Koester Expectation for Change Orders

Title: Change Order Development 
Department: Project Management / Operations 
Applies To: PMs, PEs, Superintendents, Accounting, Ops Leadership, Subcontractors (when directed) 

Objective  

Provide a clear, repeatable, and auditable process to develop, price, negotiate, approve, and close Change Orders (COs) with complete documentation, accurate cost/schedule impacts, and strong client/subcontractor relationships. 

Background 

Applies to all projects and all scope, cost, or schedule modifications, regardless of origin or financial impact. This includes changes initiated by the Owner, Design Team, AHJ, unforeseen conditions, or as directed by the Project Manager. 

This process applies to all change orders, including: 

• External Change Orders – Changes to the Prime Contract submitted to the Owner for approval and potential cost/schedule adjustment.  

• Subcontract / Commitment Change Orders – Changes issued to or received from trade partners.  

• Internal Change Orders – Budget-neutral or GC-responsible changes (e.g., scope gaps, coordination issues, or field-driven adjustments not passed to the Owner).  

• Backcharges – Cost recovery issued to trade partners for rework, deficiencies, or scope responsibility. 

Things to Consider 

• Contract Documents: Prime Agreement, General and Supplementary Conditions, and all Exhibits (including markup rules, tax, and retainage). 

• All change orders shall be prepared in accordance with the Contract Documents, with specific attention to: 

• Division 01 requirements (procedures, pricing, documentation, and approvals)  

• Owner/client change order requirements and processes  

• Allowance and contingency provisions, as applicable  

• The Contract Documents shall govern all change order formatting, supporting documentation, and approval workflows. 

• Design Revisions: RFIs, ASIs, CCDs, Bulletins, Addenda, Sketches. 

• Field Documents: FWOs/T&M Tickets, Daily Logs, Photos/Measurements. 

• Systems: Procore (Change Events/Prime COs/Subcontract COs, Budget, Schedule), Company CO Tracker, Scheduling software (e.g., P6/MSP). 

• Templates: RFP to Sub(s), CO Description Template, NTE Authorization, Email subject format, Cost backup checklist. 

Definitions 

• Change Event (CE): Internal record of a potential change. 

• Change Order (CO): Formal contract modification to value and/or time. 

• FWO/T&M: Field Work Order / Time & Material ticket signed daily. 

• NTE: Not-to-Exceed authorization to proceed pending pricing. 

• Impact Types: Owner Direction, Design Error/Omission, Unforeseen Condition, Code/AHJ, Coordination/Access, Acceleration/Interference. 

 Prerequisites 

• Create Change Event

 Roles & Responsibilities 

Service Levels  

• CE created within 24 hours of discovery. 

• RFP issued to subs/vendors within 2 business days. 

• Draft CO package assembled within 5 business days. 

• Submit to Owner or request NTE within 7 business days. 

• CO log reviewed weekly. 

Tools & File Naming 

• CO/CE Numbering: Description of Work 

• Email Subject: [Project #] – PCO #[###] – [Short Title] – [RFI/ASI Ref]. 

• Drawing Markups: Cloud/Delta with CE/PCO reference on affected sheets. 

Steps

Step 1 — Identify & Stabilize the Change 

• Halt out-of-scope work (unless safety issue). 

• Take date-stamped photos and measurements. 

• Note trigger (Owner/Design/AHJ/etc.). 

• Record in Daily Report and tag “Potential Change.” 

Step 2 — Open a Change Event (CE) 

• PE opens CE in Procore. 

• Attach initial backup (photos, plans, emails). 

• Assign cost codes and reference RFIs/ASIs. 

Step 3 — Issue RFPs 

• PE issues RFP to all impacted subs/vendors within 2 days. 

• Include scope narrative, drawings, required breakdown, and due date. 

• Note tax/markup requirements. 

Step 4 — Field Authorization (If Work Cannot Wait) 

• PM secures written NTE or direction. 

• Superintendent collects daily signed T&M tickets. 

• Upload T&M to CE same day. 

Step 5 — Build Internal Pricing 

• Compile sub/vendor quotes and validate quantities. 

• Apply contract markups, tax, and bonds/insurance as needed. 

• Add General Conditions costs if applicable. 

• Determine schedule impact and update CE pricing. 

Step 6 — Draft the CO Package 

Include: 

1. What changed 

2. Why it changed 

3. Where it occurred 

4. References (RFI/ASI/CCD) 

5. Cost breakdown 

6. Schedule impact 

7. Attachment index 

Step 7 — Internal Review & Approval 

• PM/PE review math, markup, scope clarity. 

• PM confirms tax/SOV coding. 

• Ops approves if above threshold or with schedule impact. 

Step 8 — Submit to Owner 

• Send PCO with summary email and clear ask (approval/NTE). 

• Record submission in CE. 

Step 9 — Required Attachments 

• PCO cover/description 

• Detailed cost breakdown 

• Sub/vendor quotes 

• T&M tickets (if applicable) 

• Marked plans/sketches 

• RFI/ASI/CCD references 

• Schedule impact narrative 

• Photos 

• Tax/markup tables 

• NTE documentation 

Step 10 — Negotiate & Document 

• PM reviews with Owner/Design team; issue Rev 1 if needed. 

• Capture agreements in meeting minutes/email. 

Step 11 — Approval & Authorization 

• Get written approval per contract. 

• Convert PCO to Prime CCO and update contract value/schedule. 

• Issue subcontractor CCOs. 

• Update budget/SOV. 

Step 12 — Billing & Recordkeeping 

• Add PCCO to next pay app. 

• Store full CO binder in Procore. 

• Update CO log status. 

Step 13 — Closeout 

• Confirm work completion. 

• Upload as-builts and markups. 

• Align warranty start date with Substantial Completion. 

• Record lessons learned for major COs. 

Quality Gates (Do-Not-Pass Without) 

• Clear trigger + location identified. 

• Photos/measurements attached. 

• Detailed pricing backup. 

• Contract-compliant markup/tax applied. 

• Schedule impact stated. 

• Internal approvals captured. 

Risk & Escalation 

• Never proceed without written direction (except safety issues). 

• Escalate COs >14 days old without Owner response. 

• Engage Accounting on tax/legal issues early. 

Markup & Tax Guidance (Sample) 

Communication Templates 

Owner Email Subject: 
[Project #] – PCO #[###] – [Title] – [RFI/ASI Ref] 

Body: 

• What/Why/Where 

• Cost & Time impact 

• Attachments included 

• Requested action 

Logs & Metrics 

• Weekly Review: CO log with submission/approval values, aging items. 

• Monthly Audit: Random sample for compliance.