Change Orders for Home Builder
The Change Orders process governs how any adjustment to scope, price, or schedule is identified, priced, documented, and implemented. It provides a clear path from initial request or field need through clarification, costing, written approval, and execution. Budgets, cost codes, schedules, and drawings are updated based on approved changes, preserving an accurate picture of the project. A disciplined change order process protects profitability, controls expectations, and keeps project records aligned with what is actually being built.
Explain change order rules and expectations to client and team
Step 1: Review contract and company change order policy
Read the contract sections that describe changes, including how they must be documented, who can approve them, and how schedule and price adjustments are treated. Review your company’s internal change order policy and templates so you understand required steps and approvals. Note any project-specific deviations you must follow.
Step 2: Create a simple explanation of the change process
Draft a short, plain-language summary of the change process that covers how requests are made, how pricing is prepared, when work can start, and how approvals are given. Include typical timing (e.g., “we usually need X days to price a change”) and what happens if the client delays decisions.
Step 3: Review rules with the internal team
Share the change order summary with the project manager, superintendent, client services, and any coordinators. Walk through who is allowed to promise changes, who handles pricing, and who updates budget and schedule. Clarify that no one should authorize extra work without a documented, approved change order.
Step 4: Explain change order expectations to the client
During the client kickoff or an early meeting, review the change process in simple terms. Explain that changes will be priced and documented in writing before work proceeds whenever possible. Give examples (e.g., moving walls, upgrading finishes) and explain how it can affect timing and cost.
Step 5: Document and store the communication for reference
Send the client a brief follow-up email summarizing the change order expectations and attach your simple explanation if you have one. Save this email and your internal summary in the project folder. Refer back to it if there are later disputes about how changes should be handled.
Receive and log all change requests in a central register
Step 1: Define accepted channels for change requests
Decide and communicate how change requests can be submitted (e.g., email to PM, client portal, written field request from superintendent). Make it clear that offhand comments or texts still need to be converted into a formal request before being acted on.
Step 2: Acknowledge incoming change requests
When a client, internal team member, or trade raises a potential change, acknowledge receipt promptly. Confirm that you will review and log it, and that no work should proceed on the change until it has been priced and approved. This sets the tone that the process matters.
Step 3: Create a new entry in the change order register
Open the central change order log and add a new line for the request. Include a provisional change order number or ID, date received, requester name, brief description, and initial status such as “Received – Clarification Needed.”
Step 4: Attach or link supporting information
Attach or link any emails, sketches, photos, or notes that describe the requested change to the log entry or related project folder. This keeps all relevant information tied to the specific change from the start.
Step 5: Assign an owner for next-step analysis
Assign a responsible person (usually the project manager or coordinator) to move the change forward through clarification and pricing. Record their name in the register so it is clear who is accountable for progress on this item.
Clarify requested scope and gather necessary information
Step 1: Review the original request and related documents
Read the change request and look at the affected plans, specs, and selections. Identify what is clearly stated and what is ambiguous or missing. Note any conflicts with existing design, code requirements, or site conditions.
Step 2: Discuss the request with the requester
Schedule a quick call, meeting, or email exchange with the person who requested the change (client, superintendent, or trade). Ask targeted questions to understand their intent, preferences, and priorities (e.g., cost vs. aesthetics vs. schedule). Confirm what is “must-have” versus “nice-to-have.”
Step 3: Inspect the site or drawings for impacts
If the change affects built or in-progress work, walk the site and see what has already been done. For design-only changes, review drawings to identify all impacted areas and systems (e.g., structure, MEP, finishes). Note any demolition or rework that will be required.
Step 4: Define the detailed scope and constraints
Write a concise scope description that lists what will be added, removed, or modified, and in which rooms or areas. Note constraints such as required code clearances, existing conditions, or immovable utilities. Include whether existing work must be protected, removed, or patched.
Step 5: Update the change order log with clarified scope
Enter the clarified scope summary and any key constraints into the change order register. Change the status to reflect that the item is ready for pricing and schedule impact analysis. Share the clarified scope with any internal team members who will help price the change.
