Change Order Documentation Discipline for Fixed-Bid Trade Work

Purpose

Define the documentation discipline for change orders on fixed-bid trade work. The fixed-bid model assumes the scope is locked at signing; anything outside the original scope is a change order with its own price, its own time impact, and its own signed authorization. The most common failure mode in fixed-bid work is the verbal change order: the customer asks for "one more thing," the technician says yes to be helpful, the work gets done, the invoice goes out with the added scope, and the customer disputes the bill. The discipline that prevents this is a written process applied to every scope deviation, no exceptions.

Scope

Applies to:

• Fixed-bid residential remodel, install, and service contracts
• Fixed-bid commercial trade work
• Any contract where the price was set against a defined scope

Excludes:

• Time and materials (T&M) work (scope changes are billed as additional T&M, no change order needed)
• Maintenance plans and recurring contracts (scope is defined by the agreement, not by visit)

Responsibilities

• Lead technician or project manager identifies scope deviations in the field
• Customer authorizes the change order in writing before the change work proceeds
• Office processes the change order document and tracks it through close
• Owner / GM approves change orders above a threshold

What triggers a change order

A change order is required for any deviation from the original scope, in any direction:

• Additional work the customer requests
• Additional work discovered (unforeseen conditions: hidden rot, code violation, asbestos)
• Materials substituted at the customer's request
• Materials substituted at the contractor's option (when the original is no longer available)
• Scope reduction (customer cuts an item from the bid)
• Schedule changes that materially affect cost (rushed delivery, off-hours work, weather delays exceeding the contract weather clause)

The trigger is "deviation from what was bid," not "the customer asked nicely." The friend-of-the-family discount for the bathroom faucet swap is still a change order with a zero-dollar price; the document records that the scope changed.

The change order document

A complete change order contains: project identifier (job number, customer, address, original contract date); change order number (sequential, scoped to the project, e.g. "Change Order #03"); description of the change (specific enough that a third party can understand months later); reason for the change (customer request, discovered condition, code requirement); cost impact (labor, materials, subcontractor, markup, total; reduction is a credit); schedule impact (days added or removed); warranty effect; customer signature and date; contractor signature.

The change order is a separate document, not an annotation on the original contract. Numbering and tracking keep them organized.

The procedure

Step 1. Identify, price, present, process

Whoever is on site (lead technician, PM) identifies the deviation. Default response to a customer request beyond original scope: "That's not in the original scope, but I can write up a change order so we can do it. Let me get the cost together and bring it back to you in [time]." Default response to a discovered condition: "We found [condition]. The original bid did not include [related scope]. We'll need to address this; let me write up a change order."

Never start the change work before written authorization. Three exceptions: life safety (active leak, gas, electrical hazard); code violation discovered during inspection where the inspector demands resolution before passing; verbal-plus-time-pressure where same-day written confirmation by text or email is secured. In exception cases, document urgency in the change order narrative and back-fill the signed authorization within 24 hours.

Price using the same structure as the original bid (hourly plus materials markup, or fixed labor estimate plus materials). Common failure is undercharging; apply normal markup, normal hourly rate, normal subcontractor markup, plus project-management overhead for managing the change.

Present in writing (email or paper): what the change is, what the cost is and how calculated, schedule impact, warranty implications, signed authorization needed before work. Most customers sign immediately; some negotiate price or scope, revised before signing.

Once signed: log in the project file with sequential number; update schedule with new completion date; update budget with new total contract value; issue any required progress invoice; notify office, crew, subcontractors. Field crew performs the work documented the same way as original scope (time entries, materials, photos). Invoice on the next progress invoice or final invoice with the change order number on the line item. At project close, the project file contains original contract plus every signed change order; total contract value equals original plus all change orders; reconcile against as-bid total on closeout.

Unauthorized work and customer patterns

The most common failure is work done outside the original scope with no change order. Discovery at the final invoice; the technician's "the customer asked for it" defense fails without written record. Prevention is the discipline above. Post-fact options: absorb (write off labor and materials); negotiate (split cost with documented agreement); pursue collection (only if strong evidence the customer authorized verbally and is reneging). Most of the time absorb is the answer because pursuing collection damages the relationship and rarely wins.

Customer-side request patterns: "while you're here" (the drive-by request, change order written up, priced, presented, signed before work); "can we just substitute" (material substitution that is rarely cost-neutral, process the change order); "we forgot to mention" (customer scope addition); "it's just a little extra" (customer expects the contractor to absorb; response is "It's a small addition; here is the change order at our minimum charge"). The minimum-charge policy prevents accumulated absorbed cost.

Records and retention

Retain signed change orders in the project file for the duration of the project warranty period plus state statute of limitations (typically the longer of the contract statute, often 4 to 6 years, or the warranty period). For commercial work with lien rights, retain at least through the lien enforcement window plus judgment collection.

References

• AIA Document G701 - Change Order (standard form widely used in commercial construction)
• ConsensusDocs 202 - Change Order (alternative industry standard form)
• Uniform Commercial Code Article 2-209 - Modification of Sales Contracts (sales of goods component)
• State-specific contractor licensing rules on contract amendments
• AIA Document A201 - General Conditions of the Contract for Construction (defines change order procedures for commercial work)