ConditionsWe dug and found a buried oil tank.Usually the owner pays, but contract language matters.
- Errors & Omissions (E&O)The architect forgot something, or the contractor installed it wrong.Whoever messed up pays.
The problem: The lines between these buckets are rarely clear. Most change order disputes happen in the grey zones.
The Three Grey Zones Where Disputes Happen
Grey Zone: The "Reasonably Inferable" Trap
The drawings show a light fixture but don't explicitly show the wire connecting it to the switch.
- Contractor says: "Wire wasn't drawn. That's a change order."
- Architect says: "It's reasonably inferable that a light needs power. Should've been in your bid."
Who pays? Depends on your contract language and standard of care in your jurisdiction.
(Note: Defining 'Standard of Care' is often the deciding factor in litigation. Learn more about our Expert Witness Services for construction disputes.
Grey Zone: The Coordination Clash
The mechanical duct goes exactly where the drawings said. The fire sprinkler pipe goes exactly where those drawings said. They hit each other in the ceiling.
- Both subs: "I followed the plan."
- General Contractor: "Architect, your drawings clash. Change order."
- Architect: "Your subs should have done 3D coordination before fabrication. Field issue. I'm not paying."
Who pays? This fight often ends in negotiated compromise.
Grey Zone: The Betterment Argument
The architect forgot code-required fire dampers. The wall is already built.
- Cost: $2,000 for dampers + $3,000 to rip open wall and patch = $5,000 total
- Owner: "Architect, you pay the $5,000."
- Architect: "Even if I'd drawn it correctly, you'd have paid $2,000 for dampers. I only owe the $3,000 waste. You shouldn't get free dampers because I made a mistake."
Who pays what? The concept of "betterment" makes this a calculation nightmare.
Why determining responsibility is actually a negotiation
Here's what 20+ years has taught me: Construction contracts aren't perfect. Drawings aren't perfect. Every site has unique issues.
To an experienced professional, it's a negotiation and horse trade.
You hope to treat others fairly and expect the same of them. This guide will help you know when you're being treated fairly and when you're being taken advantage of.
Section 2: Construction Change Order Costs – Why They Are So Expensive
Why does a $500 sink cost $5,000?
Change orders aren't expensive because of the thing being changed. They're expensive because of the momentum being lost.
Example: Building a hospital. Framers scheduled Monday, electricians Wednesday, drywallers Friday.
Owner decides they want an extra sink in Exam Room 4.
Obvious cost: Buy sink, run pipe.
Hidden ripple effect:
- Stop framers to redesign wall backing
- Because framers stop, electricians can't start
- Drywallers leave for another job because they can't wait
- Now you're paying remobilization costs, schedule delays, and lost productivity
The $500 sink just cost $5,000.
The critical path reality
Construction relies on a precise sequence of events (the critical path). When you disrupt that sequence, you don't just pay for the change, you pay for everything that cascades from that disruption.
This is why timing matters enormously in change order pricing. A change made during design costs dollars. The same change made mid-construction costs hundreds or thousands.
Section 3: The Big Three - Categories of Change Orders
Every change order you'll encounter falls into one of three major categories. Understanding these helps you evaluate whether the contractor's price is reasonable.
Category 1: Unforeseen Conditions
What qualifies:
- Buried oil tanks, underground utilities not on drawings
- Contaminated soil, unsuitable bearing conditions
- Hidden structural issues in renovation work
- Groundwater where it wasn't expected
Who typically pays: Owner, but pricing must be fair.
Pre-Construction Defense: The "Cheap Insurance"
The biggest mistake owners make is treating site investigation as a checkbox compliance item. Spend $20,000 now to save $200,000 later.
📎 See Appendix 7: Pre-Construction Investigation Checklist for detailed guidance on:
- Geotechnical investigation (demand "proof of rock")
- Environmental assessment (Phase I vs. Phase II)
- Subsurface Utility Engineering (SUE Level A potholing)
- Hazmat surveys for renovation projects
- Complete cost/ROI analysis
Investment: ~$53,000 | Prevents: $275K-$1.1M in change orders
When Unforeseen Conditions Appear: Pricing Red Flags
Your contractor hands you remediation pricing. How do you know if you're being gouged?
