Get the change order fully executed, add it to the schedule of values as its own line, and bill progress on it in the very next pay app. Most change order payment delays start with paperwork, not with the owner.
Review invoices, committed costs, and cash timing together before making project decisions. AI-generated illustration.
To invoice a change order without delays, get it fully signed before you bill it, add it to your schedule of values as its own line (never folded into an existing one), and bill progress on it in the next pay application, with the signed change order and cost backup attached. If the work is happening before the paperwork is done, track it as pending and push for signatures on a weekly cadence so it can be billed the next cycle instead of at closeout.
Unbilled change work is one of the most common reasons contractors finish a job "profitable on paper" and short on cash. The work is done, the crew is paid, and the money is stuck behind a missing signature.
Why change order billing gets stuck
Not fully executed. Signed by the PM but not by the owner, or approved by email with no formal change order.
Billed into the wrong line. Added to an existing line, so the reviewer cannot tell what changed and rejects the whole item.
Billed all at once at the end. The contractor waits until the change is finished, then misses the billing cutoff.
Missing backup. No labor tickets, quotes, or material invoices for time-and-materials changes.
Pending pricing. Scope approved, price still in negotiation, so nobody bills anything.
Step-by-step: billing change orders the right way
1. Separate the three stages of a change
Track every change by status: potential change (identified, not priced), change order request (priced and submitted), and executed change order (signed by all parties). Only executed changes go on a pay app. Pending items live on your change log until they are signed.
2. Push for execution every week
Keep a short list of change order requests awaiting signature, with dollar amounts and days outstanding. Review it in the weekly owner or OAC meeting. A request that sits for 45 days without a decision is a cash problem and possibly a claim, so treat it like one.
3. Add each executed change as a new SOV line
Give each change order its own line number on the continuation sheet, using its CO number and a short description: "CO 7: added corridor lighting, level 3." This keeps the original contract lines clean and makes approval faster.
4. Bill progress, not just completion
If CO 7 is 40 percent complete at the pay app cutoff, bill 40 percent. Change work is earned just like base contract work. Waiting until 100 percent can push the money a month or more past when you paid for it.
5. Attach the right backup
The fully signed change order.
For lump-sum changes: the pricing breakdown that was approved.
For time and materials changes: signed daily tickets, labor hours by classification, material invoices, and equipment hours.
Updated contract sum on the summary sheet.
6. Update the contract sum and retainage
The contract sum on the pay app summary should increase by the executed change orders to date. Retainage usually applies to change order billings too, unless the contract says otherwise.
7. Handle disputed changes separately
If the owner directs the work but disputes the price, the contract may allow a change directive or similar mechanism to bill the undisputed portion while the rest is negotiated. Use it. Do not let one disputed number hold up the whole change.
Worked example: a GC with three change orders in one month
Say a GC is on a $1,450,000 medical office build-out. At the April cutoff it has:
Example change order status at pay app cutoff
Change
Amount
Status
Percent complete
Bill this month?
CO 5: added exam room sink
$8,400
Executed
100%
Yes, $8,400
CO 6: upgraded door hardware
$12,600
Executed
50%
Yes, $6,300
COR 9: added data drops
$5,900
Submitted, not signed
30%
No, track as pending
The April pay app adds CO 5 and CO 6 as new lines, raising the contract sum by $21,000. It bills $14,700 of change work before retainage. COR 9 stays on the change log as pending, and the PM flags it in Tuesday's OAC meeting. It gets signed the next week and goes on the May pay app at whatever percent complete it has reached.
Compare that with the habit of billing changes only at the end: the $14,700 would have waited until the closeout pay app, possibly months away. Meanwhile the GC would already have paid its plumber, its hardware supplier, and its own crew for that work, financing the owner's changes out of its own line of credit.
Set up the billing rhythm at kickoff
The fastest change order billing is planned before the first change exists. At the kickoff meeting, ask the owner or GC three questions and write the answers in the minutes. Who signs change orders, and is there a dollar limit for the owner's rep? Can executed changes be billed on the very next pay app, or do they wait for an architect's review cycle? What backup do they expect for lump-sum and T&M changes? With those answers, the office can build a change order package that gets approved on the first pass instead of the third.
How subcontractors should bill change orders
Subs face the same problem one tier down, with one extra hurdle: the GC may not have its own change order from the owner yet. Ask the GC for a written change order or directive before doing the work, then bill it on the next pay app as a new line. If the GC says it cannot pay until the owner signs, that is a pay-when-paid conversation, not a reason to stop tracking. See how subcontractors should track change orders.
