Change Order Management: How to Minimize and Efficiently Handle Change Orders

Managing the Inevitable

Change orders are an unavoidable reality in construction. Whether due to unforeseen site conditions, design revisions, or client-driven modifications, change events have the power to disrupt schedules, inflate budgets, and strain relationships. However, a strategic, structured approach can transform change orders from project threats into opportunities for improved collaboration and project success.

According to the Construction Industry Institute, change orders account for approximately 10% of total project costs on average, and in some cases, up to 25% (CII, 2023). Effective change order management is essential to minimize financial impact and maintain project momentum.

Proactive Strategies to Minimize Change Orders

1. Define Scope Clearly: Ambiguity leads to conflict. Detailed, thoroughly reviewed plans and specifications significantly reduce scope gaps that drive change orders.

2. Prioritize Preconstruction Planning: Comprehensive design coordination and constructability reviews can prevent a large percentage of changes caused by design errors and omissions.

3. Set Realistic Budgets and Contingencies: Expect the unexpected. Building appropriate contingency allowances into budgets reduces friction when changes occur.

4. Formalize Change Management Procedures: Contracts should clearly define the change order process, timelines, documentation requirements, and approval procedures to protect all parties.

5. Maintain Open Communication: Early identification and discussion of potential changes allow teams to address issues before they escalate into formal disputes.

Efficient Handling of Change Orders

Once a change is identified, speed, clarity, and thorough documentation are critical to maintaining control.

• Immediate Evaluation: Project Managers (PMs) must promptly assess the change's scope, collaborate with field staff, and determine potential impacts on schedule and budget.

• Create and Track Change Events: Formalize the event through internal tracking systems to ensure traceability and visibility across the team.

• Distribute for Subcontractor Pricing: Affected subcontractors should receive requests for quotes within 24–48 hours of event identification, with clear deadlines for quote submissions (3–5 days).

• Compile and Validate Pricing: PMs must vet subcontractor quotes for accuracy, completeness, and fairness, leveraging estimators for complex scope reviews if needed.

• Develop Comprehensive Change Orders: All documentation, including subcontractor quotes, design clarifications, and impact narratives, should be attached to the change order package. Contracts often allow for an overhead and profit markup, typically around 10%.

• Submit for Client Approval Promptly: Change orders should be submitted to clients within two weeks of identification. Use digital signature tools to accelerate approvals.

• Track and Communicate Status: Change order statuses must be monitored consistently, with updates incorporated into weekly reports and Owner-Architect-Contractor (OAC) meeting minutes.

• Synchronize Financials and Schedules: Once approved, update the project’s Schedule of Values, cost reports, and project schedule to reflect the change.

Leveraging Technology for Streamlined Management

Modern construction management platforms enable real-time visibility, automated notifications, and integrated documentation. Digitizing the change order process reduces approval turnaround time by up to 33% (Buildertrend, 2024) and minimizes human error. Integrated cost controls also ensure that project budgets and forecasts remain accurate and up to date.

Avoiding Common Pitfalls

• Failure to Document: Verbal agreements are not enforceable. Always obtain written and signed approvals before executing changed work.

• Delayed Processing: Timely action is crucial. Late submission of change orders can result in disputes or nonpayment.

• Unclear Scope: Changes must be clearly defined in terms of both work and impacts to avoid misunderstandings.

• Ignoring Contract Requirements: Always adhere to contractual notice, markup, and approval stipulations to protect entitlements.

Own the Process

Change orders are inevitable, but disorganization, delays, and disputes are not. By implementing proactive planning, maintaining transparent communication, following a consistent and structured process, and embracing technology, construction managers can minimize disruptions and safeguard project success.

Handled properly, change orders can become not a liability, but a strategic asset. The key is to lead with clarity, speed, and discipline — because in construction management, how you handle change defines how you deliver success.

If your team is looking to strengthen your change order management practices, we can help. Our experts specialize in developing and implementing customized Standard Operating Procedures (SOPs) tailored to your project needs. We also specialize in vetting and implementing the right technology solutions to streamline your change management processes. Connect with us to learn how we can support your team's success.

Works Cited:

• Construction Industry Institute (CII). "Impact of Change Orders on Project Cost Performance." 2023.

• Buildertrend. "Construction Change Order Best Practices." January 2024.