The difference between a construction change directive and a change order comes down to agreement: a change order is a written modification signed by the owner, architect, and contractor after everyone agrees on the price and schedule impact, while a construction change directive lets the owner and architect order the work to begin before the contractor has signed off on those terms. Both are legitimate tools under standard AIA contracts. Which one applies depends on whether the parties can align on cost and time, and how quickly the work needs to start.
The Core Difference
A change order requires three signatures. The owner, the contractor, and the architect all sign, and the document confirms the specific change in the work, the adjustment to the contract price, and the adjustment to the contract schedule.1AIA Contract Documents. G701: Change Order Miss any one of those signatures and the change order is not valid.2Connecticut Department of Administrative Services. AIA Document G701 – 2017 Change Order
A construction change directive only needs two: the owner and the architect. Once the contractor receives it, it takes effect immediately, whether or not the contractor agrees with the price or the time adjustment.3American Institute of Architects. AIA Document G714 – 2017 Construction Change Directive
That difference in signatures reflects a difference in purpose. Change orders close the book on a modification. Directives keep the project moving while the book is still open.
When a Change Order Is the Right Tool
A change order works when the modification is not time-sensitive and the parties can reach agreement before work starts. A client wants upgraded countertops. The contractor prices the swap, the architect confirms the scope, and everyone signs. The installer then shows up with a locked-in number.
The industry-standard form is AIA Document G701. It records the project name, the original contract date, the change order number, and a description of the modification along with its cost and schedule impact. Signing a completed G701 is a final settlement on all matters tied to that particular change: direct costs, indirect costs, and schedule.
That finality cuts both ways. It protects the owner from surprise costs and protects the contractor from doing work without a locked price. It also means reopening the negotiation afterward is very difficult. If a contractor signs a G701 without accounting for a full time extension or overhead impact, recovering those later is an uphill fight.
When a Construction Change Directive Is the Right Tool
A directive is the fallback when the work has to start now but the price or schedule impact is still in dispute. The classic example: a soil report reveals contamination that requires immediate remediation, and the owner and contractor cannot agree on cost. Rather than let the project stall over dollars, the owner and architect issue a directive on AIA Document G714, and the contractor proceeds.4AIA Contract Documents. G714: Construction Change Directive
Under the AIA A201 general conditions, the contractor must promptly proceed with the directed work and notify the architect whether it agrees or disagrees with the proposed method for calculating the cost adjustment.5American Institute of Architects. AIA Document A201-2017 – Sample Promptly means now, not after the parties finish negotiating. A contractor who refuses to perform validly directed work risks a breach of contract claim, and in serious cases the owner may have grounds to terminate the contract and hire someone else to finish.
A directive is not a blank check for the owner, though. The directed change has to fall within the general scope of the original contract. If the owner tries to use a directive to fundamentally transform the project, the contractor may raise a cardinal change defense, arguing the modification goes so far beyond the original deal that it amounts to an entirely new contract. Those disputes are fact-specific and expensive to litigate, which gives both sides an incentive to use directives reasonably.
Getting Paid While the Price Is Unsettled
Contractors are not expected to bankroll disputed work indefinitely. While the final cost of a directive is still being determined, the contractor can request payment for completed directed work through its regular payment applications. The architect reviews the costs and certifies the amount that appears reasonably justified, adjusting the contract sum on an interim basis. Either party keeps the right to dispute the architect’s interim figure through the contract’s formal claims process.6University of Wisconsin System. AIA Document A201 – General Conditions of the Contract for Construction
Converting a Directive Into a Change Order
A directive is always temporary. Once the owner and contractor reach agreement on the final cost and time adjustments, the architect prepares a change order that replaces it and locks the numbers into the permanent contract record.3American Institute of Architects. AIA Document G714 – 2017 Construction Change Directive If the parties cannot agree, the claims and dispute resolution procedures in the general conditions take over.
How Directed Work Gets Priced
When work proceeds under a directive without an agreed price, the final cost is determined through one of four methods spelled out in AIA A201 Section 7.3.3:7San Francisco Mayor’s Office of Housing and Community Development. AIA Document A201 General Conditions of the Contract for Construction
- Lump sum. The parties agree on a total price after the work is better defined, supported by itemized cost data.
- Unit prices. Rates already established in the contract, such as an amount per cubic yard of concrete or linear foot of conduit, are applied to the actual quantities installed.
