Change Orders in NYC Construction: When They're Required, How to Price Them, and Getting Paid
8 min read · Updated 2025-01-15
NYC construction change order guide: what constitutes a change in scope, how to properly document and price change orders, owner approval requirements, and how to protect payment rights.
Managing Change Orders on NYC Projects
What is a construction change order?
A change order is a written modification to the construction contract that adds to, reduces, or changes the scope of work, the contract sum, or the contract completion date. Change orders are inevitable on most construction projects — they arise from design changes, unforeseen conditions, owner-requested additions, and errors in the original plans. Proper change order management is critical to project profitability for contractors and budget control for owners.
When must a DOB permit be amended for a change order?
Not all field changes require a permit amendment. Minor field adjustments that don't deviate from the approved plans's intent may be permissible with proper documentation in the site diary. However, changes that involve: structural modifications, changes to egress or accessibility, changes to fire protection systems, changes to mechanical systems, or any change that differs materially from the approved plans must be filed as an amendment through DOB NOW before the work proceeds. Proceeding with unapproved deviations from the approved plans can result in stop work orders.
How should a change order be priced?
Change orders should be priced using the same methodology as the original contract bid: direct labor (hours × rate), materials (quantity × unit price), subcontractor costs (actual sub quote plus markup), equipment costs, overhead (typically 10-15% of direct costs), and profit (typically 10-15% on the subtotal). For time-and-material (T&M) change orders, keep detailed daily records of labor hours and material receipts. For lump-sum change orders, base your price on a realistic estimate and document your reasoning.
What is a "change order clause" and why does it matter?
The change order clause in your contract specifies the process for handling changes: who can authorize a change, the required form, the timing for submitting pricing, and what happens if you proceed without written authorization. Many contracts allow the owner to order changes without the contractor's agreement (subject to pricing disputes), but require written authorization before the contractor incurs costs. Read this clause carefully — proceeding with change work without following the contract's change order process can result in denied claims.
What is a "constructive change order" and how do I document it?
A constructive change order occurs when the owner's actions (or inactions) effectively change the scope of work even without issuing a formal change order. Examples: owner-directed acceleration, design defects that require extra work, owner interference with the work sequence. To preserve your rights, give written notice immediately when you believe you've been constructively directed to perform extra work, and document the additional costs separately. Failure to give timely notice per the contract's notice provisions can waive your right to compensation.
What if an owner refuses to sign a change order but wants the work done?
This is a common and difficult situation. Options: (1) Refuse to perform the work until the change order is signed — this is contractually correct but can damage the relationship and delay the project; (2) Proceed with proper written documentation: send a letter stating "we are proceeding with the following work under protest pending agreed pricing" and keep meticulous cost records; (3) Invoke your contract's dispute resolution mechanism to have the price adjudicated. Never proceed with significant extra work based solely on a verbal agreement — document everything.
How does a contractor get paid for undisputed change orders?
Once a change order is signed, it becomes part of the contract and is paid like any other contract work — typically through the monthly requisition process. Include the approved change order amounts in your next application for payment as a separate line item. Track each change order's billing status separately from the base contract. Do not wait until the end of the project to include change order amounts — if they've been signed, include them in the next payment application.
What is a pending change order (PCO) and how do I handle it?
A pending change order (PCO) is a potential change that has been identified and priced but not yet formally approved by the owner. Track PCOs separately from approved change orders in your project accounting. On your monthly requisition, you can list PCOs separately as "pending" to alert the owner, but you typically cannot include them in your payment amount until they're approved. If a PCO involves work you must start regardless of approval (e.g., an urgent repair), document the necessity and your notice to the owner.