Change Order Pricing for General Contracting
Change Order Pricing defines how potential changes are turned into clear, supportable cost and time proposals. It covers defining the change scope, gathering subcontractor and supplier pricing, building internal estimates, adding general conditions and markups, and compiling backup documentation. The process follows contract rules for pricing so proposals are consistent, defendable, and easy for the client to review. When followed, change pricing is timely, organized, and aligned with both job realities and contract requirements.
Define change order pricing scope and assumptions
Step 1: Review change event description and source documents
Open the change event entry, related RFIs, bulletins, sketches, and any field photos or notes. Read through them to understand what is driving the change and where it applies on the project.
Step 2: Identify affected areas, systems, and trades
List the physical areas (for example, Level 2 east corridor), building systems (mechanical, electrical, architectural), and specific trades involved in the change. Note any overlap between trades that may create scope boundaries.
Step 3: Draft a plain-language scope description
Write a short paragraph describing the change in everyday terms, focusing on what work is added, removed, or changed compared to the current contract. Avoid relying only on drawing references; explain the change in words.
Step 4: State key assumptions and constraints
List any assumptions you are making for pricing (for example, work done during normal hours, access available, no need to move existing tenants) and constraints (for example, must be done in two nights).
Step 5: Note related work that is not part of this change
If there is work nearby or visually similar that is not part of this change, state that clearly to avoid confusion (for example, “finishes in adjacent rooms remain per original scope”).
Step 6: Save scope and assumptions in the change folder
Store the written scope and assumptions in the change order folder and link it to the change event ID. This document will be shared with subcontractors and used internally for pricing.
Request and collect subcontractor pricing for impacted trades
Step 1: Identify affected subcontractors from change event
From your scope definition and trade list, identify which subcontractors need to provide pricing. Include any testing, inspection, or low-value trades that may still be impacted.
Step 2: Prepare a written pricing request
Create a short written request that includes the change description, assumptions, any sketches or markups, and specific instructions on what you need (breakdowns, unit prices, alternates). Reference the change event ID and required response date.
Step 3: Attach all relevant documents
Include revised drawings, bulletins, RFIs, photos, and any other information the subcontractor needs to understand the change. Make sure documents are clearly labeled and current.
Step 4: Send requests with a clear deadline
Email or send through your project platform to each subcontractor, copying the project manager if required. State a firm due date and time for pricing and ask them to confirm they have received the request.
Step 5: Track confirmations and follow up
Note in a simple log who has acknowledged the request and who has not. Follow up with any subs who have not responded within a day or two, especially if the change is time-sensitive.
Step 6: Collect and file received pricing
As pricing comes in, save each quote in the change event folder with a clear filename (for example, “CE-012_Mechanical_Subquote_ABC_Mech.pdf”). Note receipt dates in your tracking log.
Develop internal pricing for GC-managed or self-performed work
Step 1: List GC responsibilities for this change
From the scope description, identify items that the general contractor will provide directly: supervision, coordination time, safety oversight, temporary protection, layout, and any self-performed tasks like small demolition.
Step 2: Estimate labor hours and rates
For each GC task, estimate the number of hours by role (for example, superintendent, laborer, carpenter). Apply standard or project-specific labor rates, including burdens, to derive labor cost per task.
Step 3: Estimate equipment and small tools
Identify any special equipment or tools needed (for example, lifts, saws, temporary lighting). Estimate rental days or usage and apply standard internal rates or vendor quotes.
Step 4: Estimate materials and consumables
For GC-provided materials (for example, protection materials, fasteners, trash bags), estimate quantities and apply unit costs from recent purchases or your estimating database.
Step 5: Summarize internal cost breakdown
Build a simple internal cost sheet that shows labor, equipment, materials, and any other GC costs as separate line items, with quantities, units, rates, and totals.
Step 6: Save internal pricing worksheet
Store the internal pricing worksheet in the change event folder. This becomes part of your backup if the client or leadership asks how GC costs were determined.
