Every contractor knows the moment. You're walking the job with the owner, everything is going fine, and then they stop, point at a wall, and say, "While you're here, can we move that doorway two feet to the left?" You nod and say, "Sure, we'll get you a price." Then you walk back to the trailer knowing the next two hours of your life are about to disappear into figuring out what "two feet to the left" actually costs.
Change orders are where contractors make money or lose it. The base contract was bid carefully, line by line, with real quantities and real labor rates. Change orders usually get priced in a hurry, between other things, often from memory. That is exactly why they are the most dangerous numbers you will ever put on paper.
This guide covers how to price a change order the way an estimator does it: full scope capture, honest labor rates, the costs everyone forgets, and the documentation that gets the price approved instead of argued.
What a Change Order Actually Costs
Take the doorway. Two feet to the left. Here is what actually moves:
- Demolition of the existing framed opening and surrounding drywall
- Reframing the new opening, including king studs, jack studs, and header
- Drywall patch and finish on both sides of the wall
- Paint to match, which on an occupied space means blending, not just the patch
- Trim and casing rework
- The light switch moves, which means the electrician opens the wall, reroutes, and patches
- Flooring patch where the old opening was
- Cleanup and protection of finished areas
A "small framing change" just became a demolition, framing, drywall, paint, trim, electrical, and flooring change. Priced honestly, that doorway is $1,500 to $2,500 depending on the market. Priced from memory at the kitchen table, most contractors quote $400 and eat the rest. The gap between those two numbers is the entire game.
The Four Ways to Price a Change Order
There are four standard methods. Each one is right in a specific situation and wrong in the others.
| Method | How It Works | Best When | Watch Out For |
|---|---|---|---|
| Time and Materials (T&M) | Bill actual hours at agreed rates plus materials with receipts | Scope is undefined or exploratory, like opening a wall to see what is inside | Requires daily signed tickets; disputes over hours are common without them |
| Contract Unit Prices | Apply unit prices already in the contract to the new quantities | The work matches bid items exactly and conditions have not changed | Bid unit prices assumed base-contract efficiency; small quantities cost more per unit |
| Lump Sum from Fresh Takeoff | Measure the changed work and price it like a mini-bid | Scope is defined on drawings or a clear written description | Takes the most time upfront but produces the most defensible number |
| Cost-Plus with Agreed Markup | Track costs and add a pre-negotiated percentage | Large or complex changes where neither side wants to gamble on a fixed price | Owner may demand open-book records; define allowable costs in writing first |
For most defined changes, the lump sum takeoff is the strongest method. It forces you to actually measure the work instead of guessing, and a measured number is much harder for an owner to argue down than a round number pulled from experience.
Price Labor at What It Costs You Today, Not What You Bid
This is the single most common change order mistake. Your bid labor rate is eight months old. Wages went up, workers comp renewed at a higher rate, and the crew available for this change is not the A-crew that was priced into the base bid.
Build the burdened rate fresh every time:
- Base wage: what you actually pay the mechanic doing this work, not your blended company average
- Payroll taxes: FICA, unemployment, typically 10 to 12 percent
- Workers comp and general liability: varies wildly by trade and state, 8 to 25 percent is a normal range
- Benefits: health, retirement, PTO if you offer them
- Supervision allocation: the foreman's time to lay out, check, and coordinate the change
Do the math on a $34 per hour carpenter. Add 11 percent payroll tax, 15 percent insurance, $4 per hour in benefits, and a supervision allocation. The burdened rate lands around $52 to $58 per hour. If you price the change at the $44 rate from the original bid, you just gave away roughly $10 per hour on every hour of the change. On a 40-hour change, that is $400 of margin gone before you even start.
The Costs Contractors Forget to Include
Ask any estimator what kills change order profitability and you will hear the same list. The direct work gets priced. The rest gets forgotten:
- Extended supervision. The change adds three days to the schedule. Somebody is running those three days. Price the superintendent's time.
- Schedule impact. If the change pushes other trades, you may owe them standby time or face acceleration costs to recover the schedule.
- Small tools and consumables. Blades, bits, fasteners, caulk, touch-up paint. On small changes these run 3 to 5 percent of labor and nobody prices them.
- Markup on subcontractor change orders. Your sub's CO comes in at $2,000. Your contract allows 10 to 15 percent markup on sub work. Take it. Coordinating their change is real work.
- Bond and insurance on the added value. A $50,000 change order increases your bonded contract value. The premium increase is a legitimate cost of the change.
- Permits and inspections. If the change triggers a permit revision or an extra inspection, that fee and the waiting time belong in the price.
- Cleanup and protection. Changes in finished spaces mean floor protection, dust barriers, and daily cleanup. Price it by the day.
