Glossary
Change order
A change order is the formal instrument that amends a public contract: adding or deleting scope, adjusting the price, extending the time, or all three. It must be in writing and executed by whoever holds authority to sign, which on public work is a specific officer or, above a threshold, the governing body itself.
Change orders that raise the contract price generally require a rider to the performance and payment bonds. The governing principle is simple and unforgiving: a public agency can only be bound by someone with actual authority to bind it. A project manager's verbal go-ahead is not a change order, and courts routinely refuse to enforce it.
The short version
- Written and signed by an authorized official, before you perform, is the rule. Everything else is a hope.
- Change orders above a dollar threshold usually require a public governing-board vote, which adds weeks to the schedule.
- Cumulative change orders beyond a percentage of the original contract can trigger a cardinal change problem, a modification so large it should have been competed.
- Change orders increasing contract value normally require a rider to the performance and payment bonds.
Why it matters to a bidder
Change order administration is where public contracts either become profitable or quietly do not:
- Know who can sign what. Ask at the pre-construction meeting for the delegation of authority: what the project manager can approve, what the department head can, and what requires a board vote.
- Notice periods are short. Most contracts require written notice of a changed condition within days of discovery. Miss it and you may waive the claim even if the change is real.
- Check the markup limits. Public contracts routinely cap overhead and profit on change order work, commonly at a stated percentage for self-performed work and a lower one on subcontracted work.
- Do not fund the agency's schedule. Performing changed work while approval is pending is common and is the single largest source of unrecoverable cost on public jobs. Where the work is priced from a schedule of rates, see unit price contracts.
A real example
A contractor renovating a city fire station encounters undocumented asbestos in a chase. The city's project manager tells it to proceed and promises a change order. Abatement costs $64,000. The city's ordinance requires council approval for changes above $50,000. The council, briefed three months later, approves $50,000 and disputes the remainder because the work was performed without an executed order. The contractor absorbs $14,000 and six months of carrying cost, deducted against retainage at closeout.
How state and local differs from federal
Federal contracts carry a Changes clause that gives the contracting officer unilateral authority to direct changes within the general scope, with an equitable adjustment to follow, plus a well-developed claims and appeals system through boards of contract appeals. That structure gives a federal contractor a path when the parties disagree.
State and local contracts often lack both halves. Authority is fragmented across staff, department heads and elected bodies, and the dollar thresholds are set by local ordinance rather than by a uniform regulation. There is no board of contract appeals; disputes go through the contract's claims procedure and then to state court or a state claims statute, often with a short notice-of-claim deadline measured in weeks. Some states also cap cumulative change orders as a percentage of the original contract, above which the added work must be competed separately, a limit with no direct federal counterpart.
Common questions
Can I rely on a verbal direction to proceed?
No. Public agencies are bound only by officials with actual authority acting in the required form. Get it in writing, even a signed field directive.
What is a cardinal change?
A modification so far outside the original scope that it amounts to a different contract, which competitors can challenge as an uncompeted procurement.
Is a construction change directive the same thing?
No. A directive orders you to proceed while price and time are still being negotiated. It preserves the work but not the number, so document costs daily.
Do change orders affect my bonds?
Yes. Increases in contract value normally require a bond rider and additional premium.