Price only the changed scope
A change order should identify what changed from the governing contract. Separate added materials, added labor hours, equipment, subcontractors, permits, disposal, and other direct cost. Then apply the overhead and profit method allowed by the contract and applicable requirements.
Why this matters
Changed work done without a priced, approved change order is the fastest way to erase a job’s profit. The labor and materials are still spent, but the revenue to cover them — plus overhead and profit — was never captured.
Worked example, line by line
Added materials $780, equipment or subcontractor cost $250, and labor of 12 hours at a $38 burdened rate, with a 12% overhead allocation priced for a 25% margin.
| Line | Amount |
|---|---|
| Added materials | $780.00 |
| Equipment / subcontractor | $250.00 |
| Added labor (12 h × $38) | $456.00 |
| Added direct cost | $1,486.00 |
| Overhead allocation (12%) | $178.32 |
| Total cost | $1,664.32 |
| Change-order price (25% margin) | $2,219.09 |
| Estimated profit | $554.77 |
Price is not the whole change order
- Describe the added and removed scope.
- State assumptions and exclusions.
- Record the calendar-day or milestone impact.
- Identify taxes, permits, bonds, and allowances.
- Follow the notice and authorization procedure in the contract.
- Obtain written approval from an authorized person.
Some contracts prescribe markups, forms, notice periods, or supporting documentation. The calculator does not override those terms. Emergency work and government work may have additional procedures.
Common mistakes
- Starting the changed work before written approval.
- Pricing only materials and forgetting added labor hours.
- Leaving out the schedule impact of the change.
- Skipping overhead and profit on the added cost.
Fixed-price vs. time-and-materials changes
A fixed-price change order states one agreed amount for defined scope; a time-and-materials change bills actual labor and materials at agreed rates plus markup. Fixed price gives the customer certainty and puts the estimating risk on the contractor; time-and-materials suits changes whose full extent is not yet known. Choose the method the contract allows and the scope justifies.
Documentation that protects payment
The strongest change orders pair the priced scope with a dated record: what was requested, who authorized it, the schedule impact, and a signature before work begins. That record is what turns changed work into paid work if the amount is later questioned.
Frequently asked questions
What should a change order include?
The changed scope, added direct cost, overhead and profit, schedule impact, assumptions, and written approval from an authorized person.
How do I price added work?
Total the added direct cost, apply the allowed overhead allocation, then price for the target margin. Example: $1,486 cost at a 25% margin prices to $2,219.09.
Should I start changed work before approval?
No. Performing changed work without written, priced approval is a common way to spend labor and materials that never get paid.
Does the calculator replace the contract terms?
No. If the contract prescribes markups, forms, or notice periods, those govern. The calculator only estimates the priced amount.