How to Charge for Change Orders (25-40% Markup + Signed Approval)
By Fabio Freire, Founder & General Contractor at EZ-Estimates. Published 2026-07-17.
How to Charge for Change Orders (25-40% Markup + Signed Approval)
Change orders are where GCs lose the most money without noticing. Client asks for "one small thing" during framing. You say "yeah no problem, I will just do it." Two weeks later you realize that one small thing added 8 hours of labor, $600 of materials, delayed the next trade by 2 days, and pushed the timeline back a week. You do not bill for it because you already said "no problem." That is a $2,500 leak on a single change. Multiply by 5 changes per job and 20 jobs a year and you are looking at $250,000 of unbilled scope you gave away.
Real change order pricing and process is not optional. Here is how contractors charge for change orders in 2026 without losing money or damaging the client relationship.
What Actually Counts as a Change Order
A change order is any scope, timeline, or price change from the signed contract. Trigger events:
Scope adds: Client wants more work than what was in the contract. New line item, add-on room, additional fixtures, upgraded materials.
Scope changes: Same work but different material or method. Change from LVP to hardwood. Change from standard shower to zero-entry. Change from single sink to double vanity.
Scope subtractions: Removing something from the contract. Should still be a formal change order (with credit back).
Hidden conditions: Something discovered during work that was not visible before. Rotted joist, active leak, out-of-square walls, hidden asbestos, insufficient framing for load.
Design changes by architect or client: Change to the plans mid-build.
Allowance overruns: Client selected finishes over the contracted allowance.
Timeline changes caused by client: Delayed material selection, unavailable for decision, delayed access to site.
Regulatory changes: New code interpretation, inspector requirement, permit revision.
Why Change Orders Get More Markup Than Base Work
Change orders disrupt an active job. The overhead cost of every change order is higher than a fresh scope line because:
- Coordination cost is higher (re-scheduling subs, re-sequencing work)
- Material procurement is 1-item at a time, not bulk
- Waste is higher (partial packages)
- Labor mobilization is disrupted
- Risk of downstream impact on other trades
- Administrative cost (writing, presenting, getting signed, invoicing)
Because of these, change order markup should be 25% to 40% higher than base contract markup. Not the same. Higher.
If your base contract uses 32% markup, change orders should carry 40% to 55% markup.
The Change Order Formula
Change Order Price = (Materials + Labor + Sub Cost) x (1 + Base Markup + Change Order Premium)
Example: A change order that adds $800 in material, 6 hours of labor at $75/hr burdened ($450), and $200 in sub cost.
- Direct cost: $800 + $450 + $200 = $1,450
- Base markup: 32%
- Change order premium: 12%
- Total markup: 44%
- Change order price: $1,450 x 1.44 = $2,088
If you had priced this as a fresh contract line at 32% markup, it would be $1,914. The extra $174 is the disruption premium.
For very small change orders (under $500), add a minimum change order fee of $150 to $350 to cover administrative time.
The Change Order Workflow (Signed Approval Before Starting)
Every change order must follow the same process. No exceptions:
Step 1: Client requests change (or contractor identifies hidden condition).
Verbal is fine to start the conversation. But nothing gets built off a verbal.
Step 2: Contractor prices the change.
Write a proper change order document with:
- Change order number (CO-01, CO-02, etc.)
- Description of the change
- Materials list
- Labor hours
- Total price
- Impact on timeline (X extra days)
- Impact on other trades (if any)
- Payment terms (usually due 100% up front, or added to next progress draw)
- Signature line for client
Step 3: Client signs.
Do not start work until you have a signature. Email signature, DocuSign, physical signature, portal signature. All acceptable. Verbal is not.
The contract clause you should have in every base contract: "No change to the scope of work shall be performed without a written change order signed by both parties. Work performed without a signed change order is at contractor's discretion and does not obligate the client to payment."
That clause protects you legally. It also gives you the language for the conversation: "I know it seems like a small thing. Our process is written change orders on everything. Let me write this up and send it to you. Once you sign, we start."
Step 4: Work happens.
Step 5: Change order billed on next draw or invoice.
Track change orders separately in your accounting so you can see the impact on total job margin at close-out.
