The Ultimate Guide to Construction Change Orders

Step 1: Create an Estimate

Start by creating a detailed estimate for your construction project. This serves as the baseline for any future change orders. Include itemized line items with labor, materials, and equipment costs. For example, a kitchen remodel estimate might break down costs as: demolition ($2,500), framing ($5,000), electrical ($3,500), plumbing ($4,000), and finishing ($8,000) for a total of $23,000.

Step 2: Send and Sign a Proposal

Once the estimate is ready, send it to the client for review and signature to formalize the agreement. Include project scope, timeline, payment terms, and warranty information. For instance, present the proposal with a 3-week timeline and specify payment terms as 50% upfront and 50% upon completion.

Step 3: Send an Invoice for the Proposal

After the proposal is signed, send an invoice to the client to initiate the payment process. Create an invoice reflecting the signed proposal amount. Example: Invoice for $11,500 (50% of $23,000) due upon project start, with the remaining balance due upon completion.

Step 4: Create a Change Order

If there are any changes to the original scope of work, create a change order to document and approve the modifications. Document what changed, why, and the cost impact. For example: Client requests upgraded granite countertops instead of laminate, adding $2,500 to the project. Create a change order document clearly showing the original cost, the new addition, and updated total of $25,500.

Step 5: Update the Original Estimate

After creating a change order, update the original estimate to reflect the approved changes. Revise line items and recalculate totals. In the kitchen remodel example, update the finishing cost from $8,000 to $10,500 to reflect the upgraded countertops, and update the project total to $25,500.

Step 6: Send and Sign the Change Order Proposal

Send the change order proposal to the client for review and signature to formalize the modifications. Clearly show the adjustment amount and new total. For example, send a change order proposal showing: Additional granite upgrade (+$2,500), new project total ($25,500), and updated payment schedule reflecting the increased cost.

Step 7: Send the Change Order Invoice

Once the change order is signed, send an invoice to the client for the additional work or modifications. Invoice the incremental amount or adjust remaining payments. Example: Send a change order invoice for $2,500 due immediately, or adjust the final payment from $11,500 to $14,000 to account for the upgraded materials.