Change order

What is a change order?

A change order is a signed change to a contract's scope, price or schedule after the contract is in place, often while work is under way. The AIA's G701 form records the agreed change in the work, the new contract sum and any change in contract time, and is signed by owner, contractor and architect. Federal contracts use the term for a written order the contracting officer can issue under the contract's changes clause.

Why it matters to a revenue leader

On fixed-price work, change orders are how a contractor gets paid for scope nobody priced. They are also a sales event, because the customer must agree to pay more, often mid-project and under schedule pressure. A revenue leader should care because unsigned change orders sit in a gray zone, inflating expected revenue in backlog while the cash may never arrive. The cleaner the original scope and the faster changes get signed, the less margin leaks between estimate and invoice.

During a fire alarm upgrade, the owner asks for 40 extra devices in a new wing. The project manager prices the work, but the change order sits unsigned for six weeks while crews install the devices. At closeout the owner disputes the price, and the company settles for 70% of the quoted value.