How To Negotiate Change Orders: Best Practices

June 20, 2023 by Michael Gober & Denis Gritsiyenko

In the construction business, relationships are key.

Everyone from owners to contractors all trust each other to do their best to deliver the promised results in a timely and costly fashion.

But a change order negotiation gone bad can quickly damage a great relationship, not to mention the budget for the project and the potential for work on future projects.

So how can you avoid the stress and pressure of negotiating change orders?

Keep reading to find our seven best practices to successfully negotiate your next change order and the tools you need to get it right.

CM Fusion: Change Order Negotiating Tools at Your Fingertips
Negotiating Change Orders: Why It’s Important To Get It Right
7 Best Practices To Seamlessly Negotiate Change Orders
3 Ways CM Fusion Software Helps With Successful Change Order Negotiation
CM Fusion: Simple Tools for Negotiating Complex Change Orders

CM Fusion: Change Order Negotiating Tools at Your Fingertips

CM Fusion is the industry’s leading construction management software designed to make construction management tools easy and accessible.

Our simple interface is easy to use for even the most old-school, pen-and-paper pros.

We’ve created tools that compile project data into at-a-glance insights that prepare you for negotiating construction change orders with the best.

Our software helps you create, manage, track, and approve change orders and other documents.

Cloud-based technology means that CM Fusion’s construction management software can be accessed on any mobile phone or tablet.

If you can send an email, you can harness the power of CM Fusion.

30-Day Free Trial

Negotiating Change Orders: Why It’s Important To Get It Right

Negotiating change orders has a reputation for being difficult and time-consuming –– and for good reason.

A poorly negotiated change order can cause a construction nightmare.

Negotiating the right change order provisions can help you avoid:

Increased costs that send the budget spiraling out of control.
Timeline delays that stall the completion of a project.
Disagreements on if the work is considered outside the original scope of work.
Payment disputes questioning the validity of the change order.
And more

It’s essential for everyone to agree in writing and have a thorough understanding of a change order before any work is done.

7 Best Practices To Seamlessly Negotiate Change Orders

#1: Commit To Leading With Insight and Fairness

Before you can successfully negotiate a change order, first you need to understand the reason for the requested change.

What is the issue the change order is working to solve?

Ask questions if you need to get a better grasp of the issue or to find out if there might be a better solution.

Having as much insight as possible will help you identify the best course of action.

When it comes time to negotiate, adjust your mindset to consider what is fair for everyone involved.

It helps to acknowledge the contractor wants to be paid for their hard work while keeping your timeline and budget in mind.

Is there a compromise that can achieve both goals?

Use project data and industry experience to guide your numbers.

Leading with a fair and objective mindset will help you negotiate terms that leave you both happy to work together again.

#2: Prioritize the Contract

At the start of any construction project, you should already be well informed of the contract.

Since a change order is simply an amendment to the scope of work in the contract, before you negotiate an addendum to your contract you should consult the original contract for provisions that reveal the circumstances under which a change order is allowed.

You must understand these provisions that also outline:

What defines a change order.
How change orders are requested, approved, priced, and documented.
The impact of change orders on the project schedule and budget.

Prioritizing the contract will provide you with the knowledge of what’s already been agreed upon and help you find the starting point for your negotiations.

#3: Review the Plans and Specs

While you are revisiting the contract, review the plans and specs to look out for any ambiguity, errors, or omissions that can be addressed to mitigate the need for future change orders.

This is a good time to do your due diligence and double-check any issues with the scope of work that may lead to more change orders further down the line.

Look for unexpected consequences the change may cause to the plans and specs.

Keep in mind if there have been any changes to site conditions that may create similar issues along the way.

#4: Assess Practicality and Effect

It’s important to understand the scope of work that will be involved for all parties.

Weigh the practicality and effect of the change against the costs.

Taking into account labor and resources, is it possible to complete the job at the proposed cost?

To answer that, you must first establish how the additional work will be estimated.

Consider if the estimation is based on unit pricing, time and materials pricing, or as a lump sum cost. If you’re unsure, check the contract documents or work with the contractor to find a mutually agreeable solution.

Then determine how the change order will impact the project overall.

Conduct a complete analysis to assess all the aspects of the change order including:

The impact on project objectives and deliverables
The possible risks involved
The effect on the project’s resources and timeline
Any technical, operational, and legal challenges

Survey your findings along with any alternatives and present them to the stakeholders to support your change order negotiation.

You may expect disputes over an agreement on costs, but don’t be caught off guard by pushback if actual changes to the contract scope or extensions to the original timeline are necessary.

Whether you’re negotiating with contractors, owners, or both, negotiating practical and effective changes based on an understanding of the need for the change order will help put you on the best path forward.

