Change Orders - An Overview

Change orders are used in a construction project to specify any changes in the proposed work covered by the scope of the contract or any additional work or alterations to the planned work that vary from the scope of the contract. There are two types of change orders:

• Commitment change order – Commitment change orders represent changes in the agreed cost and/or the timeline for the work covered by the scope of the contract. Contractors use commitment change orders if their deliverables would cost more than the committed cost or could extend the proposed timeline. Useful for budget amendments and schedule revisions.
• Contract change order– Contract change orders represent any addition to, alteration, or omission of planned work covered by the scope of the contract. These include work that is not covered in the scope of the contract, like deviations in plans and dimensions, changes in designs, materials, additional work, and more. There are two types of contract change orders:
  • Prime contract change order – Changes that affect the contract between the general contractor and the owner/developer. Typically prime contract change orders are initiated by the general contractor and approved by the owner.
  • Client contract change order - Changes that affect the contract between the subcontractor and the general contractor. Typically client contract change orders are initiated by the subcontractor and approved by the general contractor and/or the owner. 

Contract change orders are created for a variety of reasons, including but not limited to requests from the client/owner, improvement in designs, choice of materials used, conflicts between plans and actual site conditions, availability constraints on materials, human resources, and equipment. 

Commitment change orders are also used to specify variations in the duration and cost estimation of pre-scheduled tasks that affect the overall budget and construction timeline of the project. 

• Once the project budget is finalized and locked, it is set as the baseline. 
• Any changes or additions to the locked budget are carried out through change orders
• The change orders go through an approval workflow
• Approved change orders are added to the project schedule for execution
• Once added to the schedule and published to the respective subcontractors, the change order value adds to the project budget automatically
• You can view the change orders and their values added to the project budget in the 'Finance' > 'Budget' > 'Change Order.'  See View Budget Updates for more details.

Change orders can also arise from responses to RFIs and punch list items that require additional work or rework of already completed or ongoing tasks. These include the work that may impact the schedule and budget of the project.   

Linarc's change order module lets general contractors and subcontractors generate change orders depending on the situations that arise in their course of work. 

Each change order typically includes the type, serial number, a description of the change, plan markups, photographs, PDF documents, etc., and an estimate. The estimate can include the schedule impact, breakup of material cost, labor required, labor cost, and more. 

Contract Change Orders:

For changes that affect the prime contract, the GC can request bids from the appropriate subcontractors. Once the subs accept the change work and submit their estimates: 

• The GC reviews the bids. 
• Depending on the scope of the change work, the general contractor solicits and evaluates one or more qualified bids from specialized trade contractors, determines the final cost, and obtains approval from the owner.
• The GC gets the signatures from the involved parties.
• The GC then adds the approved CO as a task/deliverable to the master schedule, so the job(s) can be assigned to the respective subcontractors. 
• The approved total cost of the CO is added to the project budget automatically.

For changes that affect a client contract, the respective subcontractor submits their estimate. Then: 

• The GC reviews the estimate and gets approval from the owner. 
• The GC gets the signature from the involved parties.
• The GC then adds the CO to the master schedule and assigns it to the subcontractor.  

Commitment Change Orders:

The general contractor or the subcontractors can create commitment change orders. 

• The creator indicates the schedule and/or cost changes in their estimate/bid and uploads it to the change order. 
• The GC reviews the estimate and obtains approval from the owner. 
• The GC gets the signature from the involved parties.
• The GC then adds the CO to the master schedule and assigns it to the creator. 

All participants in a change order can obtain a PDF version of it, which contains complete details of the change order.

• GC - Once the GC adds a change order to the master schedule, the estimates are added to the project budget. 
• SC - Once the SCs accept the change order work assigned by the GC, the estimates from their bids are added to the project's budgeted estimate and applied to cost tracking.    

Read the following sections to know more about:

• Change Order - Workflow
• Change Order Dashboard
• View Change Orders
• Create a Contract Change Order
• Create a Commitment Change Order
• Request work estimates from subcontractors and vendors
• Respond to estimate requests
• Process change order estimates
• Close a Change Order
• Approve a change order on behalf of the owner
• Get Owner Approval for a Change Order
• Request Signatures
• Add Your Signature
• View Signature status
• View and Download Completed COs
• Chat and collaborate on a change order