Change order

A change order is an alteration to the scope of a project. Depending on the size and nature of the alteration, a change order may extend the duration and/or amount of the underlying contract. Change orders are needed in the following circumstances:

  • The client wants to add or subtract features
  • The contractor incorrectly estimated the amount of work to be completed
  • Obstacles are preventing the project from being completed as originally intended

Once a change order has been issued, it represents a modification of the underlying contract. A large project may have dozens or even hundreds of change orders associated with it. Change orders are especially common for construction and software development projects.

A common competitive bidding ploy is for a contractor to submit a bid that contains no profit, on the assumption that subsequent high-priced change orders will create a substantial profit for the entire project.

Related Courses

Construction Accounting 
Project Management