- As-built documentation. If the change alters the drawings of record, someone updates them. That is drafting time.
Materials: Price Them Like It Is Bid Day
Do not use the material prices from the original estimate. On a project that bid eight months ago, lumber, copper, and steel have all moved. Call the supplier and get today's number.
Three material traps specific to change orders:
- Small quantities cost more per unit. You cannot order three studs at the same price per stick as three hundred. Waste factors on change orders run higher, 10 to 15 percent instead of the 5 percent you used at bid time.
- Delivery minimums. A $180 material order with a $95 delivery charge is a 50 percent freight premium. Either batch the change materials with a regular delivery or price the trip.
- Long-lead items. If the change needs a fixture or device with a six-week lead time, the schedule impact may cost more than the material. Flag it in writing before you price.
Document Everything Before You Price
The best-priced change order in the world is worthless if you cannot get it signed. Owners approve what they can see and understand. Paperwork is what turns your number into their signature.
- Get the directive in writing. An email, a signed field order, even a text message. "Per your direction on site today" beats "you told me to" every time.
- Photograph before and after. Conditions before the change prove what was there. Finished work proves what was done.
- Keep daily logs. Who was on site, what hours they worked on the change, what material arrived. Memory fades; logs do not.
- Sign T&M tickets daily. If the change is on time and materials, the owner's rep signs the ticket at the end of each day. A ticket signed Friday for Monday's work will be questioned. A ticket signed Monday will not.
- Separate the change from base scope. Track change order hours and materials separately from contract work in your job cost system. Mixed costs are how changes become unbillable.
How Owners Push Back, and How to Hold Your Number
Expect three objections. Have an answer ready for each.
"That seems high." Walk them through the takeoff. Most owners have never seen what is actually inside a change. When they see the eight line items behind the doorway, the number stops seeming high and starts seeming thorough.
"Can you just roll it into the contract?" No. Every unbilled change is a donation. The polite version: "Our contract requires changes to be priced separately, which protects both of us with a clear record."
"Your bid price for drywall was lower per square foot." True, and the bid price assumed 10,000 square feet of uninterrupted production work. This is 60 square feet of patch work in a finished, occupied space. Different conditions, different price. Say exactly that.
The through line: measured quantities and documented costs beat opinions. An owner can argue with your judgment. They cannot argue with a takeoff sheet and signed tickets.
Frequently Asked Questions
What markup should I put on a change order?
Most contracts specify it, commonly 10 to 15 percent on subcontracted work and 15 to 20 percent on self-performed work for overhead and profit combined. If your contract is silent, use your company's standard markup, not a discounted one. Change orders carry more risk and disruption than base contract work, so discounting the markup is backwards.
Can I refuse to perform a change order?
Generally no, if the change is within the general scope of the contract. Standard contract clauses require the contractor to proceed with directed changes while the price is negotiated. Refusing can put you in breach. The protection is documentation: proceed, track every cost separately, and resolve the price through the contract's dispute process if needed.
Should I price a change order T&M or lump sum?
Use lump sum when the scope is defined enough to measure. It caps your risk and reads as professional. Use T&M when the scope genuinely cannot be defined upfront, like exploratory demolition or repair of concealed conditions. Never use T&M simply because you did not feel like doing the takeoff.
How do I price a change order when there are no drawings?
Work from a written scope description and site measurements. Take your own dimensions, photograph the conditions, and state your assumptions explicitly in the proposal: "Price based on field measurements taken October 6. If concealed conditions differ, price will be adjusted." Assumptions in writing turn unknowns into billable adjustments later.
What if the owner will not sign the change order before we do the work?
This is the most expensive sentence in construction: "Just do it and we'll sort out the price later." If the schedule forces you to proceed, send a written notice before starting: describe the work, state that you are proceeding under the changes clause, and note that costs are being tracked. Unsigned work performed with written notice is far more collectible than unsigned work performed on a handshake.
How do change orders affect the project schedule?
Every change consumes time, even small ones, through mobilization, coordination, and inspection. State the time impact in every change order proposal: "This change adds three working days to the schedule." If you price the cost but stay silent on time, you have agreed to absorb the delay.
Change orders do not have to be where margin goes to die. Measure the work, price today's costs instead of bid-day costs, include the indirect items everyone forgets, and document everything in writing. Do that consistently and changes become what they should be: profitable work performed for a client who asked for it.
For contractors who would rather have an estimator handle the numbers, The Virtual Estimation provides detailed quantity takeoffs and cost estimates for contractors across the USA and Canada, including change order pricing support. Send your drawings to info@thevirtualestimation.com for a free quote within one hour. Our GC estimating services cover full CSI-division takeoffs, bid preparation, and scope verification for general contractors and developers.