Obtain pricing and timing impacts from trades and suppliers
Step 1: Break the change into pricing components
Review the clarified scope and break it into pieces that map to specific trades, suppliers, and internal work. Identify which parts are subcontracted, which require new material purchases, and which involve rework or additional internal labor.
Step 2: Issue clear pricing requests to trades and suppliers
Send written pricing requests to affected trades and suppliers, including the scope description, marked-up plans if needed, and any constraints or deadlines. Specify that pricing should include labor, materials, equipment, and any expected rework or demolition.
Step 3: Estimate internal labor, materials, and overhead
For any work done by your own crews or overhead impacts (e.g., extra supervision, extended general conditions), prepare internal estimates. Use your standard labor rates, productivity assumptions, and any known unit costs. Include disposal or permit impacts if applicable.
Step 4: Identify schedule implications with the superintendent
Discuss the change with the superintendent to understand how it will impact the schedule. Determine whether it can be integrated with minimal disruption or if it will extend specific phases or key milestones. Note if the change requires resequencing or additional mobilizations.
Step 5: Compile pricing and timing into a draft impact summary
Combine trade and supplier quotes, internal estimates, and schedule analysis into a single summary. Include cost breakdowns, proposed markup, and a description of the schedule impact (days added, milestones affected, or no impact). Save this summary in the project folder tied to the change.
Prepare formal change order proposal with clear scope and pricing
Step 1: Use the standard change order template
Open the company’s change order template or system screen and enter the project information and change order number. Confirm that header fields such as client name, lot/address, and date are correct. This keeps all change orders consistent across projects.
Step 2: Write a detailed scope of work section
Copy and refine the clarified scope into a clear, readable description of what is included in the change. Use bullet points or paragraphs to separate tasks and areas. State any explicit exclusions or assumptions that affect cost or expectations.
Step 3: Enter pricing breakdown and totals
Input labor, material, subcontractor, and other costs as separate lines or groups, then apply the appropriate markup per company policy. Show the net change to the contract value as an increase or decrease. Double-check math and that totals match your pricing summary.
Step 4: Describe schedule and other impacts
In the schedule impact section, summarize how the change affects key dates or durations. If there is no impact, state that clearly. Note any special conditions, such as required expedited decisions or temporary disruption to previously agreed sequencing.
Step 5: Attach supporting information and review internally
Attach or link supporting documents like trade quotes, sketches, or marked-up plans. Have the project manager or designated approver review the change order for completeness, clarity, and margin. Once approved internally, mark the document as ready to present to the client.
Present change order to client and obtain written approval or rejection
Step 1: Choose the right format for presentation
Decide whether to present the change order via email, video call, or in-person meeting based on its complexity and the client’s preference. For larger or more sensitive changes, plan for a live discussion instead of sending it cold.
Step 2: Walk through scope, cost, and schedule clearly
Review the scope section with the client in plain language, then walk through the pricing at a summary level unless they request more detail. Explain the schedule impact and any knock-on effects to milestones. Keep the conversation factual and link back to the original request where needed.
Step 3: Answer questions and capture any requested adjustments
Allow the client to ask questions and, if they request adjustments, clarify whether those require re-pricing or a revised change order. Avoid making off-the-cuff discounts or changes without confirming margin and implications. Summarize any agreed modifications that will require a revised document.
Step 4: Send the change order for written signature
Provide the client with the formal change order via e-signature tool or PDF for signature. Clearly state that work on the change will not proceed until the document is signed, except in rare pre-approved situations. Include instructions for how to sign and return.
Step 5: Log the client’s decision and update status
Once the signed change order is received, update the change order register with the approval date, amount, and status. If the change is rejected, record the rejection and reason if provided. Save the signed document in the project folder and link it to related emails or notes.
Update budget, job cost codes, and contract value for approved changes
Step 1: Adjust contract value and change order log
Update the project’s contract value in the accounting or ERP system by adding or subtracting the net amount of the approved change. Ensure the change order register shows the same value and approval date. Verify that change order numbering and totals match across systems.
Step 2: Create or update budget and cost code lines
Add new budget lines and cost codes for the change if needed, or adjust existing ones. Make sure each part of the change (labor, materials, subs) is mapped to the correct cost bucket. Avoid lumping everything into a miscellaneous line that will be hard to analyze later.
