Is That Change Order Price Final?

A change order arrives with a number on it. You sign it, add it to your running total, and move on. Then a few months later the final invoice for that change is higher, and it turns out the number was an estimate all along.

Nobody hid anything. Change orders get priced in a few different ways, and the way it was priced decides whether the number you signed is the number you'll pay. It's worth knowing which kind you're looking at before you sign.

The four ways a change gets priced

Final price. Sometimes called a lump sum or fixed price. The builder commits to the number for the described work. If it costs more, that's on them. This is the easiest kind to track, because what you signed is what you pay.

Estimate. The builder's best guess, and you'll pay what it actually costs. Estimates are common when the work depends on something nobody can see yet, or when the sub hasn't priced it. The number is useful for planning, but it isn't a commitment.

Not to exceed. You pay actual cost up to a ceiling. If it comes in under, you pay less. If it runs over, the builder covers the rest, as long as the scope didn't change. This works well when the work is uncertain but you need a cap.

Time and materials. You pay for labor hours at a stated rate, plus materials, plus markup. There's no number until the work is done. It's the right tool for genuinely open-ended work, like chasing a problem inside an existing wall, and the hardest one to forecast.

What each one does to your forecast

Say you've signed three change orders, all illustrative:

Change	Priced as	Amount signed
Add a window in the stair	Final price	$4,800
Reroute plumbing around a beam	Estimate	$3,500
Rock removal at the garage footing	Time and materials	$6,000 (est.)
Total signed		$14,300

Your running total says $14,300. But only $4,800 of it is a commitment. The other $9,500 is a forecast, and the rock removal in particular could land well above or below what's written.

That's not a problem by itself. It just means your project forecast should show how much of it is final and how much is still moving. If you're keeping a change order log, add a column for the price type. It takes a few seconds per line and makes the total honest.

When the number isn't final

An estimate or time and materials change isn't a red flag. Sometimes it's the only fair way to price the work. If the builder doesn't know what's behind the drywall, a fixed price would either be padded or a gamble.

What helps is knowing three things up front:

• When the final number will be known. After the sub's invoice? At the next draw? At closeout?
• What the rates are. For time and materials, the hourly rates and the markup on materials should be stated, ideally in the contract already.
• What would change the estimate. If the builder can say what would push it up, you'll know what to watch for.

Then, when the final number comes in, ask for it in writing as an update to the original change order, with the backup. That closes the loop and keeps your log accurate.

Check what your contract says

Many contracts set rules for how changes get priced: a markup percentage, labor rates, and sometimes a requirement that changes be priced and approved before work starts. If your contract says that, a change priced any other way is worth a question. Not an accusation, just "the contract says changes are priced before the work. Can we get a number on this one before it starts?"

For the bigger picture on how changes fit with allowances and contract types, see Fixed price, GMP, or cost plus and Requests aren't change orders until they're priced.

None of this is legal advice. If you and your builder read the contract differently, that question belongs with a construction attorney.

Questions worth asking

• Is this price final, an estimate, not to exceed, or time and materials?
• If it isn't final, when will the final number be known?
• What rates and markup apply to time and materials work?
• What would make this estimate go up?
• Will you send the final number as a written update to this change order?