Change management under standard contracts

A change management system turns the owner's right to change the work into a predictable process with clear steps, owners and records. CON-220 explained the legal basis of changes: the owner's right to order changes within the general scope, the requirement for written authority, and the rules for pricing and differing site conditions. CON-310 showed how changes enter the cost report and forecast. This lesson works through the procedure under the standard forms in more detail, from the first request to the signed change order, with the pricing calculations and records that make each step defensible.

The standard form framework

AIA A201-2017 deals with changes in Article 7. A Change Order (§7.2) is signed by the owner, contractor and architect and states the change in the work, the adjustment to the contract sum and the adjustment to the contract time. A Construction Change Directive (§7.3) is signed by the owner and architect and directs the work before price or time is agreed; the contractor must proceed, and the adjustment is determined later by one of the methods in the directive. The architect may also order minor changes that involve no change in price or time (§7.4). Concealed or unknown conditions are dealt with in §3.7.4, delays and extensions in §8.3 and claims in Article 15. Most owners add supplementary conditions that change the markups, notice periods or documentation, so the printed form is only the starting point.

Where changes start

Changes begin in several ways, and the change log should capture all of them, because the source affects both entitlement and pricing.

A recurring problem is the instruction that changes the work without saying so. An RFI response that tells the contractor to 'provide additional bracing as shown on the attached sketch', or a site instruction that 'clarifies' a detail by adding work, may be a change even though the document says it is not. The contractor's protection is to respond promptly in writing, identifying the instruction as a change and reserving its right to an adjustment, before doing the work. Doing the work silently and claiming later invites the argument that the contractor accepted the instruction as part of the original scope.

Pricing a change

A change proposal needs three things: a clear description of the change, a price built up from its components, and a statement of the time effect. Prices for additive changes are usually built up from direct costs, with markups as allowed by the contract.

The contract usually defines the markups, often in the supplementary conditions. A common pattern is a higher percentage on the contractor's own work and a lower one on subcontracted work, to reflect the different management effort, with a cascade so that the subcontractor's own markup is included in its price and the general contractor adds its smaller percentage on top. Deductive changes are usually credited at direct cost, and contracts differ on whether the contractor must also credit markup on deleted work.

# Pricing the Ashford scoreboard change (illustrative rates and markups)
crew_hours = 96          # own forces: blocking, embedded conduit, patching
wage_rate = 62.50        # dollars per hour
burden = 0.38            # payroll burden as a share of wages
materials = 7_850.00
equipment = 1_200.00
sub_price = 118_400.00   # electrical and AV subcontractor, including its own markup
own_markup = 0.15        # overhead and profit on own work (contract value, illustrative)
sub_markup = 0.07        # overhead and profit on subcontracted work
bond_ins = 0.012         # bond and insurance premium on the total

wages = crew_hours * wage_rate * (1 + burden)
own_direct = wages + materials + equipment
own_total = own_direct * (1 + own_markup)
sub_total = sub_price * (1 + sub_markup)
subtotal = own_total + sub_total
price = subtotal * (1 + bond_ins)
print(f"Own forces: wages {wages:,.2f} + materials {materials:,.2f} + equipment {equipment:,.2f} = {own_direct:,.2f}")
print(f"  with {own_markup:.0%} markup: {own_total:,.2f}")
print(f"Subcontract: {sub_price:,.2f} with {sub_markup:.0%} markup: {sub_total:,.2f}")
print(f"Subtotal {subtotal:,.2f}; bond and insurance {bond_ins:.1%}: {price - subtotal:,.2f}")
print(f"Change price: {price:,.2f}")

Own forces: wages 8,280.00 + materials 7,850.00 + equipment 1,200.00 = 17,330.00
  with 15% markup: 19,929.50
Subcontract: 118,400.00 with 7% markup: 126,688.00
Subtotal 146,617.50; bond and insurance 1.2%: 1,759.41
Change price: 148,376.91

The pricing above is straightforward because the scoreboard is a discrete addition. The harder questions are about what the price leaves out. Does it include the time effect, if the scoreboard installation extends the finishing phase? Does it include the effect on other work, such as the tile crews who must work around new embedded conduit? Standard forms expect the contractor to include all effects of the change in the change order price, and many supplementary conditions say that a signed change order is full and final compensation for the change, including its impact on other work. A contractor who signs a change order for the direct cost alone may have given up its right to claim the indirect effects later.

Reservation of rights

When the full effect of a change cannot yet be priced, the contractor has three options. It can price the direct cost now and expressly reserve its right to claim time and impact costs later, if the contract permits a reservation. It can delay signing the change order until the full effect is known, while proceeding under a directive. Or it can include an estimate of the impact in the price now and accept the risk that the estimate is wrong. Many owners resist reservations, and some contracts state that change orders cannot contain them. The safest approach is to agree the wording with the owner expressly, for example 'This change order covers the direct cost of the work described. The contractor reserves its claim for any extension of time and associated costs, to be submitted within 30 days.' A reservation buried in a cover letter, or added by hand to a signed form without agreement, is weak protection.

Change directives and force account

When an owner directs work before the price is agreed, the adjustment must eventually be valued. Standard forms allow several methods: a lump sum agreed later, unit prices, or the cost of the work plus a fee. Where cost plus fee applies, the contractor must keep detailed records of the labor, materials and equipment used on the directed work, usually on daily force account or time-and-materials sheets signed by the owner's representative. These sheets are often the only reliable evidence of the cost of directed work, and disputes about them are common: the owner's inspector may refuse to sign, or sign 'for hours only', or the contractor may forget to separate directed work from base-contract work done by the same crew on the same day.

