Change Order Disputes: How Contractors Lose Money on Extra Work

The Most Common Way Contractors Lose Money

You're on the job. The GC's superintendent walks over and says, "While you're here, can you run that pipe over there too?" You do it because it's easier than arguing, the crew is already mobilized, and you figure you'll get a change order later.

Later never comes. The GC says it was in the original scope. You say it wasn't. There's nothing in writing. You lose.

This happens every single day on construction sites across the country. It's the number one way contractors lose money — and it's almost entirely preventable.

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Why Change Orders Fail

Change order disputes usually happen because of one of these failures:

1. No written process in the contract If the contract doesn't spell out how extra work gets authorized and priced, every change becomes a negotiation.

2. Verbal direction without documentation The superintendent tells you to do something extra. You do it. Nobody writes it down. Later, the GC denies it happened.

3. Work performed before approval You start the extra work while the change order paperwork is being processed. The GC decides not to approve it. You've already done the work.

4. Disagreement on what's "in scope" The GC says it was included in your original scope. You say it wasn't. With a vague scope of work section, the GC usually wins.

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What Your Contract Should Say About Change Orders

Before you sign, check for these provisions:

Written Authorization Required

The contract should require a signed change order before extra work begins. But watch for language like:

"No additional compensation shall be paid unless a written Change Order is executed prior to commencement of additional work."

This puts all the risk on you. If the GC verbally directs extra work and you do it before getting a signed CO, you lose.

Better language: "In the event Contractor is directed to perform work that Contractor believes is outside the original scope, Contractor shall provide written notice within 48 hours. If Owner does not respond within 5 business days, the work shall be deemed a valid change order."

Pricing Method

The contract should specify how change order work is priced:

• Agreed lump sum — both parties agree on a price before work starts
• Time and materials — labor and material costs plus an agreed markup (typically 10-15% for overhead and profit)
• Unit prices — pre-agreed rates for specific types of work

Without a pricing method, every change order becomes a price fight.

Schedule Impact

Changes almost always affect the schedule. The contract should state that approved change orders include a time extension equal to the additional time needed to complete the extra work.

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How to Document Change Orders on the Job

Even with a good contract, documentation is everything. Here's a field-tested system:

Step 1: Identify the Change

When you're directed to do something that isn't in your original scope, immediately flag it — in writing.

Send an email or text that says: "Per our conversation today, you've asked us to [describe the work]. We consider this outside our original scope of work and will submit a change order proposal by [date]."

Step 2: Submit a Formal Proposal

Prepare a written change order proposal that includes:

• Description of the additional work
• Labor hours and rates
• Material costs with markup
• Equipment costs
• Impact on the schedule
• Reference to the original scope (showing why this work isn't included)

Step 3: Get Written Approval

Don't start the work until you have written approval — a signature, an email confirmation, or a signed change order form.

If the GC says "just start, we'll handle the paperwork later," send a follow-up email confirming their verbal direction. This creates a paper trail, even without a formal approval.

Step 4: Track the Costs

Keep separate time sheets, material receipts, and photo documentation for all change order work. Co-mingle it with your base scope work and you'll have no way to prove the additional costs.

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When the GC Says "It's in Your Scope"

This is the most common change order dispute. The GC says the work was included in your original contract. You disagree.

How to win this argument:

1. Pull out the original scope of work and show specifically what's included
2. Reference the drawings and specs — if the work isn't on the drawings, it's not in scope
3. Check for "excluding" language in your contract
4. Look at industry standards — what would a reasonable contractor include in that scope?

How to prevent this argument:

• Negotiate a detailed scope of work before signing (not "all work necessary to complete")
• Include a clear exclusions section
• Reference specific drawings and specifications by revision date

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Constructive Change Orders

A constructive change order occurs when the GC doesn't formally issue a change order but takes actions that change your scope. Examples:

• Directing work in a different sequence than planned
• Delaying your access to the work area
• Providing revised drawings without acknowledging the impact
• Refusing to accept work that meets the original specs

Your contract should include a constructive change order provision — but most don't. If yours doesn't, document the GC's actions in writing and submit a claim for the additional costs.

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Protect Yourself Before You Sign

The best change order protection starts with the contract. Make sure yours has a written change order process, a clear pricing method, and provisions for verbal direction confirmation.

Upload your contract to ContractDoctors and our AI will check whether your change order section actually protects you — and flag the gaps that could cost you money on extras.