Four Red Flags to Watch:
- The "Standby" Equipment Gouge - Charging full operating rate for parked equipment (should be 50% standby rate)
- The "Ghost" Operator - Billing for operators who worked productively elsewhere
- Material "List Price" - Charging retail prices instead of actual contractor cost
- The Nebulous "Inefficiency Factor" - Adding percentage without documented proof
📎 See Appendix 8: Unit Price Bid Template to lock in competitive pricing for common unforeseen conditions BEFORE they're discovered, when contractors are competing for your job.
Category 2: Weather and Protection
The baseline rule: In 90% of standard contracts (AIA, ConsensusDocs), weather delays are "Excusable, Non-Compensable."
- Excusable: Hurricane hits, contractor gets more time (days added to schedule)
- Non-Compensable: Contractor does NOT get more money for extended overhead
Exception: If weather reveals site grading problems or if owner-caused delays force winter work that wasn't originally scheduled.
What's Contractor vs. Owner Responsibility?
Contractor pays (base bid):
- Standard tarps & dewatering
- Worker comfort (temporary heat)
- Snow removal from site
- Pumping rainwater from excavations
Owner pays (change order):
- Force majeure damage (Builder's Risk insurance)
- Process environment (heat building to 65°F when permanent HVAC delayed by owner)
- Differing conditions revealed by rain
- Extended protection if owner delays power connection
The Three Games Contractors Play with Weather
Game A: The "Mud Day" Multiplier - Claiming Tuesday rain PLUS Wednesday-Friday "drying out" when critical path work could have continued
Game B: The "Saturday" Special - Claiming Saturday as weather day when they weren't planning to work Saturday anyway
Game C: The "Constructive Acceleration" Setup - You deny legitimate weather days, they hire extra workers to catch up, then sue you for forcing them to accelerate
The "10-Year Average" Contract Clause
The smartest way to stop weather arguments before they start: Define "normal" in your contract using NOAA data.
📎 See Appendix 3: NOAA Weather Data Tables for Ohio for:
- Pre-calculated baselines for 6 major Ohio markets
- Contract language template
- Monthly tracking logs
- How to handle weather disputes
Category 3: Conflicting Design Information
The three most common conflicts:
- Specs vs. Drawings War - Drawings show vinyl tile ($2/SF), specs call for ceramic tile ($12/SF)
- Reflected Ceiling vs. Structural Clash - Ceiling plan shows 10' height, structural beam hangs at 9'
- Civil vs. Architectural Gap - Site grade and floor elevation both at 100.00' = rain flows through door
The "Who Pays" Playbook for Design Conflicts
Step 1: Check "Order of Precedence" Clause
Your contract defines hierarchy: Agreement > Addenda > Specifications > Drawings
If Specs rule and said "expensive tile," contractor should have bid expensive tile.
Step 2: The "Patent Ambiguity" Test
If mistake was obvious, contractor had duty to ask during bidding. Can't stay silent, low-ball bid, then claim change order.
Step 3: The "Spearin Doctrine"
US Supreme Court law: Owner impliedly warrants plans are accurate and buildable. If plans are truly wrong, owner pays contractor, then recovers from architect (waste only, not betterment).
📎 See Appendix 2: Contract Language Library for protective clauses that prevent these disputes from reaching your project.
Section 4: The Evaluation Process - What to Do When a Change Order Lands on Your Desk
Step 1: Ask for Backup Documentation
This is the FIRST thing you do. Before evaluating anything, before negotiating, ask for complete backup.
Two things will happen:
Option A: Good backup arrivesYou'll learn a ton. The change order, though expensive, will start to come into focus.
Option B: No backup or weak backupThere's a reason they don't have good backup. Dig into that reason and decide whether to delay work or proceed at your risk.
Step 2: The Sniff Test - Evaluating Backup Documentation
When good backup arrives, apply the sniff test:
Find the hourly rates:
- $100/hour for licensed electrician = Reasonable
- $100/hour for general labor = Red flag
📎 See Appendix 4: Labor Rate Benchmark Guide for Ohio to compare claimed rates against market standards for 15+ trades, including burden breakdowns and hidden profit detection.
