Identify the change against the original scope
Describe exactly what is added, removed, or revised and reference the original contract, drawing, or scope section. Record the request and the reason for the change. Avoid repricing work already included in the base contract. For a substitution, consider both the credit for removed work and the cost of replacement work, including impacts on procurement or completed work.
Build the direct-cost breakdown
List added or credited labor hours, the stated labor-rate basis, materials, delivery, disposal, equipment, subcontractors, and other affected direct costs. Price the net scope difference and explain assumptions or exclusions. Confirm whether subcontractor quotes include the same changed scope. Do not apply labor burden or overhead again if the entered rate or cost already includes those items.
Worked example: overhead and profit are separate steps
Suppose a change adds $1,500 labor, $800 materials, and $200 equipment: direct costs total $2,500. A 10% allocation of overhead on direct costs adds $250, producing a $2,750 cost base. If the pricing method targets 20% margin on that combined cost base, the pretax price is $2,750 ÷ 0.80 = $3,437.50. The $687.50 amount above the cost base is profit after the modeled overhead allocation. If your contract instead specifies a markup, use that stated method; do not substitute a margin formula.
Explain schedule and payment impacts
State whether the change affects duration, sequencing, lead times, inspections, or access. Update payment milestones and the contract total consistently with approved changes. Tax treatment, permitted deposits, retainage, and notice requirements vary by jurisdiction and contract. Confirm applicable requirements rather than assuming every changed item is taxed or paid the same way.
Seek written approval before proceeding
Provide the scope description, itemized pricing or agreed lump sum, applicable tax, revised contract amount, time impact, and approval fields. Request written approval through the procedure stated in the contract before starting changed work where required. For emergency or time-sensitive work, follow the applicable contract and legal procedure and record the communications; a calculator result is not approval or a signed agreement.
Close the record and compare actuals
Keep the approved change order with the original estimate, supporting quotes, correspondence, and invoices. Reconcile approved changes with the payment schedule so a changed total is not billed inconsistently. Compare actual change-order costs with the estimate to improve future pricing. Documentation supports clear decisions, but no template or calculation guarantees payment or legal enforceability.