Change orders should be a profit opportunity. For a lot of contractors they're the opposite — a slow leak that turns a good job mediocre. The reason is almost always the same: the change gets priced by slapping a small markup on the obvious cost, and the real cost of the disruption never makes it into the number. Here's how to price a change so it actually pays.
What a change order really costs
A change has two kinds of cost, and most contractors only price the first one.
- Direct cost — the new materials, the added labor (burdened), and any subs the change requires. This is the obvious part.
- Ripple cost — everything the change disrupts: work you have to redo, a crew you have to remobilize, trades running out of sequence, and the productivity you lose on work you'd already scheduled. Disrupted work commonly runs 10–30% slower.
The ripple is usually the bigger of the two, and it's the one that gets forgotten. Price only the direct cost and you've absorbed the disruption for free.
The 10% markup trap
The classic move is "cost of the change plus 10%." It feels fair and it's fast. It's also how you lose money. A flat markup on the visible cost ignores the ripple entirely — and a 10% markup is only a 9% margin to begin with. Once you count the real disruption, the "10% markup" change order frequently comes in at a negative margin: you're paying for the privilege of doing the extra work.
How to price a change order right
Three steps, the same discipline you'd use on the base job:
- Total the direct cost. New materials, added labor at its burdened rate, any subs.
- Add the ripple cost. Estimate the productivity you'll lose on the scheduled work the change affects (a 10–30% hit), plus remobilization and any out-of-sequence work.
- Price it on margin. Take the full cost — direct plus ripple — and price it on the same margin as the base job: Price = Cost ÷ (1 − Margin).
A worked example
A client wants to add a heated floor and relocate plumbing partway through a bathroom remodel:
| Item | Amount |
|---|---|
| Added materials | $1,800 |
| Added labor (16 hrs × $45, burdened 35%) | $972 |
| Plumbing sub | $600 |
| Direct cost | $3,372 |
| Productivity loss (15% on $4,000 of affected work) | $600 |
| Remobilization / out-of-sequence | $350 |
| Ripple cost | $950 |
| Total change-order cost | $4,322 |
Priced on a 30% margin: $4,322 ÷ 0.70 = $6,174. Now compare the trap: a 10% markup on just the direct cost would be $3,372 × 1.10 = $3,709. That price doesn't even cover the real cost of $4,322 — its true margin is about −16%. The gap between the right price and the trap is $2,465, lost on a single change order.
Small changes, added up all year
Change orders run 8–14% of contract value on a typical job, and roughly a third of projects hit a major scope change. Underprice each one by a few hundred dollars, multiply across a year, and you've handed back real profit — invisibly. Logging every change against the original contract keeps the cumulative total honest and shows creep before it gets out of hand.
Put it in writing
A change order isn't just a price — it's a small contract. Every one should be documented before the work starts: the scope of the change, the price, the adjustment to the contract total, and signatures from both you and the client. A clear, signed change order protects your payment and prevents the "I didn't agree to that" conversation at the end of the job.
Price it and document it in one place
The BidSolid Change-Order Calculator prices the change on direct cost plus ripple, on your margin — and shows the trap price beside it so the gap is obvious. Then it generates a clean, client-ready change-order document that fills itself from your inputs, ready to sign and send.
See the tool — $99Frequently asked
How do you price a change order?
Add the direct cost (new materials, burdened labor, subs) to the ripple cost (rework, remob, out-of-sequence, lost productivity), then price the total on your margin. Don't just add a flat markup to the visible cost.
What markup should I add to a change order?
Skip the flat markup. Count the full cost including ripple and price it on the same margin as the base job — a 5–10% markup on the obvious cost usually loses money once the disruption is counted.
What is ripple cost?
The cost a change creates beyond its own materials and labor: redone work, remobilization, out-of-sequence trades, and lost productivity (often 10–30%) on scheduled work.
What percentage of a contract are change orders?
About 8–14% on a typical job, with roughly a third of projects seeing a major scope change. Track the cumulative total against the original contract.
Sources: change orders 8–14% of contract value — Navigant Construction Forum; ~35% of projects experience a major scope change — industry; productivity loss on disrupted work 10–30% — industry. Markup-to-margin figures are arithmetic. Dollar examples are illustrative.