Quantify labor, material, equipment, and production impacts
Step 1: Review change scope for each cost category
Go through the written scope and identify where there are impacts to labor, material, equipment, and other indirect costs. Pay attention to tasks that will be redone, moved, or re-sequenced.
Step 2: Estimate added and reduced quantities
Where quantities change (for example, more fixtures, less drywall), calculate the net quantity difference for each item. Use takeoffs, markups on drawings, or simple counts as appropriate.
Step 3: Identify rework and inefficiency impacts
Determine if existing work must be removed or modified, or if crews will work in less efficient conditions (for example, after-hours, tight spaces). Estimate additional hours or time loss reasonably, based on field input.
Step 4: Consider access, mobilization, and cleanup costs
Identify extra mobilizations, access equipment moves, and cleanup efforts directly caused by the change. Estimate the time and resources required and assign costs to them.
Step 5: Document assumptions for non-linear or disrupted work
When estimating inefficiencies or disrupted workflows, write down your reasoning (for example, “crew must demobilize and remobilize two times, adding X hours”). This will be important if questioned.
Step 6: Update internal pricing sheets with quantified impacts
Add these quantified items into your internal pricing and, where appropriate, communicate assumptions to subcontractors so they can reflect similar impacts in their pricing.
Evaluate schedule/time impact and general conditions costs
Step 1: Discuss schedule impact with superintendent and scheduler
Review the change with the superintendent and scheduler (if applicable) to understand if it will extend the project duration, change phasing, or require overtime or added shifts.
Step 2: Review schedule activities impacted by the change
Identify the schedule activities that will be affected and whether their durations or logic need to change. Note if the change touches the critical path or near-critical tasks.
Step 3: Estimate added or reduced time on site
Based on the schedule discussion, estimate how many extra days, weeks, or shifts are required (or saved) due to the change. Be realistic and document the assumption.
Step 4: Determine additional general conditions costs
For any added time, calculate additional general conditions such as site supervision, trailers, utilities, security, and rentals. Use daily or monthly rates based on your project budget and job cost data.
Step 5: Document schedule and GC cost assumptions
Write a short note explaining how you arrived at the time and general conditions cost impact, including which schedule activities and rates were used.
Step 6: Include time-related costs in pricing worksheet
Add these general conditions costs into your internal pricing and flag them as schedule-driven so it is clear why they are included in the change order.
Compile and level subcontractor and internal pricing
Step 1: Create a change pricing summary worksheet
Set up a worksheet with lines for each trade, GC internal costs, general conditions impact, and any allowances or contingencies. Include columns for description, amount, and notes.
Step 2: Enter subcontractor quote amounts
For each trade, enter the quoted amount from the selected subcontractor. If multiple subs priced the same scope, note which quote you chose and why (for example, best alignment with scope).
Step 3: Verify scope coverage and exclusions
Compare each quote to your written scope and assumptions. Check inclusions and exclusions to ensure all required work is covered and there are no major overlaps between trades.
Step 4: Incorporate GC internal and general conditions costs
Add the internal GC costs and general conditions impacts from your worksheets into the summary, clearly labeled. Ensure they are not double-counted with subcontractor scopes.
Step 5: Check math and totals
Verify that subtotals and totals calculate correctly and that the combined amount matches what you expect when adding each piece manually. Correct any formula or entry errors.
Step 6: Note open questions or uncertainties
In the notes column, record any items that feel uncertain or may need clarification with subs or the client (for example, “duct reroute route assumed; final path may vary”). This will guide the next review step.
Apply markups, overhead, and profit per contract
Step 1: Review contract change order pricing provisions
Read the contract section that defines allowable markups on changes, including percentages for subcontractor work, self-performed work, and general conditions. Note any caps or exclusions.
Step 2: Determine which cost elements are markup-eligible
Decide which cost categories are subject to markups under the contract (for example, direct labor and material may be marked up, but tax or bond costs might not).
Step 3: Apply subcontractor markups correctly
If subcontractor quotes already include their overhead and profit per subcontract terms, avoid double-marking them up. If you are allowed a prime contractor markup on subcontractor amounts, calculate it according to contract percentages.
