Change Orders: Why They Happen and What They Cost
A change order is a written amendment to a construction contract that adjusts the scope, schedule, or price. Understanding why they happen — and which ones are legitimate — is one of the most useful things a homeowner can know before signing a contract.
What a change order actually is
A change order is a written document that modifies an existing construction contract. It specifies what changed, why it changed, how much it costs, and how it affects the schedule. Both parties — owner and contractor — must sign it before the additional work proceeds. That last point matters: a legitimate change order is signed in advance, not after the work is already done and the invoice arrives.
Change orders can increase or decrease the contract price. They can add scope (you decided to add a bathroom mid-project), remove scope (you decided against the tile backsplash), or adjust for conditions discovered during construction. All three types are legal and expected on any substantial project.
The three legitimate sources of change orders
Not all change orders represent a problem. Three categories of change orders are normal and fair:
- Owner-directed changes. You asked for something not in the original contract. A different tile, an added outlet, a change to the cabinet layout. These are 100 percent your call and your cost. A contractor who absorbs these without a change order is cutting corners somewhere else to cover the difference.
- Unforeseen conditions. Opening a wall reveals asbestos-wrapped pipes. The soil at footing depth is not what the original site assessment showed. The existing electrical panel is at capacity and the new subpanel was not in the original scope. These conditions were genuinely not visible until construction began. They are legitimate change orders.
- Design changes from the architect or engineer. The structural engineer required a beam the drawings did not specify. The architect changed the header size after permit review. These are also legitimate, though the responsibility for the cost is sometimes shared between the contractor, architect, and owner depending on the contract.
The two problematic sources of change orders
Two categories indicate a contractor problem rather than a project problem:
- Incomplete bidding. The contractor bid without doing a thorough site walk, did not review the existing MEP systems, or did not visit the permit office to check for prior violations. When those gaps surface as change orders, the homeowner is paying for the contractor's incomplete due diligence. These are the most common source of surprise change orders on residential projects.
- Scope creep used as profit recovery. Some contractors deliberately bid low to win the job, then recover margin through change orders on items that were reasonably foreseeable. Common tells: the change order arrives within the first two weeks for conditions that were visible during the bid walk; the change order is submitted verbally without a written breakdown; or the markup on the change order labor and materials is significantly higher than the original bid's overhead rate.
The test for legitimate change orders: Ask the contractor to show you where the original contract and scope documents address the issue being changed. If the item was explicitly excluded, it is a legitimate addition. If it was simply not mentioned because the contractor did not assess it, that is incomplete bidding — and whether you pay for it depends on your contract language.
What a properly written change order contains
A complete change order document should include: a description of the work being added or changed; the reason (owner request, unforeseen condition, design revision); the cost breakdown showing labor hours, material cost, and markup rate; the schedule impact in calendar days; and signature lines for both parties with date. Change orders submitted without a cost breakdown — just a single number — are not adequately documented and should not be signed until the breakdown is provided.
How to respond when a change order arrives
First, do not panic. Change orders are normal. Second, verify the basis: is this something you requested, something genuinely unforeseen, or something the contractor should have identified during bidding? Third, review the cost components. Labor rate times hours should be consistent with the original bid's rate. Material cost should be supportable with a supplier quote. Markup should match the contract's stated overhead rate. Fourth, check the schedule impact. If the contractor is claiming a schedule extension, it should be proportional to the added work and should not be used to absorb delays that predate the change order.
You can and should negotiate change orders. Contractors expect it. A change order submitted at $8,400 often settles at $6,200 if you ask for the backup documentation and question the hours. Asking for documentation is not adversarial — it is how professionally managed projects run.
Preventing avoidable change orders before the project starts
The most effective prevention is a thorough pre-bid site walk with all three contractors bidding the project. Ask each one, in writing: what conditions are you assuming about the existing electrical, plumbing, and structural? What site conditions did you observe that could affect cost? Ask them to list their five most common sources of change orders on similar projects.
A contractor who has thought carefully about change order risk will have specific answers. A contractor who says "we don't really have change orders" is either very unusual or not being candid. The honest answer is that every project of substance has at least one. The question is whether it is a change order for something the homeowner chose, or something the contractor did not look at carefully enough to include in the bid.