Pricing a Change Order That Sticks

## Pricing a Change Order That Sticks A well-documented change order request that gets rejected on price is almost as bad as not submitting one at all. Here's how to price changes that hold up under scrutiny. ### The Components of a Change Order Price **Direct Labor** Use actual labor rates, not budget rates. Include: - Base wage - Burden (payroll taxes, insurance, benefits) — typically 30–45% of base wage - Foreman time (often overlooked) - Travel time if applicable **Materials** Use actual invoices or current market quotes. Don't use your bid unit prices — those were based on bulk purchasing and favorable market conditions that may not apply to a small change. **Equipment** Use actual rental invoices for rented equipment. For owned equipment, use the AED Green Book or your internal rate schedule. Don't forget fuel, operator, and mobilization. **Subcontractors** Pass through actual sub quotes with your markup. Most contracts allow 5–10% markup on sub work. **Overhead and Profit** Your contract specifies the allowed markup. If it doesn't, industry standard is 10% overhead + 10% profit on labor and materials, 5–10% on subs. Don't leave this out — it's legitimate and expected. **Time-Related Costs** If the change extends your schedule, include: - Extended general conditions (superintendent, trailer, temporary utilities) - Extended equipment rental - Escalation on materials if the delay pushes you into a higher-cost period ### The Productivity Loss Problem Changed work is almost always less productive than planned work. You're working in a disrupted environment, with different materials, in a different sequence. Productivity losses of 20–40% are common on heavily changed projects. Documenting productivity loss is difficult but not impossible: - Compare your actual labor hours on changed work to your bid productivity - Use industry studies (Mechanical Contractors Association, NECA) to support your claim - Keep detailed records of disruptions that affected productivity ### Avoiding the "Should Cost" Trap GCs often respond to change order requests with a "should cost" analysis — their estimate of what the work should have cost. This is almost always lower than your actual cost. Your defense: actual cost records. If you can show actual invoices, timesheets, and equipment logs, you have a much stronger position than a GC with a spreadsheet.