Change Order Process in Commercial Contracting

The change order process is one of the most consequential administrative mechanisms in commercial construction, governing how modifications to an original contract are formally authorized, priced, and incorporated into a project's scope. This page covers the definition of a change order, how the approval and documentation process functions, the most common triggers for change orders in commercial projects, and the decision boundaries that separate types of change orders from one another. Understanding this process is critical for owners, general contractors, and subcontractors navigating the financial and schedule implications of scope changes on commercial builds.

Definition and scope

A change order is a written amendment to a signed construction contract that modifies the original scope of work, contract price, project schedule, or a combination of all three. Under standard industry contract frameworks — including the American Institute of Architects (AIA) A201 General Conditions of the Contract for Construction (AIA A201-2017) — a change order becomes a binding part of the contract only when signed by the owner, the architect, and the contractor.

The scope of change orders in commercial contracting is broad. A change order may address:

• Additions to the original scope (new work not included in the contract)
• Deletions from the original scope (removal of previously specified work)
• Substitutions of materials or methods
• Changes to sequencing or schedule that affect cost
• Work required by unforeseen site conditions

Change orders are distinct from minor field directives and clarifications, which do not alter contract price or schedule. They are also distinct from claims, which arise when a party asserts entitlement to additional compensation that the other party disputes. The commercial contractor contract types used on a project — lump sum, cost-plus, or GMP — directly shape how change order pricing is calculated and contested.

How it works

The change order process follows a structured sequence from identification to execution:

1. Identification — A party (owner, contractor, architect, or subcontractor) identifies a condition requiring a scope change. This may originate from a Requests for Information (RFI) response, a design revision, a field discovery, or an owner directive.
2. Request for Proposal (RFP) or Change Order Request (COR) — The contractor prepares a detailed cost and schedule impact analysis in response to the identified change. This document typically includes labor hours, material quantities, subcontractor quotes, overhead markups, and schedule adjustments.
3. Review and negotiation — The owner and architect review the contractor's pricing. Markup rates for overhead and profit on change order work are often specified in the original contract; AIA A201 does not set a fixed markup but requires the parties to agree on rates in advance.
4. Execution — All required signatories execute the change order document. Only after full execution is the contractor authorized to proceed with the changed work and entitled to revised compensation.
5. Integration — The executed change order updates the contract sum and contract time, creating a revised baseline for project tracking.

On projects using commercial construction management services, a construction manager may administer the change order log, track pending CORs, and manage the potential impact of unresolved changes on the project's Guaranteed Maximum Price (GMP).

A critical distinction exists between directed changes and constructive changes. A directed change occurs when an owner formally instructs the contractor to perform work outside the original scope. A constructive change occurs when owner actions — such as interference, delayed approvals, or defective contract documents — effectively require the contractor to perform additional work without a formal directive. Constructive changes are among the most litigated issues in commercial construction and frequently escalate into formal claims if not resolved through the change order process.

Common scenarios

The following conditions generate the highest volume of change orders on commercial projects:

• Unforeseen subsurface conditions — Soil contamination, rock, or underground utilities not reflected in geotechnical reports trigger scope additions under differing site conditions clauses.
• Design development errors or omissions — Incomplete or conflicting construction documents require field resolution that often carries cost and schedule impacts.
• Owner-directed scope additions — Owners modify program requirements after construction documents are finalized, adding square footage, upgrading finishes, or incorporating new building systems.
• Code compliance updates — Local building departments or plan reviewers identify code requirements not addressed in the original permit set, requiring remediation during construction. This is especially common in commercial contractor regulatory compliance contexts where ADA, fire code, or energy code requirements are retroactively applied.
• Long-lead material substitutions — Supply chain disruptions force substitution of specified materials, potentially altering installation methods or structural requirements.
• Subcontractor coordination conflicts — Trade overlap discovered during commercial subcontractor coordination — for example, mechanical ductwork conflicting with structural beams — requires redesign and reassignment of scope.

Decision boundaries

The primary classification boundary in change order administration separates unilateral change orders from bilateral change orders:

Under AIA A201, a Construction Change Directive (CCD) allows an owner and architect to direct the contractor to proceed with changed work even before price agreement is reached. The contractor is obligated to perform the directed work and is compensated based on cost-plus methods defined in the contract. The final price is then negotiated or resolved through the dispute process outlined in commercial contractor dispute resolution.

A second decision boundary separates time-only change orders from cost-and-time change orders. Not every scope change results in additional cost; an owner substituting one equal-cost finish for another may generate only a schedule adjustment. Contracts should define whether schedule extensions require corresponding cost adjustments (such as extended general conditions costs) or whether the extension stands alone.

On public projects, additional constraints apply. Federal and state-funded work subject to prevailing wage and commercial contracting requirements must maintain prevailing wage compliance on all change order work, regardless of whether the original contract was competitively bid. Change order labor rates must reflect applicable wage determinations, not the contractor's standard internal rates.

The threshold for owner-authorized change orders without board or executive approval is typically specified in internal procurement policies. Institutional owners — hospitals, universities, government agencies — commonly set a per-change-order dollar ceiling (often between amounts that vary by jurisdiction and amounts that vary by jurisdiction) below which project managers have delegated approval authority, though the specific threshold varies by organization policy rather than any universal statutory standard.

References

• AIA A201-2017 General Conditions of the Contract for Construction — American Institute of Architects; the primary standard form defining change order procedures, construction change directives, and contractor entitlement in US commercial construction contracts.
• FAR Part 43 — Contract Modifications — Federal Acquisition Regulation; governs change order authority, unilateral modifications, and constructive changes on federal construction contracts.
• AIA Document G701 — Change Order Form — American Institute of Architects; the standard execution form used to document bilateral change orders on AIA-based commercial contracts.
• ConsensusDocs 200 Standard Agreement and General Conditions — ConsensusDocs coalition; an alternative to AIA documents providing change order procedures with collaborative risk-allocation language, widely used in commercial construction.