🇺🇸United States

Labor and Material Overruns from Delayed or Incomplete Change Order Approvals

3 verified sources

Definition

When change orders are poorly documented, approvals are delayed, yet field crews in finishing trades often proceed to avoid schedule impacts, incurring overtime, out‑of‑sequence work, and premium material costs without confirmed compensation. These undocumented cost escalations drive project overruns even when some change value is eventually recovered.

Key Findings

  • Financial Impact: $10,000–$100,000 per project in extra labor (overtime, re‑mobilizations) and rush materials on complex finishing scopes; multi‑project contractors routinely see 2–4% margin erosion attributable to poorly controlled change processes in industry benchmarks.
  • Frequency: Weekly on active finishing projects with frequent revisions or RFIs.
  • Root Cause: Lack of standardized, timely documentation (clear scope, quantities, schedule impact, and pricing) creates negotiation ambiguity and slows owner approval, forcing contractors to absorb acceleration, resequencing, and procurement premiums.[3][4][6] Without documented impacts to cost and schedule, it is difficult to justify compensation for inefficiencies caused by changes.

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Building Finishing Contractors.

Affected Stakeholders

Project Manager, Scheduling/Planning Engineer, Site Superintendent, Foreman, Procurement Manager, CFO/Controller

Deep Analysis (Premium)

Financial Impact

$10,000–$100,000 per project in extra labor and materials[1][3]. • $10,000–$100,000 per project in overruns[2][4]. • $10,000–$100,000 per project in overtime labor and premium materials[1][2].

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Current Workarounds

Crew proceeds with Excel-tracked extras • Excel and email attachments. • Excel cost trackers and WhatsApp for design approval chats.

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Unpaid Extra Work Due to Poor or Missing Change Order Documentation

$50,000–$250,000 per mid‑size project with heavy finish changes; recurring annually across portfolios (documented examples show contractors forfeiting six‑ and seven‑figure sums when change requests are denied for lack of proper documentation).

Rework and Defects from Ambiguous or Undocumented Finish Change Orders

$5,000–$50,000 per project in rework for finish trades (painting, millwork, flooring, ceilings), with industry research attributing a substantial share of rework to change‑related communication and documentation failures.

Owner and Tenant Frustration from Slow, Confusing Change Order Paperwork

Difficult to quantify precisely, but industry surveys link poor change management and documentation with higher dispute rates and lower repeat‑business; lost repeat client or GC relationships can represent hundreds of thousands in foregone revenue over time.

Extended Time-to-Cash from Slow, Paper-Heavy Change Order Documentation

Commonly 30–90 days of additional delay on collecting change order revenue; on a contractor with $5M/year in change orders, this represents hundreds of thousands of dollars trapped in working capital and increased interest/financing costs.

Project Management Capacity Consumed by Manual Change Order Paperwork

For a PM spending 20–30% of time on manual change documentation across several jobs, fully burdened cost can exceed $30,000–$60,000 per year, with additional opportunity loss from fewer bids or poorly supervised field work.

Contractual Non-Compliance and Claim Denials from Failure to Follow Change Order Procedures

Denied claims commonly range from tens of thousands to several hundred thousand dollars per project, particularly where change‑related delay or disruption costs are rejected due to lack of timely written notice.

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