Mistakes that delay change order payments
Billing changes that are approved by email only.
Folding change work into base contract lines.
Waiting until a change is 100 percent done before billing any of it.
Sending T&M bills without signed daily tickets.
Forgetting to update the contract sum, so the pay app math does not tie.
Letting pending change requests age without escalation.
Smart Business Automator links change orders to invoicing on the same project, so an approved change can be added to the next invoice without retyping. See change order approval automation.
Frequently asked questions
Can I bill a change order before it is signed?+
Most owners will reject it, and billing unsigned work can weaken your position if the change is later disputed. Track it as pending and bill once it is executed, unless the contract allows billing under a directive.
Should change orders get their own line on the schedule of values?+
Yes. A separate line per change order makes approval easier and keeps the original contract lines clean for tracking.
Does retainage apply to change orders?+
Usually yes, at the same rate as the base contract, unless the contract states otherwise.
How do I bill a time-and-materials change order?+
Bill actual labor, material, and equipment per the contract's T&M rates and markup, with signed daily tickets and invoices attached. Bill as the work progresses, not only at the end.
Maurice Francois writes and edits construction operations guides for Smart Business Automator. More from Maurice on the Scaling Legends podcast.
Related listening · Scaling Legends
Construction Market Intelligence: April 3 - Senate Introduces Work Zone Safety Bill as Anti-DEI Executive Order Hits Federal Contractors and DBE Court Challenge Gets Dismissed
Friday intelligence: Safe Roads for Those Who Serve Act introduced bipartisan. Anti-DEI EO creates 6 new obligations for all federal contractors, April 25 deadline. Mid-America Milling v. DOT dismissed as moot. ConstructConnect: spending +5.2% but starts -3.5%. Weekly trends + deadline recap.
Starts muted when the player comes into view.
Read the full episode transcript
Published transcript from Scaling Legends. It may contain transcription errors. View the source transcript.
A bipartisan work zone safety bill just dropped in the Senate. A new executive order is forcing every federal contractor to change their DEI programs in 30 days or face debarment. And a court just dismissed a major challenge to the DBE program. But not for the reason you think. This is Construction Market Intelligence for April 3rd. Yeah, I mean, it has just been an absolute whirlwind of a week. Oh, totally. It's like the ground is just shifting under everyone's feet right now. Three regulatory earthquakes in a single week. So, welcome to the Deep Dive. We've got a lot to get through today. We really do. And you know, if you're operating in the construction space right now, the margins for error are just vanishing. They're practically gone. Right. And that's exactly why we're doing this. Our mission today is tailored specifically
for you. The busy construction professional, the project manager, the executive who just needs to cut through the noise. We aren't just going to read the headlines to you. We're going to break down the how and the why behind these shifts. Yeah, because the through line today is really this collision of compliance and complexity. The definition of a successful contractor is fundamentally changing. It used to just be about, you know, managing your materials and labor. Exactly. Flawlessly managing concrete and weather. But now it's about flawlessly managing data and regulatory exposure deep inside your supply chain. OK, well, let's unpack this because I want to start with the physical reality on the ground before we get into the back office paperwork. Let's look at the safety baseline. Yeah, the new work zone safety bill. Right. The Safe Roads
for Those Who Serve Act. It's bipartisan, introduced by Senator Cortez Masto, a Democrat from Nevada, and Senator McCormick, a Republican from Pennsylvania. And we really need to ground this in the human element because we aren't just talking about abstract policy here. The stats are just, they're stark. Yeah. What are the current numbers looking like? We're seeing roughly 100 ,000 work zone crashes annually. 100 ,000. Wow. Yeah. And out of those, about 35 ,000 injuries. 1 ,000 overall deaths, and tragically, around 150 construction worker fatalities every single year. 150 workers who just don't get to go home. I mean, that's a heavy number. But haven't states always tracked work zone accidents? What makes this specific Senate bill different? They do track them, sure.
