BUSINESS
How to Price a Change Order
Contractor method for pricing extra work: direct cost, markup and the contingency line.
Change orders fail on the contingency and the markup. The direct cost is easy math; the cascade of markup and contingency is where the price grows and disputes start.
THE SHORT ANSWER
How do you price a change order?
Document the scope, price the direct cost (materials, labor, subs), then apply markup (~20%) and contingency (~10%) in cascade. A $2,160 direct cost at 20% markup and 10% contingency prices at $2,851.
Document the scope
Before pricing, write exactly what changed. Extra work without a written scope is where profit disappears and disputes start.
- Describe the added work in detail
- Note what's excluded
- Get the client's written approval before starting
- Date and sign the change order
Price the direct cost
Add materials, subs and labor at your loaded crew rate. The direct cost is the floor — never price a change order below your real cost.
Apply markup and contingency
Markup (usually 20%) pays your company and contingency (10%) covers surprises. Apply them in cascade: direct × (1 + markup) × (1 + contingency). Use the Change Order Price Calculator to build the price.
Check the total
Your price should cover the extra work fully, including your profit. Never eat a change order to keep the client happy — it sets a bad precedent.