Approved change orders directly affect your contract sum and billing. Understanding this impact helps you create accurate pay applications and track project financials.
Pro Feature
Impact on AIA G702 Line 2
On the AIA G702, Line 2 shows "Net Change by Change Orders." This is the sum of all approved change orders.
| Change Order | Amount | Running Total |
|---|---|---|
| CO #1 | +$25,000 | $25,000 |
| CO #2 | -$5,000 | $20,000 |
| CO #3 | +$15,000 | $35,000 |
| Line 2 | - | $35,000 |
Contract Sum Calculation
Line 3 on the G702 shows your current contract sum:
Line 3 = Line 1 + Line 2
Contract Sum = Original Contract + Net Change Orders
Example
| Line | Description | Amount |
|---|---|---|
| 1 | Original Contract Sum | $500,000 |
| 2 | Net Change by Change Orders | $35,000 |
| 3 | Contract Sum to Date | $535,000 |
Automatic Update
Impact on Schedule of Values
When you add a change order, you need to decide how it appears in your SOV:
Option 1: Separate Line Item
Add the CO as a new line item in your SOV:
- Pros: Clear visibility of CO work and billing
- Cons: SOV grows with each change order
Option 2: Modify Existing Line
Adjust the scheduled value of an existing line item:
- Pros: Keeps SOV compact
- Cons: Less visibility of what's original vs. changed
Best Practice
Billing Change Order Work
When You Can Bill
You can bill for change order work only after the CO is approved. The approval date determines when the work becomes billable.
How to Bill
- CO must be in "Approved" status
- Add CO line item to your SOV (if not already)
- Enter progress on the CO work in your pay application
- CO amount is included in your total billing
Retroactive Billing
If you've already completed CO work before approval:
- Wait for approval
- Add the CO line item to your SOV
- Bill for the completed work in your next pay app
- You may bill for more than one period's worth if work is done
Retainage on Change Orders
Retainage typically applies to change order work at the same rate as original contract work.
Example
| Item | Billed | Retainage (10%) | Net |
|---|---|---|---|
| Original SOV Work | $50,000 | $5,000 | $45,000 |
| CO #1 Work | $25,000 | $2,500 | $22,500 |
| Total | $75,000 | $7,500 | $67,500 |
Pending COs: What Not to Do
Common mistakes with pending change orders:
Don't Include in Billing
Pending COs should not appear in Line 2 or your SOV. They are not part of your contract until approved.
Don't Bill for the Work
Even if you've performed the work, you cannot bill for it until the CO is approved. Track your costs separately.
Risk of Rejection
Tracking Pending COs
RIVET helps you track the financial impact of pending COs:
- Pending CO Total - Sum of all pending COs
- Potential Contract Value - Current + pending COs
- At-Risk Amount - Work done on unapproved COs
Financial Reporting
When reporting project financials, separate:
- Committed Contract - Original + approved COs
- Pending Changes - Submitted but not approved
- Potential Contract - Committed + pending
Best Practices
Track Approval Dates
Reconcile Monthly
Separate Line Items
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