Verify equipment and supply costs:
- Demand supplier invoices showing actual cost
- Check equipment rates against rental company pricing
- Watch for "standby" charges at full operating rates
Step 3: Review Required Documentation Components
Every change order must include three distinct elements. If any one is missing, reject as "Incomplete."
Component 1: The Narrative (The "Why")
- The cause (cite specific RFI, drawing revision, field directive)
- The scope (exactly what will be done)
- The exclusions (what is NOT included)
Component 2: The Detailed Cost Breakdown (The "What")
- Labor (Hours × Rate by trade)
- Materials (Quantity × Unit Price with quotes)
- Equipment (Hours × Rate with justification)
- Subcontractor costs (with sub's backup attached)
Never accept a lump sum.
Component 3: The Schedule Impact (The "When")
- Statement of time extension requested (yes/no)
- If yes: days requested with schedule analysis
Step 4: Watch for the Three Hidden Profit Centers
Hidden Profit: The "Blind" Subcontractor Markup
GC submits "Plumbing: $10,000" but plumber only charged GC $8,000. GC is hiding $2K profit before applying their markup percentage. Demand to see sub's backup.
Hidden Profit: The "List Price" Material
Electrician claims wire costs $1.00/ft (Home Depot website price), but contractors get 20-30% trade discounts. Demand supplier invoice showing actual cost paid.
Hidden Profit https: The "Burden" Inflation
Labor shows "$85/hour carpenter" but carpenter's wage is $40. If burden exceeds 70%, they're hiding profit in the "cost" before applying markup percentage.
📎 See Appendix 4: Labor Rate Benchmark Guide for burden breakdown calculators and verification procedures.
Section 5: Emergency Triage - You're Drowning in Change Orders Right Now
If you're mid-project and things have gone sideways:
Immediate Action: Stop All Work Without Approval
The rule: No work is EVER done without owner's written approval, except in true emergency.
What's an emergency? Immediate danger to health or property. Not schedule pressure. Not contractor convenience.
When unauthorized work happens: Refuse to pay. Not negotiable.
📎 See Appendix 1: Email Template for the exact script to use when rejecting unauthorized work.
Immediate Action: Implement the Change Order Rejection Checklist
The Change Order Rejection Checklist:
Send back for "Revise and Resubmit" if you see:
- ❌ Lump sum pricing (reject - require line-item breakdown)
- ❌ Labor rate higher than contract rate
- ❌ "Small Tools" as separate charge (included in overhead)
- ❌ O&P applied to sales tax (markup net cost, then add tax)
- ❌ Project manager or superintendent hourly charges (included in General Conditions)
Immediate Action: Assess If Your Contractor Is In Financial Distress
Three warning signs that your contractor is heading toward bankruptcy:
⚠️ Warning Sign: Weaponized RFIs
Suddenly RFI volume spikes, but questions change from "How do I build this?" to "Please confirm you're forcing us to do this."
They're building a "claim file" to manufacture delay justifications for future change orders.
⚠️ Warning Sign: Front-End Loading of Pay Apps
Aggressively over-billing for early, easy work:
- Claim 100% of "Mobilization" before trailer arrives
- Claim slab is 90% complete when only 50% poured
They're using your project to pay off debt from their last project. When that early cash runs out, they'll manufacture change orders.
⚠️ Warning Sign: Ghosting the Supply Chain
Physical signs visible onsite:
- Dumpsters overflowing, not being pulled (waste company stopped service for non-payment)
- Port-a-potties dirty (service stopped)
- Concrete pours cancelled last minute ("scheduling issues" = credit hold)
When contractors are in trouble, they stop paying "silent" vendors first. If site hygiene is slipping, aggressive change orders are usually 2 weeks away.
📎 See Appendix 6: RFI Pattern Analysis Worksheet to track and identify weaponized RFIs early.