Good practice is simple but demanding. Open a separate cost code for each directive. Record the crew, hours, equipment and materials daily, on a form that identifies the directive and the location. Ask the owner's representative to sign the sheet the same day, and if they will not, send the unsigned sheet to them in writing the same day so that there is a contemporaneous record. Summarize the sheets weekly and send the running total, so that the owner sees the cost growing and cannot later say it was surprised.

# Weekly force account summary for the contaminated fill directive (illustrative)
import datetime as dt
rates = {"helper": 58.0, "operator": 71.0, "foreman": 79.0}   # dollars per hour incl. burden
equip_rates = {"excavator 30t": 185.0, "tandem truck": 125.0}  # dollars per hour
sheets = [  # date, {trade: hours}, {equipment: hours}, materials $, signed by owner?
    (dt.date(2026, 4, 6), {"operator": 9, "helper": 18, "foreman": 4}, {"excavator 30t": 9, "tandem truck": 16}, 0.0, True),
    (dt.date(2026, 4, 7), {"operator": 9, "helper": 18, "foreman": 4}, {"excavator 30t": 9, "tandem truck": 18}, 640.0, True),
    (dt.date(2026, 4, 8), {"operator": 8, "helper": 16, "foreman": 4}, {"excavator 30t": 8, "tandem truck": 14}, 0.0, False),
    (dt.date(2026, 4, 9), {"operator": 9, "helper": 18, "foreman": 4}, {"excavator 30t": 9, "tandem truck": 18}, 1_180.0, True),
]
fee = 0.15  # fee on cost under the directive (contract value, illustrative)
week_cost = 0.0
for d, lab, eq, mat, signed in sheets:
    cost = sum(rates[t] * h for t, h in lab.items()) + sum(equip_rates[e] * h for e, h in eq.items()) + mat
    week_cost += cost
    flag = "signed" if signed else "NOT SIGNED - sent to owner same day"
    print(f"{d}  cost {cost:9,.2f}  {flag}")
print(f"Week cost {week_cost:,.2f}; with {fee:.0%} fee {week_cost * (1 + fee):,.2f}")

2026-04-06  cost  5,664.00  signed
2026-04-07  cost  6,554.00  signed
2026-04-08  cost  5,042.00  NOT SIGNED - sent to owner same day
2026-04-09  cost  7,094.00  signed
Week cost 24,354.00; with 15% fee 28,007.10

Disposal of the contaminated soil itself, charged by a licensed receiving facility by weight, would be added from invoices, with manifests as proof of quantity. The unsigned sheet for 8 April is a typical problem: it was sent to the owner the same day, which preserves the record, but it will need to be reconciled before the directive is valued.

Reviewing change pricing as the owner

Owners and their consultants review change proposals against the contract and their own estimates. Common review points include quantities taken off the drawings, labor productivity compared with standard references and the contractor's own base bid, rates that match the contract's schedule, markups applied only once, no double counting of supervision or small tools already in overhead, and credits for work deleted. A good review is prompt and specific: it accepts what is reasonable, questions what is not and explains why. Long delays in reviewing changes are themselves a common cause of disputes, because they leave the contractor financing work it cannot bill and blur the record of what was agreed.

The change log

Both parties should keep a change log that tracks every potential change from first notice to final agreement. CON-310 showed how pending changes affect the cost forecast. For claims purposes, the log also proves when each issue was raised, how long the owner took to respond and which items remain open. A typical log records the change number, description, source and date raised, the contractor's proposed price and time, the owner's response, the status (pending, priced, approved, rejected, in dispute) and the signed amount.

# Ashford change log: exposure from open items (illustrative)
log = [  # number, description, proposed $, proposed days, status, approved $
    ("PCN-014", "Contaminated fill remediation (directive)", 612_000, 15, "directive", 0),
    ("PCN-021", "Roof truss redesign: extra steel and connections", 286_500, 30, "pending", 0),
    ("PCN-022", "Roof truss redesign: delay costs", 455_000, 0, "claim", 0),
    ("PCN-030", "Timing and scoreboard system", 0, 3, "approved", 0),
    ("PCN-031", "Competition pool tile layout change", 64_800, 5, "pending", 0),
    ("PCN-033", "Deleted sauna", -38_000, 0, "approved", -38_000),
]
log[3] = ("PCN-030", "Timing and scoreboard system", 148_377, 3, "approved", 148_377)
approved = sum(a for *_, a in log)
open_items = [r for r in log if r[4] in ("pending", "directive", "claim")]
exposure = sum(r[2] for r in open_items)
print(f"Approved change orders: {approved:,.0f}")
print(f"Open items: {len(open_items)}, proposed value {exposure:,.0f}, proposed days {sum(r[3] for r in open_items)}")
for n, d, p, days, s, a in open_items:
    print(f"  {n} {s:<9} {p:>10,.0f}  {days:>3} days  {d}")

Approved change orders: 110,377
Open items: 4, proposed value 1,418,300, proposed days 50
  PCN-014 directive    612,000   15 days  Contaminated fill remediation (directive)
  PCN-021 pending      286,500   30 days  Roof truss redesign: extra steel and connections
  PCN-022 claim        455,000    0 days  Roof truss redesign: delay costs
  PCN-031 pending       64,800    5 days  Competition pool tile layout change

The log makes the exposure visible: about $1.4 million of proposed value and 50 proposed days are still open, most of it in the contaminated fill directive and the truss redesign. Both parties should be reviewing this list at every site meeting. An owner who sees a large and growing open balance should prioritize decisions; a contractor should push for resolution while the facts are fresh.