But the way they do it is incredibly broken. It's totally fragmented. Like historically mismatched. Exactly. A minor collision with a traffic barrier might be logged as an actual incident in Pennsylvania. But then in Nevada, they might just categorize it as a hazard report. You can't fix a national problem when the data doesn't even match up. So this bill basically forces states to improve and standardize that data collection. Yes, for both injuries and fatalities. The way I was reading it kind of feels like putting a federal speed camera on the states themselves. That's a great way to put it, because it triggers mandatory safety improvement plans if a state's numbers rise over a two -year period. Oh, so there are actual consequences. Big ones. And as an update from our work zone safety deep dive back on March
26, you got to remember the looming Federal Highway Administration deadline. The FHWA compliance deadline is sitting out there on December 31st, 2026. Right. So this new Senate bill is basically adding legislative teeth to that upcoming deadline. Exactly. State DOTs are going to start cracking down aggressively on prime contractors to make sure work sites are airtight. They have to. Or they risk federal funding. Which means the target for safety compliance is moving fast. Yeah. And, you know, tracking these moving legislative targets is exactly why tools like the Smart Business Automator are flagging legislative developments affecting construction safety compliance. directly on contractors dashboards because you just you can't afford to bid a three -year project using yesterday's safety rule you really can't being caught off guard right now is just not an option
okay so we're seeing how this safety bill forces states to track physical data but simultaneously the federal government is demanding that contractors track social data in the back office which brings us to the compliance sledgehammer the new dei executive order right let's pivot from physical safety to legal exposure On March 26th, 2026, we got a new executive order titled. addressing DEI discrimination by federal contractors. And this is a whole new level of scrutiny. It's super important we break down the factual requirements here with absolute neutrality. We're just reporting the facts because regardless of your personal politics, the operational impact of this is what matters to your business. Absolutely. So what are the actual requirements? The EI introduces
six mandatory contract clause obligations. Contractors must formally certify that their DEI programs, diversity, equity, and inclusion do not use race or ethnicity as... criteria in hiring, promotion, or training. Okay, wait, just to be incredibly clear on the scope here, it is strictly limited to race and ethnicity and disparate treatment, right? Yes, strictly limited to that. So it does not impact general safety training or mentorship programs or just general workforce development? Correct. It doesn't touch those. The language is highly specific to criteria used for hiring, promoting, and training. Okay, but let me ask a critical question here. Say I don't run a massive federal prime contractor. How does a prime even track the hiring policies of a small sub? Like, how far down the food chain does this actually
go? This is where it gets incredibly serious. It applies to all federal contracts and subcontractors at every single tier. Every single tier. You mean even the local crew just laying rebar for a week? Every tier. Tier one, tier two, tier three. It operates through flow down clauses. So the federal government makes the prime sign it. The prime is legally obligated to put it in the contract for the tier two sub. The tier two sub has to put it in the contract for the tier three sub. Wow. Yeah. And it goes much further than previous orders like EO 14173. because it explicitly makes compliance material to payment. So if your Tier 3 subcontractor is out of compliance, say they have a hiring quota based on race, your payment on the entire project is at risk. Your payment is at risk and the penalties are harsh. We are talking about contract cancellation, total
debarment from all federal work, and trouble damages under the False Claims Act. Stop right there, because people really need to understand that term. Trouble damages under the False Claims Act. Yeah. That doesn't just mean a fine, does it? No. Trouble damages means three times the amount of actual damages the government sustained. Sometimes the government views the entire contract as fraudulently obtained if you lie on a compliance form. It is a company -ending penalty. Man. So what is the ticking clock on this? It is moving fast. The initial compliance deadline is April 25th. That is 30 days from when it was signed, just weeks away. Then we have FAR guidance, federal acquisition regulation at 60 days, and compliance reviews start at 120 days. That is basically
tomorrow in construction time. You have to audit your entire supply chain right now. And again, this is why people are leaning so hard into tech. Smart business automator compliance tracking flags EO requirements on your federal projects automatically. Because a simple clerical error from a sub down the line could literally tank your entire federal portfolio. You don't want to get accidentally debarred. No, you definitely don't. And, you know, while we're seeing the federal government tighten its grip on equity compliance from the top down, we're also seeing this intense pressure from the bottom up in the courts. Which is the perfect transition to our third topic. The phantom ruling. Let's talk about the recent Mid -America milling versus DOT case. Right. In the Eastern District of Kentucky. Yes. Judge Van Tattenhove. We covered the lead up to this extensively in our March 18th and 24th