Immediate Action: Financial Distress Response Tactics
Tactic 1: Joint Check Agreements
Write checks jointly to "ABC Construction AND XYZ Electrical Supply." Both must endorse. Guarantees subs get paid, prevents liens.
📎 See Appendix 9: Joint Check Agreement Sample for ready-to-sign template and implementation procedures.
Tactic 2: Invoke Your "Right to Audit"
Demand to see cancelled checks proving subs were actually paid. Invoices marked "Paid" aren't enough.
Tactic 3: Notice to Cure
Formal letter: "You have 72 hours to fix this or we reserve right to terminate." Starts the legal clock, protects your ability to use retainage.
📎 See Appendix 10: Notice to Cure Letter Template for complete legal notice with all required elements.
Tactic 4: Call the Surety
If bonded, contact surety company: "Your contractor is behind schedule and subs claim non-payment. We're sending Notice to Cure."
Surety will freeze contractor's bonding capacity, forcing them to be honest with you.
Critical rule: Do NOT pay in advance. When drowning contractors beg for early release of retention or advance payment for materials, never do it. You'll never see that money again and you'll have zero leverage when they collapse.
🚨 Need immediate backup? If your contractor is showing these signs, you need an independent advocate on site within 48 hours. See how our Owner's Representative Services stabilize distressed projects.
Don't want to write these rejection emails yourself? Download my 11 "Copy-Paste" Rejection Templates in the Change Order Defense Kit. Download the Defense Kit Now
Section 6: Warning Signs of General Contractor Financial Distress
The smartest owners don't just respond to crises — they see them coming.
The RFI Pattern Analysis
RFI responses tell you everything about where your budget is headed.
The tell: If RFIs show architect frequently changing design, owner is paying for those changes. Each design revision in an RFI = potential change order.
📎 See Appendix 6: RFI Pattern Analysis Worksheet for monthly tracking system and red flag identification.
The Meeting Minute Test
Watch for:
- Meeting minutes delayed, incomplete, missing action items
- Key stakeholders absent from meetings
- Updates reactive (you chase them) vs. proactive
The tell: When meeting minutes slip, management attention is slipping. Budget/schedule problems follow 2-4 weeks later.
The Canary System
✔ Site cleanliness - Messy site = either benevolent inattention (fixable) or financial distress (dangerous)
✔ Daily logs - Incomplete or inconsistent daily logs signal lost control
✔ Superintendent location - Spending all day in trailer vs. walking site = lost control of work
📎 See Appendix 5: Change Order Tracking Spreadsheet, Tab 6 for Red Flag Tracking system with weekly scoring.
Make Your Priorities Known - The Squeaky Wheel Strategy
Get ahead of problems by:
- Identifying your 3-5 non-negotiable priorities
- Stating them clearly and repeatedly in meetings
- Documenting them in meeting notes
- Creating your defense when issues arise
Why this works: People are human. Mistakes happen. But the squeaky wheel gets the grease. When the inevitable issue arises, you have documented proof you flagged it as priority multiple times.
Section 7: Contract Protection - Setting Up Success Before You Start
The best defense against change order abuse is contract language established BEFORE your project starts.
The Two Critical Protection Clauses
Clause 1: The "Reasonably Assumed" Protection
Eliminates "the wire wasn't drawn" arguments. If equipment needs components to function, contractor must include them.
Clause 2: The "Complementary Drawings" Protection
Eliminates "coordination clash" arguments. Contractor responsible for coordinating trades, not just following individual drawings in isolation.
📎 See Appendix 2: Contract Language Library for:
- Complete text of both clauses (ready to copy-paste)
- 15 additional protective clauses organized in 7 sections
- Implementation checklist
- Attorney review notes
The Unit Price Defense
Require contractors to bid unit prices for common unforeseen conditions DURING BIDDING when they're competing.
Why this works: During bidding, they give competitive prices ($50/CY). If you wait until rock is found, they have you hostage ($150/CY).
📎 See Appendix 8: Unit Price Bid Template with 6 sections covering earthwork, groundwater, obstructions, contamination, hazmat, and structural unknowns.
The Weather Baseline
Include NOAA 10-year average data in contract. Contractor gets time extensions only for days exceeding baseline.
