Change Order Management

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A change order (CO) is a formal amendment to the GMP contract that modifies scope, cost, or schedule. After the GMP is signed, any work outside the contracted scope must go through the CO process before the contractor proceeds. Change orders are mini-estimates — the same skills used to price the original GMP apply to each CO.

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Types of Change Orders

Type	Initiator	Cost Responsibility
Owner-Directed Change	Owner adds or removes scope	Owner pays (adds to GMP)
Constructive Change	Owner action causes cost without formal direction	Owner pays — must be documented
Unforeseen Conditions	Site conditions different from contract documents	Owner pays (subject to differing site conditions clause)
Design Omissions	Design team missed scope clearly part of project intent	In DB, contractor usually absorbs unless excluded in BOE
Design Development	Design evolves from Class 3 to IFC and adds cost	Absorbed by contingency (if within scope) or CO (if new scope)
Regulatory / Permit Conditions	AHJ requires more than spec’d	Depends on contract language; typically shared risk
Time Extension Only	Schedule impact without cost impact	No GMP change; schedule adjusted

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Step-by-Step Change Order Pricing Process

Step 1: Identify and Document

1. Log in the CO register immediately with CO number, date, and description
2. Determine the trigger type
3. Do NOT proceed with the work until the CO is formally approved — unless safety requires immediate action (document everything)

Step 2: Scope the Change

Write a scope of work for the change:

• What work is being added or deleted?
• Which contract documents establish the change?
• What are the scope boundaries (what’s in, what’s out)?

Step 3: Price the Change

Method A: Lump Sum — detailed estimate: QTO + sub quotes + direct cost + GC impact + escalation + contingency + fee

Method B: Time and Materials (T&M) — track actual labor hours, materials, equipment daily; apply agreed markups. Use when scope is unknowable in advance or emergency work required before pricing. Always establish T&M rate schedule in the GMP contract upfront.

Method C: Unit Prices — use pre-agreed unit prices from the GMP contract schedule × measured quantity. Good for predictable work types (earthwork CY, concrete CY).

Step 4: Assess Schedule Impact

Every change has a potential schedule impact. Determine:

• Does this change extend the critical path?
• If so, by how many days?
• Cost of schedule extension = extended general conditions per day × days

Even if the CO scope cost is small, a 30-day extension at $4,500/day gen cons = $135,000 in additional cost.

Step 5: Submit and Track

Required CO submittal package:

• CO number, project name, date
• Description of change (reference drawing/RFI/direction that triggered it)
• Detailed cost backup (quantities, unit rates, sub quotes)
• Schedule impact analysis
• Total cost request (cost + time)
• Signature block for owner approval

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Change Order Register

CO #	Description	Date Submitted	Amount Requested	Status	Approved Amount	Approved Date
CO-001		mm/dd	$	Pending
CO-002		mm/dd	$	Approved	$	mm/dd

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Constructive Changes — Critical for DB Estimators

A constructive change is a situation where the owner’s actions effectively direct a change without a formal CO. Examples:

• Owner’s design team issues a drawing revision that adds scope
• Owner demands faster schedule — accelerating adds cost
• Owner withholds a decision, causing delay

How to protect yourself:

1. Issue a written Notice of Potential Change (NPC) as soon as the event occurs
2. Document all impacts in writing (daily reports, emails, meeting minutes)
3. Do NOT wait until project completion — most contracts have 30–90 day notice periods after which claims may be waived

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Change Order Markups

Component	Typical Range
Direct labor and material cost	At cost
Sub markup (GC overhead on sub work)	5–10% of sub’s cost
Home office overhead	5–10% of direct cost
Profit	5–10% of direct + overhead
Bond (if bonded CO)	Bond rate × CO amount

Negotiate the CO markup structure into the GMP contract before construction starts — trying to negotiate per-CO creates disputes.

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Scenario Example: 35,000 SF Food & Bev Expansion

CO #	Description	Trigger	Amount	Schedule Impact
CO-001	Owner adds third dock position	Owner-directed	+$87,500	+14 cal days
CO-002	Existing 6” gas line found 3’ off as-built	Unforeseen	+$31,000	+7 cal days
CO-003	MEP coordination required FP system redesign	Design coordination	Absorbed in contingency	0
CO-004	Owner deletes interior mezzanine (VE)	Owner-directed	-$62,000	-10 cal days
Net Change			+$56,500	+11 cal days
Original GMP			$21,400,000
Revised GMP			$21,456,500