📘 What is a Change Order?

A Change Order is a written agreement that modifies the original terms of a construction contract, often related to scope, budget, or schedule. It may be initiated by the property owner, contractor, or architect during the course of a real estate project.

Change orders are a common part of development and renovation projects, ensuring that all parties are aligned on modifications to the plan.

📌 When and Why It’s Used

Change orders are used when unexpected conditions arise, design changes are requested, or errors or omissions are discovered in the original construction documents. They help ensure transparency and formalize how those changes affect costs or timelines.

Without a documented change order, disputes may arise over who is responsible for extra work or delays.

🧮 How It’s Calculated or Applied

The financial impact of a change order is calculated by estimating the additional labor, materials, equipment, and time required. The contractor provides a breakdown, which must be reviewed and approved by the client or project manager.

It also includes documentation of any changes to the project schedule or deliverables. Change orders are typically signed by all parties before work on the modified scope begins.

Properly tracking change orders is essential for budgeting and legal compliance throughout the build process.

✅ Pros

• Creates a formal paper trail for scope and cost changes
• Reduces risk of disputes and miscommunication
• Allows flexibility during complex or unforeseen conditions

⚠️ Cons

• Can delay project completion if frequent or poorly managed
• May increase overall project cost
• Requires time and admin effort to document and approve