Bidding and Contracts

A change order is the mechanism to amend the specifications (and usually the cost) of a fixed-price contract. For example, if the painter was hired to paint four rooms for a fixed price of $1000, adding a fifth room would require an adjustment to the specs and an increase in cost. Most change orders are initiated by the owner, by adding features to the project as it unfolds. However, some change orders are requested by the contractor based on an ambiguity in the specs. For example, the painter may ask for a change order (and more money) to fill nail holes before painting. While the owner may have assumed that this work was included, unless it is specifically stated in the contract, the painter is not required to do it. Projects with incomplete or poorly written specs can result in significant cost-overruns due to change orders. Even accurately specified jobs can have change orders, due to the vagaries of the existing conditions.

Consider an example: John (the contractor) is hired to add a breakfast room addition, and tear down a wall between the existing kitchen and pantry to make one large room. The architect's drawings specify "match addition floor height to existing kitchen". John builds the new floor to match the existing, but discovers after demolition that the pantry floor is an inch higher than the kitchen. John legitimately requests a change order for extra money to raise the kitchen and addition floors to match the pantry.

Change orders are often the nexus of conflict between the owner and contractor, as they represent the intersection between two different interpretations of what work was included for the fixed-price.