#5: Review the Final Change Order Carefully

Your negotiation responsibilities aren’t complete once the final change order has been written.

By the time they reach this point, most people are tired of the back and forth and just want to move on with the project.

Still, if vague language and broad terms are used in the final change order, failing to review it carefully before you execute can lead to confusion, resulting in more change orders in the future.

Be sure to check that the change order reflects the new:

Scope
Cost
Schedule; and
Terms

Be mindful of how the change order affects the contract and specs. Any alterations arising from the change order should be incorporated and referenced in the contract documents.

If necessary, the contract should be appropriately revised to reflect the changes elsewhere in the contract and be consistent with the new language and scope of work.

#6: Communicate Thoroughly and Promptly

Clear and concise communication will help make sure all parties are aware of the details and agree to the changes.

That means prompt and thorough communication is just as important with contractors as with stakeholders.

A single change order can affect a project’s overall quality, cost, scope, and duration, so all players must have up-to-date information.

Some key aspects to include in your change order communications include:

The new scope of work requested
The reason for the requested change
The benefits and risks involved
The impact on the construction schedule, performance, and cost
How the change will be managed; and
Request feedback and input

Establishing a formal communication process for change orders will help you ensure all parties stay informed.

#7: Keep Meticulous Records

Document everything.

Every step and discussion of the change order should be recorded in writing. Keeping meticulous records can save you from unnecessary miscommunications, errors, and change orders in the future.

Don’t begin any change order work without authorization from all stakeholders, and be sure all costs and any other negotiated terms are covered in a signed document.

A change order should at least include the:

Scope
Cost
Schedule
Terms; and
Party signatures

Don’t forget to update the project plan, budget, schedule, and risk assessment and follow through by communicating the changes to the team and stakeholders.

Once the change order work begins, monitor and control the implementation of each task and document the progress, time, material costs, and performance along the way.

Employ a uniform system for handling change order documents that remains consistent regardless of the complexity or number of change orders in a project.

Having a consistent change order system in place can help a contractor understand and actively prepare for your process before submitting change orders, effectively streamlining your process and saving you time.

3 Ways CM Fusion Software Helps With Successful Change Order Negotiation

Successfully negotiating change orders has never been easier than with CM Fusion.

CM Fusion’s construction management software houses everything you need at the tip of your fingers.

Say goodbye to the days of projects being stalled by mounting change orders that aren’t handled correctly.

Our software makes it easy for contractors and owners alike to keep costs down and budgets under control.

#1: Easy Accessibility

No more spreadsheets with confusing formulas and the dreaded “#ref” error while trying to keep up with countless change orders.

Just upload the change order costs and invoices and watch the CM Fusion software compile your cost tracking data in a single, easy-to-view format.

Access cost tracking data from anywhere on your mobile phone or tablet and get a comprehensive picture of your company’s spending and profitability.

That means you can quickly call up the status of your budget and profitability for fast and accurate change order negotiating.

#2: Built-in Cost and Compare Features

Need to check if the cost of a change order request is within budget?

Or maybe you just need to check how the project budget fairs against burgeoning costs?

Simply glance to the left-hand side of the CM Fusion cost tracking software to find our cost and compare features with real-time results.

In one step, you can see if your best move is to shoulder the cost or stick to your negotiating guns.

#3: Permissions Management

Nothing feels worse than frantically searching through stacks of papers if you need to reference authorizations for change orders.

With CM Fusion’s easy document tracking tool, you can request, track, save, and view permissions in one click.

Decide who has access, and when, when you set up permission expiry dates.

Our document management system allows you to:

See change orders and other documents as they arrive in real-time.
Keep track of the latest version of all of your construction documents.
See exactly when documents are updated, if and when your team has viewed and uploaded them, and from where.

Don’t drop the ball after you’ve done all the hard work of negotiating, effortlessly manage your change order documents with CM Fusion.

CM Fusion: Simple Tools for Negotiating Complex Change Orders

At CM Fusion we can’t negotiate change orders for you, but we can provide you with all the tools you need to confidently negotiate and manage them yourself.

From cost tracking and budget features to document management we’ve got you covered. You can even pull up documents from similar work done on old projects to help you negotiate pricing.

No need to delay stressful negotiations until you get back to the office to run numbers.

CM Fusion construction management software is cloud-based and mobile-ready, so pull up your tools on-site and negotiate those complex change orders head-on.

Worried about training your not-so-tech-savvy team to use our software?

Don’t be.

Our software was created with simplicity in mind. If your tech-challenged colleagues can send an email, they can use CM Fusion.

The best part is –– you can do it all for one easy fixed price, just decide if you’ll use the software for less than or more than 100 projects at a time.

No hidden fees or long-term commitments.

CM Fusion, construction management software made easy.