Change Orders: What They Are and How to Manage Them

Key takeaways:

• Document all contract modifications with formal written change orders to ensure legal protection, as verbal agreements are insufficient and courts have ruled inconsistently on whether they can effectively amend contracts.

• Implement change orders in two primary situations: when clients request modifications to project scope, features, or deliverables, and when unforeseen circumstances like regulatory changes or technical limitations require contract adjustments.

• Include three essential components in every change order: project information (names, dates, original contract details), detailed contract changes (additions, subtractions, costs, specs, and drawings), and a summary of how changes affect the overall contract price and timeline.

• Streamline change order processes using contract lifecycle management platforms that centralize contract data and workflows, as organizations using these systems have achieved measurable results including an average 55% improvement across value metrics and reduced cost and schedule growth.

How many times have you been deep into a project when your client suddenly needs “just one small change”? What starts as a simple request quickly becomes a web of coordination—tracking down the original contract, gathering new estimates, and making sure everyone understands what’s changing and why.

Managing these changes, called change orders, presents significant challenges for most organizations, with one study from the Texas Department of Transportation finding that errors and omissions contributed to one-fourth of all change orders over a 14-year period. You need information from the original contract, project specifications, and stakeholder input. This information typically lives in separate systems that don’t communicate with each other, creating coordination problems and delays.

These disconnected systems and processes complicate the creation of a robust and thorough change order. Navigating these isolated processes takes time and leaves room for human error. It also leaves clients and your own team in the dark, as there’s no transparency in the contract creation process.

The good news is that a streamlined change order process can save your legal team time, prevent mistakes, and give your clients and teams better insight into how contracts are built. But why are change orders so important?

What is a change order?

A change order is a written amendment to an existing contract that modifies the original scope, cost, or timeline after signing. Change orders provide a formal way to document and approve contract modifications without creating an entirely new agreement.

Contracts are designed to be final, but business realities often require adjustments. When clients discover new requirements or project conditions change, change orders provide the legal framework to modify the original terms while protecting both parties.

For example, suppose a client realizes they need an additional feature from the project you are completing for them. They can request a change order from you to add that feature. Your legal and design teams then produce a first-draft of a change order that includes the new feature, the adjusted price, and any company fees for altering the contract after the effective date.

From there, you and your client can negotiate minor details of the change order contract. Once you’re both satisfied, you can sign the form. At that point, it’s considered a legally binding extension of the original contract.

The purpose of a change order

A change order contract allows your legal team and your clients to come to an agreement on any alterations to the contract terms without needing to scrap the original. A change order acts as legal protection for your company and your clients.

It acts as an extension of the contract and ensures that all parties understand their new duties and expectations. It codifies the specific changes the client wants, and provides legal notice of any adjustments to the price and timeline that the client should expect.

When do I need a change order?

You need a change order in two primary situations:

Client-requested changes: When your client wants to modify project scope, add features, or adjust deliverables after contract signing.

Unforeseen circumstances: When you discover new information that affects the project, such as regulatory changes, technical limitations, or previously unknown requirements.

Both situations require formal documentation to protect your organization legally and ensure all parties understand the modified terms.

Both situations require you to deviate from your original contract. Even if the client requested it, deviation from a contract without a paper trail can leave you open to legal consequences.

For example, your client could refuse to pay for the additional services, or file a lawsuit for deviating from the written contract. Without a change order, it would be difficult to pursue legal action or defend your company. A verbal agreement simply isn’t robust enough, as courts have delivered conflicting rulings on whether verbal agreements are sufficient to amend contracts, with some cases finding that consistent use of written change orders shows that parties did not intend to waive formal requirements.

Even if your client appears to be acting in good faith, change orders are still valuable. The process of writing the change order makes sure that you’re both on the same page.

Parts of a change order

Every change order contains three essential components that document the modification completely:

• Project information includes the project name and the owner’s and contractor’s information. It also covers information about the original contract, including the effective date and the work to be provided. Finally, it should include the change order’s effective date and number (i.e., the second change order is labeled 02)..

• Contract changes include every change the client has requested. In this section, it’s best to be detailed. Cover additions, subtractions, and the cost of each change. The best practice is to include specs, drawings, and any other attachments that clarify the scope of the change order.

• Cost and time changes: Finally, the cost and time changes summarize how the contract changes will affect the contract price and timeline.

One field where change orders are common is construction, where major industry agreements like the AIA-A201 and ConsensusDocs 200 include dedicated articles that outline change provisions. A free change order form template may be effective for occasional change orders, but if you’re in an industry that requires you to perform frequent contract alterations, you’ll likely need a more robust solution.

Limitations of change orders

Change orders have two significant limitations. First, suppose the scope of the change order is wider than the original order requirements. In that case, a change order contract may not be enough to satisfy the clients’ new needs.

For example, if a client initially contracted for a simple website build but then requests to add a full e-commerce platform, the change is so significant that it falls outside the scope of the original agreement. In such cases, a new contract is more appropriate than a change order to properly define the new project.

