Most money lost on a custom home is not lost in the estimate. It leaks out through changes: the client moves a wall, upgrades a window package or adds pot lights at the walk-through, and the work gets done before anyone writes down what it costs. A change order form fixes that by putting the change, the price and the effect on the schedule on paper, with a signature, before the work starts.
This guide covers what a change order form should include, how to price a change, how to handle the schedule, and how to keep a log that ties every change back to the contract and the draws.
When you need a change order
Write a change order any time the agreed scope, price or completion date moves. That includes:
- Client requests: a layout change, an added feature, an upgrade.
- Allowance overages and credits, if your contract handles them as changes.
- Hidden conditions: rock, poor soil, rot found in an existing structure.
- Changes required by the inspector or the designer after the contract was signed.
- Credits, when something is removed.
Small changes count. A $400 change that is never written up is a $400 argument at the final draw.
What a change order form should include
A good form fits on one or two pages and answers every question the client will ask later.
The project and the parties. Project name and address, client names, your company, and the change order number. Number changes in sequence so gaps are obvious.
What is changing. A plain description of the work added, removed or changed, with any drawing or specification it refers to. Write it so someone who was not at the meeting can understand it.
Why. Client request, hidden condition, design change or allowance overage. This matters later when you review where the changes came from.
The price. Cost before markup, markup, the price before tax, tax and the price including tax. Show credits as negatives.
The effect on the contract. Original contract, approved changes to date, this change and the revised contract. This one block heads off most disputes.
The effect on the schedule. The number of working days the change adds or saves, and the revised completion date.
Billing. Which draw the change will be billed on, or whether it is due on approval.
Approval. Signature lines and dates for the client and for you. State that work on the change starts after the signed form is returned.
How to price a change
Price changes with the same discipline as the original estimate.
- List the direct costs. Materials, labour and trade quotes, plus any equipment or disposal.
- Add the costs people forget. Supervision time, extra site visits, re-ordering, restocking fees on returned material, and the cost of work that has to be undone.
- Apply your markup. Many builders use a higher markup on changes than on the base contract, because changes disrupt the job and cost more time per dollar. Whatever you choose, set it in your contract and apply it consistently. Credits are often returned at cost or at a lower markup; again, say so in the contract.
- Add the schedule cost. If the change adds days, your site overhead runs for those days too.
- Add tax as your accountant advises.
Handling the schedule
Clients think of changes in dollars. Builders know the bigger cost is often time. Every form should state the days added in working days, not calendar days, and show the new completion date. Count working days around weekends and statutory holidays so the date on the form matches the date on your schedule. If a change adds no time, write zero. That still tells the client you checked.
Worked example: a change order log
The table below is a sample log for a sample project with a $1,850,000 original contract. Figures are made up to show the arithmetic. It uses a sample 15% markup on added work, cost on credits, and a sample tax rate of 8%.
| CO | Description | Type | Cost | Markup | Price before tax | Tax (8%) | Days | Status |
|---|---|---|---|---|---|---|---|---|
| 01 | Add 6 pot lights in great room | Client request | $1,800 | $270 | $2,070 | $165.60 | 0 | Approved |
| 02 | Rock removal at north footing | Hidden condition | $9,400 | $1,410 | $10,810 | $864.80 | 3 | Approved |
| 03 | Upgrade window package | Client request | $21,500 | $3,225 | $24,725 | $1,978.00 | 5 | Approved |
| 04 | Delete basement bar sink | Credit | -$1,150 | $0 | -$1,150 | -$92.00 | 0 | Approved |
| 05 | Tile allowance overage | Allowance | $3,600 | $540 | $4,140 | $331.20 | 0 | Pending |
Approved changes before tax: $36,455. Revised contract before tax: $1,886,455. Days added by approved changes: 8. The pending change is shown but not counted until it is signed.
A running log like this is what turns a stack of signed forms into a number you can bill. Each draw invoice should show the original contract, approved changes to date and the revised contract, so the client sees the same figures every month. See our guide to construction draw schedules for how changes are billed with the draws.
A short how-to
- Put your change process and markup in the contract before the job starts.
- When a change comes up, open the next numbered form and describe it in writing.
- Price it: costs, markup, tax and days.
- Send it for signature before the work starts.
- Log it, with its status and the draw it bills on.
- Update the revised contract and the completion date.
- Bill it on the agreed draw and mark it billed in the log.
The template
Our Change Order System (CA$49) sets this up in one place. The Excel log holds up to 50 changes with type, cost, markup, schedule days, status, approval date and the draw each is billed on, and it works out markup, sales tax, retainage or holdback, the amount due when billed, the running revised contract and the revised completion date in working days around your holidays. It comes with a two-page change order form your client can read and sign, a one-page client change summary and a six-page guide to pricing, approving and billing changes.
If you are still building the budget the changes will be measured against, start with the free Custom Home Cost Breakdown Template.
FAQ
Can a change order be approved by email?
Many builders accept it, but a signed form is easier to rely on later. Whatever you accept, your contract should say so. Ask your lawyer.
What markup should I use on change orders?
That is a business decision for your company. Many custom builders set a change order markup at or above their base contract markup. State it in the contract so it is not negotiated change by change.
Should credits get the same markup?
Usually not. Many contracts return credits at cost or at a reduced markup. Decide in advance and write it down.
What if the client refuses to sign but wants the work done?
Do not start the work. Explain the price and the days in person, then send the form again. Unsigned changes are the hardest money to collect.
Is the form a contract document?
It amends your contract, so have your lawyer review the wording against your contract before first use.