Why Change Orders Make or Break Construction Profitability
No construction project goes exactly as planned. Owner-driven scope changes, unforeseen conditions and RFIs all lead to extra work. If you don’t capture, price, approve and bill those changes, you silently give away labor and materials—and your margin. That’s why disciplined change order management in your construction management software is essential.
From Field Impact to Formal Change
Every change order starts as an impact in the field. Without a structured process, those impacts become “we’ll sort it out later” promises that never hit the contract. Construction software helps by:
- Letting supers and foremen log potential changes as soon as they’re spotted.
- Capturing photos, notes and T&M tickets directly from mobile devices.
- Routing these potential changes to PMs for pricing and formal submission.
When field and office work in the same system, the chances of missing billable work drop dramatically.
Standardizing Change Order Workflow
A good change order workflow includes:
- Identification – field logs potential change with impact description.
- Pricing – PM or estimator builds cost and markup using job cost data.
- Proposal – change request sent to owner or GC with clear scope and price.
- Approval – signed change order captured in the system.
- Execution & Tracking – extra work tracked to the correct change order.
- Billing – change included on the correct pay app or invoice.
Construction management software automates statuses, reminders and documentation at each step.
Linking Change Orders to Budget, Schedule and WIP
Approved changes shouldn’t live in a separate spreadsheet. They must update:
- Contract value in your construction accounting system.
- Job budget and cost codes for the extra work.
- Project schedule when added days are part of the change.
- WIP calculations and forecasted profit.
Integrated software ensures that when a change is approved, it hits the right financial and scheduling levers automatically.
Managing Pending and Disputed Changes
Not all change requests are approved right away. Some linger, some get disputed, some are rejected. Construction platforms let PMs:
- Track pending changes separately from approved ones.
- Flag disputed changes and record all correspondence.
- Run reports showing exposure—the value of work performed that hasn’t been formally approved.
These insights help owners and PMs decide where to push harder and which risks to avoid stacking on top of each other.
T&M Work and Backup Documentation
Time-and-materials (T&M) work is particularly risky if not documented well. Construction management software supports:
- Digital T&M tickets signed by owner reps in the field.
- Attachments of photos, delivery tickets and notes to each extra work ticket.
- Roll-ups of T&M tickets into formal change orders when required.
Strong backup makes change-related billing disputes easier to resolve.
Measuring Change Order Performance
To see how well you manage changes, watch metrics like:
- Average days from change identification to formal submission.
- Approval rates and average negotiation discount.
- Percentage of revenue coming from changes vs. base contract.
- Number of unpriced or unapproved changes at any time.
Construction management and accounting systems can surface these KPIs automatically.
Final Thoughts
Change orders are inevitable—but losing money on them isn’t. When you use construction management software to connect field impacts, pricing, approvals and billing, you turn chaos into a controlled revenue stream and keep project margin where it belongs: on your side of the ledger.