Step 4: Apply GC overhead and profit to internal costs
Calculate overhead and profit on GC direct costs and general conditions as allowed. Use separate line items for markups so they are visible in the breakdown.
Step 5: Check markup calculations for accuracy
Review all markup formulas to ensure percentages were applied correctly and that you did not accidentally mark up excluded items.
Step 6: Summarize total change order value before taxes
Calculate the final proposed change order amount before any applicable sales tax. Note this total clearly on your pricing summary for use in the formal proposal.
Prepare change order cost breakdown and backup package
Step 1: Choose the required cost breakdown format
Verify whether the client requires a specific change order form or breakdown (for example, CSI division, labor/material/equipment breakdown). Use the required format or your company standard if none is specified.
Step 2: Populate breakdown with cost summary
Copy the finalized cost summary (trade amounts, GC internal, general conditions, markups) into the breakdown form. Make sure descriptions are clear and match the scope wording the client will see.
Step 3: Attach subcontractor quotes and internal worksheets
Compile all subcontractor proposals, internal cost sheets, and any supplier quotes as backup. Label each with the change event ID and trade so they are easy to match to the breakdown lines.
Step 4: Include schedule impact explanation if applicable
If there is a time impact, add a brief written explanation and a simple schedule sketch or description showing how the change affects milestones or durations.
Step 5: Organize documents in logical order
Assemble the package with the cost breakdown first, followed by schedule notes, then subcontractor and supplier backup, and finally any internal calculation sheets you deem appropriate to share.
Step 6: Save the complete pricing package
Save the full package as a combined PDF or a clearly labeled folder in your project system. This package will be used for internal review and then submitted to the client as needed.
Review draft pricing with project manager and superintendent
Step 1: Schedule a short internal review
Set up a brief meeting or call with the project manager and superintendent to review the draft pricing package. Share the cost breakdown and scope summary ahead of time so they can skim it.
Step 2: Walk through scope and major cost items
Review the change scope and highlight the main cost components: largest trades, GC internal costs, general conditions, and any unusual items. Ask if this aligns with their understanding of the change.
Step 3: Discuss schedule assumptions and impacts
Explain any schedule impact you have included and how you quantified additional time and general conditions. Ask the superintendent and scheduler whether these assumptions are realistic.
Step 4: Address questions and note requested adjustments
Capture any questions or requested changes, such as adding missed items, adjusting quantities, or clarifying assumptions. Do not argue; treat this as a working session to improve the pricing.
Step 5: Revise pricing and documentation
Update the pricing summary, breakdown, and backup to reflect agreed adjustments from the review. Re-check totals and markups after making changes.
Step 6: Confirm final internal sign-off for pricing
Ask the project manager to confirm that the revised pricing is ready to move to formal approval and client submission. Note the date and any conditions on this internal approval.
Finalize pricing package and update change log status
Step 1: Lock the final pricing documents
Once internal review is complete, save a “Final” version of the pricing summary and cost breakdown with the date in the filename. Avoid making further changes without clearly marking them as revisions.
Step 2: Update the change event register with pricing details
In the change register, enter the final priced amount, any noted schedule impact, and the date pricing was completed. Change the status to “Priced – Pending Approval” or your equivalent.
Step 3: Note key assumptions in the register
Add a short note capturing the most important assumptions used in the pricing (for example, normal hours, access after turnover of adjacent space). This provides quick context later without reopening backup.
Step 4: Store all backup in the change event folder
Ensure that subcontractor quotes, internal worksheets, schedule notes, and the final pricing documents are all saved in the change folder for this event, organized and easy to find.
Step 5: Inform the person responsible for change approval and issuance
Notify the project manager or designated change order lead that pricing is complete and ready for the next step in the approval process. Include a link or path to the final package.
Step 6: Prepare for potential clarifications or negotiations
Anticipate questions the client or leadership may ask about the pricing. Keep your internal worksheets handy so you can quickly explain how numbers were developed if needed.
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