Why change orders get rejected or underpaid
Extra work is where contractors should earn a fair margin, yet change orders are often priced in a hurry on the back of a field ticket. The common problems are predictable: a labor rate without burden, material without tax, a markup the contract doesn’t allow, no request for time, or a lump sum with no backup that the owner’s reviewer sends back for detail.
A change order request that shows its math is approved faster and is much harder to cut.
How the calculator works
- Labor. Hours × burdened rate for each classification or crew. The total hours are shown so the reviewer can check productivity.
- Material. Quantity × unit cost, then sales tax on the material subtotal.
- Equipment. Quantity × unit cost, for rentals or company-owned equipment at an internal rate.
- Overhead is applied to self-performed cost (labor + material with tax + equipment).
- Profit is applied to self-performed cost plus overhead.
- Subcontracts are added at cost, and your sub markup is applied to them separately.
- Bond is applied to everything above.
The request also shows the effective markup: how much the total is over raw cost. It’s a quick check against what the contract allows in total.
A worked example
An owner asks the GC to add two exam rooms in the east wing after framing inspection (RFI 014 / ASI 3). The drywall contractor prices it:
| Item | Amount |
|---|---|
| Labor: 176 hours (framing, hang and finish, foreman) | $10,080.00 |
| Material: studs and track, 88 sheets Type X, finishing supplies | $4,409.20 |
| Sales tax on material (7%) | $308.64 |
| Equipment: scissor lift, 1 week | $420.00 |
| Overhead (10% of self-performed cost) | $1,521.78 |
| Profit (10% of cost plus overhead) | $1,673.96 |
| Subcontract: electrical, 6 devices and 4 fixtures | $3,850.00 |
| Markup on subcontract (5%) | $192.50 |
| Bond (1%) | $224.56 |
| Total change order amount | $22,680.65 |
Self-performed cost is $15,217.84. Overhead brings it to $16,739.62 and profit to $18,413.58. Add the electrical sub with its 5% markup and the 1% bond, and the request totals $22,680.65, an effective markup of 18.95% over raw cost. The contractor also asks for 3 calendar days.
The labor line is the one reviewers question most. Show hours by crew, not just a dollar amount, and use a rate you can back up with payroll records.
Tips for getting change orders approved
- Price it before you build it. Most contracts require written authorization before extra work starts. If the work must proceed immediately, get a signed field directive and track time and material daily.
- Reference the source. Cite the RFI, ASI, bulletin, or directive number and date. It ties the cost to a documented change in scope.
- Include every cost. Supervision, cleanup, protection of finished work, extra mobilizations and small tools are real costs of extra work.
- Separate markups the way the contract does. If the contract allows different rates for self-performed and subcontracted work, keep them separate, as this calculator does.
- Track unsigned requests. Keep a log of pending change orders and follow up weekly. Unapproved work is unbilled work.
Related tools
Get the labor rate right with the labor burden calculator, and check that your markups cover company overhead with the overhead and markup planner. Many change orders come from work that was excluded in the original bid, which is why clear lines from the inclusions and exclusions library pay off later.