Real Change Order Examples with Pricing
CO-01: Upgrade primary bath tile from $6/sqft to $18/sqft, 85 sqft
- Material cost delta: 85 sqft x ($18 - $6) = $1,020
- Additional waste factor: 12% x $1,020 = $122
- Total material: $1,142
- Labor: no change (same install time)
- Direct cost: $1,142
- Markup (base 32% + CO premium 12% = 44%): $502
- Change order price: $1,644
CO-02: Add fourth bedroom electrical outlets and switch (5 receptacles, 1 switch, 1 fixture)
- Materials: $180
- Labor: 3.5 hrs at $75/hr burdened = $262
- Sub cost (licensed electrician for install): $650
- Direct cost: $1,092
- Markup (44%): $480
- Change order price: $1,572
CO-03: Discovered rotted floor joist under bathroom (hidden condition)
- Materials: sistered joists, LVL, hardware = $340
- Labor: 8 hrs at $75/hr = $600
- Sub cost: none (in-house)
- Timeline impact: 1 day delay (mention but do not bill)
- Direct cost: $940
- Markup (44%): $414
- Change order price: $1,354
CO-04: Client wants to add a laundry sink in basement
- Materials: sink, faucet, drain, supply lines = $420
- Sub plumber cost: $1,850
- Direct cost: $2,270
- Markup (44%): $999
- Change order price: $3,269
CO-05: Delete second-floor deck from contract (scope reduction)
- Original contract line for deck: $9,800
- Actual work not performed: no material purchased, no sub scheduled
- Credit to client: $9,800 x 0.85 = $8,330 (contractor keeps 15% for overhead already absorbed)
- Change order value: -$8,330 (credit)
How to Present Change Orders to Clients Without Damage
The way you deliver a change order matters as much as the price. Language and framing:
Good: "You asked about the tile upgrade. I put the details together. Materials go up $1,142, labor stays the same. Total change is $1,644. If you want to move forward, sign here and I will order the tile Monday."
Bad: "So because you changed your mind, we have to charge you more..."
Never make the client feel punished for having new ideas. Frame the change as a business transaction. Both parties agree to the new terms.
When a hidden condition triggers a change order:
"Hey, we opened up the wall under the vanity and there is joist rot from a slow leak. Not your fault. We need to sister two joists before we can proceed. Total is $1,354. Adds a day to the schedule. Do you want me to email you the change order to sign?"
Straight forward. No blame. No drama.
Common Change Order Mistakes
Doing the work first and billing later. You lose leverage. Once the work is done and the client is happy, "I will pay you next week" becomes "I do not remember approving that." Every dollar of unsigned work is at risk.
Skipping the change order for "small stuff." Small stuff adds up. Ten $200 verbal changes = $2,000 you did not bill. Set a minimum threshold ($100 or $150) below which you absorb it, and paper everything above.
Using verbal agreements. Clients forget. Spouses were not present. Words get remembered differently. Everything gets papered.
Underpricing labor time. A "one hour" job usually takes 3 hours by the time you drive over, set up, tear apart, reassemble, and clean up. Bid 3 hours.
Forgetting timeline impact. Even if the change does not delay the total project, it may delay a specific trade. Mention it so the client cannot claim you missed the deadline later.
Not tracking change orders separately. At project close-out you should know: base contract $180k, change orders $22k, total $202k. If you cannot see that split, you cannot analyze whether change orders were profitable.
Change Order Template Language
Use this in every change order document:
"Change Order No. [X], dated [date], to the original contract dated [contract date] for [project address]. Description of change: [describe scope]. Additional cost: $[amount]. Additional time: [days]. This change order, when signed by both parties, becomes part of the original contract. All other terms of the original contract remain in full force. Payment for this change is due [terms]."
Signature lines for contractor and client. Date lines. Copies to both parties.
Related Reading
Automate Change Orders With EZ-Estimates
Writing a change order in Word, calculating markup by hand, emailing it, chasing signatures, and remembering to bill it eats 30 to 60 minutes per change. On a job with 8 changes that is 4 to 8 hours of admin time you do not bill for.
EZ-Estimates lets you describe the change with your voice, generates a formal change order document with proper markup applied, sends it to the client for signature, and adds it to the job automatically. You bill it on the next draw without touching a spreadsheet.
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