Second, some localities have statutes that limit the amount by which a project’s scope can be increased through change orders. If a project’s scope increases too dramatically in these districts, it’s better to write and agree upon an entirely new contract.

Common reasons for a change order

Change orders become necessary for several common reasons that affect project scope or execution:

• The customer requesting adjustments to the project, such as new features or changes to existing elements

• Correcting an inaccurate estimate of the project’s work or scope, such as an overestimate of time to completion

• Adjusting the contract in response to setbacks like new regulatory requirements or unexpected delays

• Altering the project budget to ensure deliverables can be completed

It doesn’t have to be complicated. While change orders may seem overwhelming at first, they can be broken down into more approachable steps.

Starting the creation process

Creating effective change orders requires systematic attention to detail and clear communication with all stakeholders. The process involves five key steps that ensure accuracy and stakeholder alignment.

Review all original documentation: Start by thoroughly examining the original contract, project specifications, and any related plans to understand what’s changing and why.

Communicate with stakeholders: Engage both your client and internal teams to gather complete information about the requested changes and their implications.

Document all requested changes. Collect all information regarding the changes in one place to ensure that you aren’t missing important details.

Consolidate information into the change order template. Once you’re confident you have all the details, input the data into the change order form. If you notice anything missing, follow up with the relevant party.

Refine with the client and creative teams. Present the change order to your team to ensure it’s feasible, then negotiate any changes the client may want.

Managing change orders

Change orders involve complex information gathering and stakeholder coordination. The challenge multiplies when contract data, project specifications, and communication history are scattered across different systems.

This fragmentation creates several problems. Teams spend excessive time hunting for information, risk missing critical details, and struggle to maintain version control. Meanwhile, clients and project teams wait for updates, potentially discovering new requirements that require additional changes.

Streamlining the change order process

Streamlining change orders requires complete visibility into document creation and approval workflows. Transparent processes allow you to track each change order from initial request through final execution.

This visibility delivers measurable benefits. For example, Washington State Department of Transportation projects using a streamlined review process saw an average reduction in cost and schedule growth related to change orders. In the private sector, the impact is similarly profound, with The 2025 Contracting Benchmark Report finding an average 55% improvement across value metrics for organizations using Ironclad CLM. You can identify and eliminate bottlenecks, decrease error rates, and improve client satisfaction with faster turnaround times.

You can achieve this with a contract lifecycle management solution. A contract management platform acts as your company’s single source of truth. It centralizes your contracting process, allowing you to create, fill, and sign documents in one location. There’s never a risk of missing documents that would affect your contracts. The process is entirely transparent, so there’s no doubt about how your contracts are put together.

Product features that help

If you’re considering implementing contract lifecycle management in your firm, our contract lifecycle management platform can help you design change order templates, collaborate with your team on changes, and maximize the use of your contract data—all within a single platform. This type of efficiency is becoming standard, as The State of AI in Procurement 2025 Report notes that 80% of procurement leaders now use AI for contracting. But implementing these tools requires more than just software—you also need to manage change across your people and processes to ensure adoption.

Using digital contract management for change orders and statements of work makes it easy to fill and update forms, but it is crucial to select platforms with strong compliance guarantees, as research into modern vendor contracts shows that some shift accountability, with as few as 17% of AI vendors explicitly commit to complying with all applicable laws. All your information is easily accessible, from the original contract to the supplementary appendices. There’s no back-and-forth necessary—individual team members can fill in elements of the form when they’re available. The entire process can be managed and completed in a fraction of the time.

Simplify change orders for good

Change orders are vital documents, allowing you to keep contract changes legally secure. However, they can be time-consuming to produce. That’s particularly true if all of your contract information and specs are stored in different places.

Using Ironclad’s digital contract management software can help you stay on top of the process. By consolidating your data and streamlining contract creation, you can produce robust change orders quickly. Request a demo today to learn how AI contracting can simplify your firm’s change order workflow for good.

Frequently asked questions about change orders

What is the difference between a purchase order and a change order?

Think of it this way: a purchase order (PO) is for buying something new, while a change order is for modifying something you’ve already agreed to buy. A PO kicks off a new transaction for goods or services. A change order, on the other hand, amends an existing contract or PO. It’s the formal way to document that the scope, price, or timeline of the original deal has been adjusted.

What is a change order in banking or finance?

In banking, a change order isn’t about construction or project scope. It’s typically a request from a business to a bank for a specific amount of cash—coins and bills—needed for their daily operations. For example, a retail store would place a change order to get enough small bills and coins for their cash registers. It’s about managing cash inventory, not changing a contract.

What happens if we don’t use a formal change order for a project change?

Skipping a formal change order is asking for trouble. Even if the change was requested verbally or in an email, without a signed change order, you’re exposed to risk. The client could refuse to pay for the extra work, claiming it wasn’t approved. Or, they could argue that the change shouldn’t have affected the original deadline. A change order is your paper trail—it protects both sides by making sure everyone is aligned on the new scope, cost, and timeline. It prevents misunderstandings that can lead to disputes and damaged relationships.

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Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.