What this does: Eliminates emotion. You simply count days against baseline. Math beats feelings.
📎 See Appendix 3: NOAA Weather Data Tables with pre-calculated baselines for Columbus, Cleveland, Cincinnati, Toledo, Dayton, and Akron.
The Labor Rate Documentation
Before work starts, require contractor to submit detailed breakdown of wage + burden for all trades. Locks in rates throughout project.
What this prevents: Inflated hourly rates in change orders, hidden profit in "burden" calculations.
📎 See Appendix 2: Contract Language Library, Clause 3A for required labor rate documentation clause.
Section 8: The Rejection Process - How to Say No
When You Determine It's Not Your Responsibility
After evaluating the change order, you may determine it's not your responsibility.
How to reject properly:
Email is sufficient but must include:
- The rejection statement
- The specific reason (contract section, drawing, specification)
- Polite but firm tone
- Support for the relationship while holding boundary
The critical balance: Be firm on contractual obligations while remaining supportive partner.
📎 See Appendix 1: Change Order Rejection Email Templates for 11 ready-to-use templates covering:
- Work in base contract
- Reasonably inferable work
- Patent ambiguity
- Coordination failures
- Insufficient backup
- Inflated pricing
- Unauthorized work
- Negotiation offers
- Escalation situations
- Partial approval (betterment)
If You Don't Have Strong Contract Language
What if you're mid-project and DON'T have protective clauses?
Your strategy shifts to relationship and creativity:
- Be humble, ask for help, request favors
- Horse-trade something else
- Split the baby (50/50)
- Find win-win solutions
When negotiating from weakness, preserve the relationship while protecting what you can.
Section 9: Quick Reference Tools
The Change Order Evaluation Flowchart
Shutterstock
Explore
- Ask for complete backup → If missing → STOP. Demand documentation.
- Identify category → Owner Request? Unforeseen? Design Error?
- Check contract language → Do you have protective clauses?
- Evaluate pricing → Sniff test using Appendix 4 benchmarks
- Assess fairness → Legitimate or overreach?
- Make decision → Approve, Reject, or Negotiate
- Document everything → Email with clear reasoning
The "Is This Fair?" Quick Check
✔ Did contractor ask for clarification during bidding?
✔ Is pricing backed with actual costs (no lump sums)?
✔ Are hourly rates reasonable vs. contract rates?
✔ Did they include overhead/profit in wrong places?
✔ Is schedule impact justified or manufactured?
✔ Would an experienced professional find this reasonable?
Key Documents to Have Ready
- Original contract and general conditions
- All addenda issued during bidding
- Complete drawing set (note revision)
- Full specifications
- Approved wage scale / labor rates
- Schedule of values
- Project schedule (current version)
- All previous RFIs and responses
- All previous change orders
📎 See Appendix 5: Change Order Tracking Spreadsheet for system to organize all documentation and track patterns.
Section 10: When to Call for Help
The DIY vs. Professional Help Decision
You can likely handle change orders yourself if:
- You have solid contract language
- Project is under $1M
- Contractor is communicating professionally
- Change orders are well-documented
- You have time to review properly
You need professional help if:
- Total change orders exceed 5% of original contract
- Contractor shows signs of financial distress
- You're being pressured to approve without proper backup
- Work is proceeding without your authorization
- You suspect contractor is manufacturing claims
- Contract language is weak or unclear
- You don't have time to properly evaluate
- Disputes are heading toward litigation
What an Owner's Representative Does
An owner's representative works exclusively for you.
What I bring to change order management:
- Experience: 20+ years managing $400M in projects. I've seen every game contractors play.
- Operating systems: Structured processes that catch problems early through systematic oversight.
- Focus and time: Dedicated attention to read every contract, observe onsite, review backup, advise on strategy.
These three things dramatically improve odds of successful outcomes.
The Two Paths to Working Together
Path 1: Emergency Intervention
You're drowning in change order disputes right now.
- Immediate audit of pending change orders
- Contractor financial health assessment
- Negotiation strategy and support
- Crisis management
You're in pre-construction and want to set up for success.
