How to Price a Change Order: Labor, Material, Equipment, and Markup

Price Every Change Order the Same Way, Every Time

Inconsistent change order pricing is one of the fastest ways to erode job margin. One PM adds 15% overhead and profit. Another adds 10%. A third forgets to include equipment standby time entirely. By the end of a project, you have left real money on the table and you cannot even explain the variances in a cost review.

This checklist gives you a repeatable formula. Work through it in order on every change order, whether the number is $800 or $80,000.

Step 1: Identify the Scope Before You Price Anything

Write down exactly what changed. Reference the RFI, ASI, or owner directive that triggered the work. If it came in verbally, send a written confirmation by email before you build the number. Pricing a vague scope creates disputes at approval time.

Tie the change to the CSI MasterFormat division it affects. Concrete work is Division 03. Mechanical is Division 23. This matters for your cost code tracking and makes the backup cleaner for the architect reviewing the G702/G703.

Step 2: Price Direct Labor

Start with your crew. For each trade or classification, document:

Labor burden typically runs 30% to 45% of base wages depending on your state, trade classifications, and insurance rates. Use your actual burden rate, not a guess. If your foreman earns $42.00 per hour base and your burden is 38%, your fully loaded cost is $57.96 per hour. Price from that number, not the base wage.

Example: 16 hours of Carpenter Foreman time at $57.96 loaded = $927.36 in direct labor cost.

Step 3: Price Materials

Get a written quote from your supplier or pull the price from a recent purchase order for the same material. Do not price from memory.

Document:

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Watch for waste factors. A concrete pour on a change order does not use material at perfect efficiency. Apply the same waste allowance you would use in your original estimate.

Step 4: Price Equipment

This is the step most PMs skip or undercharge. If you are mobilizing a piece of equipment specifically for the change order work, price it. If existing site equipment is being redirected from other productive work, price standby or idle time accordingly.

Use one of these three sources for equipment rates:

Include operator time in Step 2 under labor. Equipment pricing here covers the machine only, not the person running it.

Step 5: Add Subcontractor Costs

If any of the change order scope flows to a sub, get their written price first. Do not estimate what they will charge. Once you have their number, apply your markup to it the same way you would to your own costs. Some GCs apply a lower markup to sub costs, typically 5% to 10%, because the administration burden is lighter than self-performed work. Whatever your policy is, apply it consistently.

Step 6: Apply Overhead and Profit Markup

This is where the formula comes together. Add your four cost categories:

Apply overhead and profit as a percentage on top of direct cost. Common approaches:

Many standard contract forms, including AIA A201, allow the contractor to state a fixed overhead and profit percentage in the contract. If your agreement specifies 15%, use 15% and document it. Do not renegotiate that rate mid-project.

Applying 15% to $2,687.36 gives you $403.10. Your change order total is $3,090.46, which you would round or keep as-is depending on your preference.

Step 7: Check for Schedule Impact Before Submitting

Every change order has a potential schedule impact even if it seems minor. Before you submit the number, ask whether this work adds days to a critical path activity. If it does, document the time extension request alongside the cost. Pricing the work without reserving the right to a time extension is one of the most common mistakes GCs make. A signed change order without a time extension clause can be used against you in a delay claim later.

Step 8: Assemble the Backup and Submit

Your change order package should include:

Submit through whatever process your contract requires. Most AIA contracts route change orders through the architect for recommendation and then to the owner for signature. Keep your log current. Mark the change order pending until you have a signed approval in hand.

Use the Same Checklist on Every Job

Pricing discipline is what separates contractors who make money on change orders from those who break even or lose. Run through these eight steps on every change, document your backup, and never accept verbal approval as final authorization.

Tracking change orders across projects does not have to live in spreadsheets. EZBilling ties them directly to your Schedule of Values and pay applications so your G703 stays current without manual reconciliation.