What is a change order in construction?

Change orders appear on almost every construction project. An owner may change the scope, a general contractor (GC) may pass down a design revision, or site conditions may require the team to adjust the original plan. 

For subcontractors, the GC’s written approval should come before crews start changed work or the team orders materials for the new scope. Without it, crews may perform extra work that the contract value doesn’t reflect, making margins harder to protect and job cost reports unreliable.

This guide explains what a change order is in construction, what it should include, and how it affects job costing for subcontractors.

Change order in construction defined

A change order in construction is a formal legal amendment to the original contract. It changes the project scope, contract value, schedule, or all of these when the contractually required parties sign or approve it.

Construction teams often use related terms for contract changes. A GC might call it a scope change, contract amendment, construction change directive, or scope change. The wording might be different, but the financial impact is the same: Work that falls outside the original scope may go unpaid if crews complete it before the GC signs off on the change. The subcontractor may then absorb added material, schedule, and labor costs without a matching adjustment to the subcontract value. 

For example, a GC may send a drywall subcontractor a change order after the owner adds rooms to the project scope. Before assigning crews or ordering materials, the subcontractor reviews the added work, confirms how it changes the subcontract value, and checks whether the timeline needs adjustment. Once the GC provides written approval, the subcontractor’s finance teams can enter the change into job cost records.

What every change order should include: 6 key elements

A construction change order should give the subcontractor enough detail to price the work and update job cost records. Before accepting a change order form from a GC, subcontractors should check for these six details.

1. Project and party contact information

The change order should identify the project, construction contract, GC, subcontractor, and any other required signatories. This information helps the subcontractor connect the approved change to the right subcontract and billing record instead of treating it as an undocumented field cost.

2. A detailed description of the required work

The document should explain what work the GC adds, removes, or revises. A detailed scope description helps the subcontractor separate original contract work from changed work and connect crews, costs, and billing back to the correct scope.

3. Schedule impact

The change order should state how many days the change adds or removes from the project timeline. Extra scope of work can increase time-related costs like extended super and foreman hours, equipment rental fees, and crew labor running past the original schedule. Without a documented schedule impact, the subcontractor may forget to account for expenses that don’t appear in the material price alone.

4. Cost adjustment

Changed work usually affects the subcontract value, so the change order should show the price adjustment. The modification can increase or decrease the contract amount, depending on whether the GC adds, removes, or revises the scope. The subcontractor’s finance team needs this number before they update budgets and margin forecasts.

5. Updated total contract value

A complete change order shows the revised contract value after all approved changes to date. This gives finance leaders a current baseline for job cost reporting. Without it, reports may compare actual costs against the original subcontract value, which can make the project look over budget even when approved work caused the increase.

6. Dated signatures or written approval

The change order should include dated signatures or another form of written approval required by the contract. For subcontractors, this step matters most before crews start working with the changed scope. Without a written GC sign-off, the subcontractor may struggle to prove that the added work qualifies for payment.

Common reasons for change orders in construction

Most types of change orders in construction don’t come from one obvious mistake but rather from normal project complexity. Drawings change, site conditions differ from expectations, materials become harder to source, and GCs need subcontractors to adjust the work.

Common reasons for adjustments include:

• Unforeseen site conditions: A GC may issue a change order when crews discover unplanned site conditions during excavation, demolition, or structural work. For subcontractors, these conditions can change labor hours and equipment needs, so the change order needs to reflect the added cost before work continues.
• Owner or GC-directed scope of work changes: The owner may request design changes, such as adding new rooms, changing finishes, or revising the layout. When the GC passes that change down, the subcontractor receives new work that often falls outside the original scope.
• Errors or omissions in drawings or contracts: Missing construction contract details, conflicting drawings, and poor trade coordination can trigger a change when the field work no longer matches the original subcontract. A crew may need to pause or redo work while the GC clarifies who owns the issue. That delay can financially strain the subcontractor before responsibility for mistakes becomes clear.
• Material substitutions: Supply chain issues can force the GC to approve different materials than the ones listed in the original contract. A substitution may affect price or specialized labor requirements.
• Code or regulatory changes: Updates to fire and life safety codes, ADA accessibility requirements, or energy code revisions can force a mid-project redesign. Inspector callouts on items like fire stopping, fall protection, or trench shoring can also push a scope change after the work has started.

How the change order process works for contractors

For subcontractors, the change order process starts when the GC sends a change that affects the original subcontract scope. The subcontractor then reviews the change, evaluates its impact, and waits for the GC’s written approval before starting the revised work. Subcontractors who proceed without that approval take on the risk that the GC may reject payment for the added work. 

A typical change order process looks like this:

• Reviewing the change: The subcontractor compares the change order to the original scope and contract terms. This review confirms whether the scope of work falls outside the existing agreement and if the GC needs to clarify the change order request.
• Evaluating the cost and schedule impact: The team checks whether the change order includes a clear scope description, timeline, and cost adjustment. If the document leaves out any of these details, the subcontractor should negotiate a revised version before proceeding. 
• Responding to the GC: The subcontractor accepts the change order or responds with missing information or cost concerns. A written response gives both sides a record of what the subcontractor agreed to and what still needs modifications.
• Waiting for written GC sign-off: Crews shouldn’t begin the revised scope, and the team shouldn’t order materials for it, until the GC provides the approval required by the contract. Starting without a written approval can leave the subcontractor with labor or material costs that the GC has not agreed to pay.
• Entering the approved change into job cost records: Once the GC approves the change, the team records it against the correct job and cost codes. This updates the budget baseline, so job cost reports compare actual costs against the revised subcontract value.

How change orders affect job costing

When the GC approves the added or revised scope, the subcontractor’s budget, cost codes, and billing records need to reflect that change. If they don’t, job costing might break in the following ways:

• Unreliable reporting: New labor and material costs make job cost reports misleading when teams assign them to the wrong cost codes. The report may show higher costs, but it will not show whether that increase came from the original scope or the change order.
• Outdated budgets: If the budget still shows the original subcontract value, finance leaders may review the job using the numbers that no longer match the approved work.
• Margin erosion: Unapproved or undocumented change work can increase labor and material expenses without increasing revenue. If those costs sit inside the main job budget, the margin loss may not stand out until the project closes. 
• Compliance exposure: On prevailing wage or government-funded jobs, change orders can affect which work crews performed and how they should receive pay. If the subcontractor doesn’t track changed work accurately, certified payroll reports and fringe benefit calculations may not match the job cost records or the actual work performed, adding compliance risk on top of the financial risk.
• False overruns: A GC-approved change order that has not entered the system leaves the budget at the original contract value. Every job cost report run during that gap compares actual costs against the wrong baseline. This can make the construction project appear more overbilled or underbilled than it really is.

Track change order costs accurately with Miter.

Change orders create job costing problems when labor, material, and production expenses reach the office after the crews finish the changed work. By then, the subcontractor may have to piece together what happened from timecards and field notes, leaving room for missed hours, miscoded materials, or costs that blend into the original scope.

Miter helps subcontractors capture change order costs in the field, against the right job and cost code. With Miter’s time tracking, expense coding, and field production tracking, teams can record added work as crews perform it. When a change order adds labor or materials, those costs flow into job cost reports sooner instead of getting reconstructed at project close. 

Miter’s Job Costing helps subcontractors track change order costs before they get buried in the original scope.