A working change order process has five steps: capture the request, price it, get written approval before the work starts, track its costs separately from the original scope, and bill it. Most change order losses happen because one of those steps lives in a conversation instead of a document.
“We’ll take care of it” on a job site is generous and often expensive. Extra work agreed verbally tends to show up later as a dispute, an unbilled cost, or a margin you cannot explain.
Why change orders leak money
- The extra work is agreed on site and nobody writes it down.
- It is priced after the fact, from memory.
- The customer never approved the price in writing.
- Its costs are mixed into the original scope, so the job report cannot show what happened.
- It never makes it onto an invoice.
The five steps
1. Capture
Anyone who hears a change request (crew lead, project manager, salesperson) records it the same day: what was asked, by whom, and any photos or measurements. A short form on a phone works better than a text thread.
2. Price
The person who owns pricing scopes the work, including labor, materials, subs and schedule impact. Use the same cost codes and the same pricing math as your estimates, so the change carries its share of gross margin. See markup vs margin.
3. Approve in writing
The customer approves the description, price and schedule effect before the work starts. E-signature makes this fast. The rule is simple: no written approval, no extra work. Contract terms and legal wording belong to your attorney; the process is what keeps the rule from slipping.
4. Track separately
Give the approved change order its own budget and record its costs against it, not against the original phase. Then both the base job and the change can be compared with their estimates.
5. Bill
Approved change orders go on the next invoice under the payment terms you set. Many contractors bill change orders when they are approved. Whatever your terms, make billing a step someone owns, not something remembered at closeout.
A simple SOP you can adapt
Purpose: Every change to scope is priced, approved in writing, tracked and billed.
Trigger: A customer or team member asks for work outside the signed scope.
Owner: Project manager (or the owner, in a small company).
Steps:
- Record the request the same day with photos and notes.
- Price it within an agreed number of business days, using the job’s cost codes.
- Send it for written approval with the price and schedule effect.
- Do not start the work until it is approved.
- Create a change order budget on the job and code its costs to it.
- Add the approved change to the next invoice.
- Review open change orders in the weekly job meeting.
Quality check: Every open change order shows a status: requested, priced, sent, approved, in progress, billed.
Escalation: If the customer wants the work started before approval, the owner decides, in writing.
Next step
If extra work keeps blending into original scope, it usually points to a bigger handoff issue between sales, production and the office. The estimating page covers that handoff, or tell me what is going on and we can talk it through.