Change orders: where contractor margins go to die

The client asks for a change, the crew does the work, and nobody bills it. Uncontrolled change orders eat margins quietly. Here is the control loop that stops the leak.

No project finishes exactly as drawn. The client moves a wall, upgrades the floor, adds a window. Each change feels small in conversation and significant in total. At the end of the job, the gap between what was quoted and what was built has a name: changes that were done but never billed.

Deviation is the norm, not the exception

McKinsey's research on construction's digital future documents that large projects typically run up to 20% longer than scheduled and up to 80% over budget. Not all of that comes from scope changes, but poorly managed changes are among the few drivers a contractor controls directly.

Anatomy of a lost change

• Agreed verbally: "sure, we'll sort it out later" is the most expensive sentence on a job site.
• Executed before pricing: the crew does the work, then nobody agrees on what it was worth.
• Missing from the client file: when the bill arrives, the client's memory and yours do not match.
• Never added to the payment plan: the change was invoiced... in which installment, exactly?

The control loop

Every change order, however small, follows the same loop: describe it, price it, get written approval, execute it, add it to the client's balance. Nothing gets built before the approval exists. Five minutes of paperwork that turns an end-of-project argument into a signed document.

The loop only works if it lives where the contract and the payment plan live. If it lives in each team member's chat history, it does not exist. That is the case for keeping change orders inside your ERP for construction companies, attached to the client record they belong to. For the broader picture of what disorganized information costs, see our post on bad data and rework.