- Contract review and protective language insertion
- Project protocol establishment
- Ongoing oversight and change order management
- Early warning system implementation
The Free 30-Minute Consultation
Before you commit to anything, let's talk about your specific situation.
In 30 minutes, I can usually:
- Identify your biggest vulnerability
- Explain if your situation is normal or a red flag
- Give you 2-3 specific actions to take immediately
- Tell you honestly if you need professional help or can handle it yourself
No pressure, no sales pitch - just straight talk about your project.
Conclusion: The Three Things That Matter Most
After 20+ years and $400M in projects, here's what I know for certain:
1. Documentation Wins Arguments
The project manager who writes everything down usually wins the fight. But the project manager who is fair and reasonable prevents the fight from becoming a lawsuit.
2. Boundaries Save Money
Never - not once - allow work to proceed without your written authorization. Give in once and you open the floodgates.
3. Relationships Matter
Construction is messy. Contracts aren't perfect. The best outcomes happen when owners and contractors negotiate fairly and work together to solve problems.
But you can only do that from a position of strength.
This guide gives you that strength, the knowledge to evaluate what's fair, the tools to protect yourself, and the confidence to hold firm when necessary.
Use it well.
Download Your Complete Tool Kit
This guide references 10 practical appendixes with templates, checklists, and tools you can use immediately:
📎 Appendix 1: Change Order Rejection Email Templates (11 templates)
📎 Appendix 2: Contract Language Library (17 protective clauses)
📎 Appendix 3: NOAA Weather Data Tables for Ohio (6 markets)
📎 Appendix 4: Labor Rate Benchmark Guide (15+ trades)
📎 Appendix 5: Change Order Tracking Spreadsheet (8-tab system)
📎 Appendix 6: RFI Pattern Analysis Worksheet
📎 Appendix 7: Pre-Construction Investigation Checklist
📎 Appendix 8: Unit Price Bid Template
📎 Appendix 9: Joint Check Agreement Sample
📎 Appendix 10: Notice to Cure Letter Template
Professional Value: $2,500+ in consulting templates
Your Investment: Already included with this guide
Appendix: The 44 Questions This Guide Answers
This comprehensive guide addresses all 44 common change order questions:
Understanding Change Orders:
1. What exactly is a change order?
2. Who typically pays for change orders?
3. What makes determining responsibility so tricky?
4. Why are change orders so expensive?
Categories of Change Orders:
5. What are unforeseen conditions?
6. How do weather delays create change orders?
7. What are design conflicts?
8. Are there price guidelines for standard change orders?
Pre-Construction Protection:
9. What site investigation should I do before starting?
10. How can I protect myself in the contract?
11. What is a unit price bid?
12. Should I include weather baselines in my contract?
Evaluation Process:
13. What backup documentation should I demand?
14. How do I evaluate if pricing is fair?
15. What hourly rates are reasonable?
16. How do I verify material costs?
Documentation Requirements:
17. What must be included in every change order?
18. What's typically missing from change orders?
19. How do contractors hide profit?
20. What is the double-dip markup?
Unforeseen Conditions:
21. What pre-construction investigation reduces surprises?
22. What's fair vs. gouging for remediation pricing?
23. What is a standby equipment rate?2
4. How do I verify material invoice prices?
Weather and Protection:
25. What weather costs are contractor responsibility?
26. When does owner pay for temp heat or protection?
27. What games do contractors play with weather delays?
28. How does the 10-year average clause work?
Design Conflicts:
29. What are the most common design conflicts?
30. What is order of precedence?
31. What is patent ambiguity?
32. What is the Spearin Doctrine?
Warning Signs:
33. How do I spot contractor financial distress?
34. What are weaponized RFIs?
35. What is front-end loading?
36. What does a messy site signal?
Crisis Management:
37. What do I do if contractor is in financial trouble?
38. What are joint check agreements?
39. What is my right to audit?
40. When do I send a notice to cure?
41. When should I call the surety?
Rejection Process:
42. How do I properly reject a change order?
43. What if I don't have strong contract language?
44. When should I call for professional help?