Step 3: Enter revised budget amounts
Update the project budget so that each affected cost code reflects the new expected total after the change. Check that the sum of all budget changes aligns with the change order total. Document any special assumptions used in budgeting the change.
Step 4: Notify accounting and project team of updates
Inform accounting, the project manager, and superintendent that the change has been loaded into financial and cost tracking systems. Share any new cost codes and how they relate to the field work so coding on future invoices will be accurate.
Step 5: Store backup and cross-check reports
Save a copy of the budget update report or screen in the project folder along with the signed change order. Run a quick cost report to confirm that the new budget and contract value are appearing correctly. Resolve any discrepancies immediately.
Update schedule and note any impacts from approved changes
Step 1: Review schedule impact from the approved change
Look at the schedule impact you defined in the change order proposal. Confirm with the superintendent whether this still holds or if field conditions require a different adjustment. Identify which activities and milestones are affected.
Step 2: Adjust schedule activities and dependencies
In the scheduling tool, add or modify activities to represent the change work as needed. Update durations, start and finish dates, and dependencies between activities. Make sure the change work is placed in the correct phase and does not inadvertently overlap with incompatible tasks.
Step 3: Update key milestones and completion dates
Check how the change influences key milestones such as inspection dates, walkthroughs, and completion or closing. If dates shift, update them in the schedule. Note whether the change consumes float or extends the critical path.
Step 4: Document the change order reference in the schedule
Add a note or code on affected tasks linking them to the specific change order number. This makes it easier later to understand why certain delays occurred and to explain them to stakeholders if needed.
Step 5: Communicate schedule updates to stakeholders
Share significant schedule changes with the project manager, superintendent, and client services. If major milestones or closing dates are affected, coordinate with whoever is responsible for client communication to ensure the homeowner is informed clearly and promptly.
Release approved changes to field teams and suppliers with clear instructions
Step 1: Summarize the change in field-ready language
Write a short summary of the change that focuses on what is different in the field: locations, dimensions, products, and sequence. Avoid financial jargon and instead use terms foremen will recognize from plans and specs.
Step 2: Update drawings, specs, and selections as needed
Coordinate with design or drafting to issue updated drawings, details, or selection sheets that reflect the change. Clearly label revisions with dates and revision markers. Ensure old versions are removed or clearly marked as superseded.
Step 3: Issue written instructions to superintendent and trades
Send the change summary and updated documents to the superintendent and affected trades, referencing the change order number. Specify when the change is to be implemented and whether any existing work must be removed or modified. Ask recipients to confirm they understand the change.
Step 4: Notify suppliers of material changes
If the change affects materials already ordered or planned, inform suppliers of revised quantities, product selections, or delivery dates. Cancel or adjust existing POs as required and issue new ones for additional materials. Confirm updates in writing.
Step 5: Place copies of updated information in field references
Ensure that printed sets of drawings, site binders, or digital field tools are updated with the new information. Remove or clearly mark old sheets as superseded to avoid confusion. Briefly review the change with field leaders at the next huddle if it is significant.
Track change order status and profitability through project completion
Step 1: Maintain an up-to-date change order register
Regularly review the change order log and update status for each item (e.g., pending pricing, sent to client, approved, rejected, in progress, complete, billed, paid). Ensure amounts and key dates are accurate and reflect the latest information.
Step 2: Monitor costs against each approved change
Run job cost reports or review cost transactions coded to each change order’s cost codes. Compare actual costs to the budgeted amount for that change. Note any change orders where costs are trending higher than expected or margin is eroding.
Step 3: Review change order portfolio periodically with the PM
On a regular cadence (e.g., monthly), review the full list of change orders with the project manager. Discuss open items that need action, changes not yet billed, and problem changes with low or negative margin. Decide on corrective steps where needed.
Step 4: Ensure billing and collections are current
Coordinate with accounting to verify that all approved change orders have been invoiced according to contract terms and that payments are being received. Follow up on unpaid or disputed changes and document any compromises made.
Step 5: Reconcile and close out change orders at project end
As the project nears completion, reconcile the final cost and revenue for each change order. Mark them as closed in the register once work is finished and payment is received or written off. Capture any notable lessons from problematic changes to feed into future estimating and process improvement.
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