Change Order

A change order is a formal document used to modify the scope, schedule, pricing or deliverables of an existing project or contract. It allows parties to record agreed changes after work has started and maintain a clear record of what has changed.

How It Works

So if one side asks for a change to the original scope, the changes that are proposed are written down on a change order. The document describes what is changing, the reasons for the change, how it impacts pricing or timelines and any new responsibilities for either party.

Both parties review and approve the change order before work resumes on the revised scope. Once approved, it is incorporated into the contract record and modifies the original project requirements. Change orders are common in construction, consulting, software development and professional services where requirements change over time.

Why Legal & CLM Teams Should Care

Here's the catch. Projects rarely start the same way they end up. In the absence of a formal change process, you end up with disputes about what work was actually requested, what was approved and what got delivered. One side thinks it has a feature. The other one doesn’t.

Change orders are a paper trail. Before work begins, both parties agree to and sign off on exactly what is changing. And if a dispute arises later, you have documentation of when the change was approved and the cost.

Example Use Case

A company hires a software vendor to build a customer portal for $150,000 over four months. Halfway through, the company requests additional reporting features not in the original scope. The parties create a change order documenting the new requirements, adding $30,000 to the contract cost and extending the timeline by three weeks before any additional work begins.

How It Relates to Adjacent Concepts

Change orders work in parallel with statements of work, amendments and contract approval processes. A change order typically addresses issues like scope and deliverables that are unique to the project. Usually an amendment is to change more general terms of the contract.

FAQs

What is a change order?

A formal document that records approved changes to a project's scope, pricing, timeline or deliverables after work has started.

Is a change order legally binding?

Yes. Once approved and signed by both parties, it becomes part of the contractual agreement.

What's the difference between a change order and an amendment?

A change order handles project-level changes. An amendment typically modifies broader contract terms.

Related Terms

• Statement of Work
• Amendment
• Contract Approval Process
• Master Service Agreement
• Version Control
• Contract Lifecycle Management

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