- Cost plus fee. The contractor tracks every dollar spent on labor, equipment, and materials, then adds a negotiated percentage for overhead and profit. Many contracts set this markup in the range of 10 to 15 percent, though it varies by agreement.
- Architect’s determination. If none of the above methods work, the architect determines a reasonable cost based on the contractor’s expenditure records, and either party can dispute the figure through formal claims procedures.
Cost plus fee demands the most careful recordkeeping. Daily labor logs by trade, equipment usage with hourly rates, and receipts for every material purchase all need to be in order. For contractor-owned equipment, many contracts reference published rate guides rather than letting the contractor set its own rental figure. Those published rates cover ownership costs, maintenance, fuel, and depreciation but exclude profit and company overhead, which are already covered by the markup percentage.
Deductive changes work differently. When a modification results in a net decrease to the contract price, the credit is calculated at actual net cost. The markup applies only to the net increase, if any, when additions and credits are combined within the same change.
A Third Category: Minor Changes in the Work
Not every modification needs a change order or a directive. Under AIA A201 Section 7.4, the architect can order minor changes unilaterally, so long as they are consistent with the design intent and do not affect the contract price or schedule.7San Francisco Mayor’s Office of Housing and Community Development. AIA Document A201 General Conditions of the Contract for Construction These are documented on AIA Form G710.8AIA Contract Documents. Instructions: G710 – 2017, Architects Supplemental Instructions Swapping one paint finish for an equivalent product at the same cost qualifies. Adding a new room does not.
There is an important catch for contractors here. If you believe an architect’s minor change will actually affect the price or schedule, you need to notify the architect before performing the work. Do the work first without raising the issue and you waive any right to a cost or time adjustment later.
Time Extensions and Liquidated Damages
Both change orders and directives frequently move the schedule, and how the schedule adjustment is documented matters. A change order should state the exact number of days being added to the contract completion date. Vague language invites disputes.
The interaction between changes and liquidated damages is where owners most often stumble. If an owner directs extra work after the contractual completion date has passed without clearly communicating that liquidated damages still apply, a court may find the owner has waived them. Cooperating with a late contractor to develop a new schedule, requesting additional scope, and then trying to collect delay penalties looks contradictory from the bench. Owners who want to preserve those rights should send written notice of intent immediately after the breach and include explicit reservation-of-rights language in every subsequent change document.
For contractors, the same lesson runs in reverse. If a directive or change order does not mention a time extension and you believe one is warranted, raise it in writing before performing the work. Silence on schedule impact does not mean the owner has conceded extra time.
Impact on Insurance and Bonding
Change orders that increase the total project value can create a gap between the builder’s risk insurance coverage and the actual value of the structure. If a policy was written for a $2 million project and change orders push the value to $2.4 million, the last $400,000 in work may be uninsured unless someone updates the policy. Notify the insurance agent whenever a change order increases the project value so the coverage limits can be adjusted.9US Assure. Increase Project Flexibility with Change Order Endorsements
Surety bonds raise a separate concern. Bond premiums are calculated on the final contract price, so an increase triggers an additional premium. More problematic: when change order costs are disputed, a surety that sees a large unresolved claim on the contractor’s books may remove that receivable from the financial statement, weakening the contractor’s overall bonding capacity. Thorough documentation and prompt resolution of disputes can prevent a surety from making those downward adjustments.10Commercial Surety Bond Agency. How Do Change Orders Affect Your Surety Capacity
Documentation Essentials
Both the G701 and G714 forms require the same baseline information: project name and address, original contract date, and a sequential number.2Connecticut Department of Administrative Services. AIA Document G701 – 2017 Change Order Skipping a number or duplicating one creates confusion during audits and closeout, especially on projects with dozens of modifications.
The form fields are only the surface. The supporting documentation is what actually protects the parties: a clear description of the modification, specific references to the contract drawings or specification sections affected, itemized labor and material breakdowns, and any marked-up drawings showing the revised scope. The contractor typically submits this package to the architect, who reviews it for technical accuracy and cost reasonableness before forwarding it to the owner for financial authorization.
Official AIA forms can be purchased through the AIA website or accessed through authorized contract management platforms. On commercial projects they usually route electronically through project management software that timestamps each signature and maintains a revision history. On smaller jobs, certified mail or tracked email to all stakeholders serves the same purpose. The goal in either case is a clean audit trail showing who approved what, when, and for how much.