coverage. It's a major challenge to the Disadvantaged Business Enterprise Program, the DBE. Yeah. And everyone was watching this case closely. Here is the twist. The judge dismissed the challenge on March 19, 2026. but he did not dismiss it on the merits of the case. Right, he dismissed it on the grounds of mootness. Okay, so explain that. What does mootness actually mean for the people out there pouring concrete? It basically means the legal question was no longer relevant. Because the underlying facts had already changed. Back in October 2025, the DOT issued a new rule that voluntarily eliminated the specific race and sex presumptions that were being challenged in the first place. Ah. So they essentially said, you can no longer just presume someone is socially or economically disadvantaged based solely on
their race or gender. Exactly. They replaced that presumption with a requirement for a personal narrative. Business owners now have to provide specific, individualized proof of disadvantage. So the court looked at the lawsuit and said, well, the thing you are suing over doesn't even exist anymore. So it's moot. So essentially the target moved before the legal arrow could hit it. Perfect way to describe it. Yeah. So there is no constitutional ruling from this court. The DBE program stands as it was modified last year. The judge did say future reinstatement of those presumptions is legally possible, but he called it sheer speculation at this point. OK, so the legal challenge is over. But for the listener, the operational headache just continues. Because proving individualized disadvantage sounds like a ton of paperwork. It is a massive operational
impact. Just look at Wisconsin. There are approximately 1 ,300 DBE businesses in Wisconsin alone that are currently facing recertification under these new modified rules. 1 ,301 states. Yeah. They have to submit tax returns, personal narratives, bank records. It's a huge administrative burden. And it creates massive uncertainty for the prime contractors who rely on those DBEs to meet your project goals. Yeah. If you're subjecting loses certification mid -project, you're scrambling. It's just a gauntlet of administration right now. It really is. Okay, let's zoom out from compliance and transition over to capital. Let's look at the macroeconomic view. We have fresh data from ConstructConnect, and there is a really weird divergence happening. Yeah, the numbers are kind of pulling in two different directions.
Right, so total construction spending is actually up 5 .2%, but construction starts are down 3 .5%. So what does this all mean for you listening? Are we just finishing expensive legacy projects but hesitating to break ground on new ones? That is exactly what's happening. And Michael Gux, he's the chief economist over at ConstructConnect. He provided an amazing breakdown on this uncertainty. It's a massive sector divergence. Okay, so who's winning? Manufacturing construction is the absolute standout. It is experiencing 13 .4 % growth. Wow, 13 .4%. That's fueled by the Cheech's Act, right? and reshoring. The Cheat GPS Act, general supply chain reshoring, and the impact of tariffs. Tariffs make foreign steel and components expensive, so it creates this huge domestic manufacturing
opportunity. But wait, doesn't relying on tariffs come with a massive reversal risk? Like, depending on the political winds? Oh, completely. Gux points that out. If an administration repeals those tariffs, the incentive to build a domestic plant could vanish, so it's a high -reward, high -risk sector. Makes sense. What else is booming? Power generation. It's booming due to just insatiable demand. Between the grid infrastructure for EVs and the massive power requirements for AI data centers, we're seeing huge investments in nuclear, wind, and data centers. But then residential is the anchor dragging the numbers down. Yeah. Residential dropped 9 % in 2024. Now, the expectation is a recovery in late 2026, but right now it's hurting. This maps so perfectly onto the emerging search and trend signals we're tracking. And
actually, if you look at how the smart business Automator Economic Dashboard shows sector performance by region, it's so clear. We are seeing a cluster of construction companies, specifically J .E. Dunn, Klune, and Leighton, tied to Google AI News, hitting a breakout score of 65. People are chasing that data center boom. They really are. The Port Washington Data Center also hit a 65 breakout score. And get this, search volume for construction safety management software is seeing a sustained plus 450 % surge. Which goes right back to the compliance panic we were just talking about. Exactly. Plus, we're seeing diesel fuel costs hitting a produce more signal with an average score of 97. That's a proven keyword we just produced a deep dive on, briefing 198. In fact, all core keywords remain rising from
the March data. Keeping a pulse on these shifting sectors is crucial. And it's why Smart Business Automator tracks emerging search signals for content positioning. It gives you a massive competitive edge for business development. You have to know where the capital is flowing. You really do. Okay, let's synthesize the sheer volume of what we've discussed today. Because if I'm listening to this right now, I'm feeling a little overwhelmed. Let's run through the deadline gauntlet really quick so everyone has their calendar marked. Let's do it. It's a rapid fire list. All right. April 25th. That's the anti -DEI executive order initial compliance deadline. That is just 23 days away. Yep. April 16th. The Gateway Tunnel court date. That's 13 days away. Then May 20th, the DOE SPARC applications are due. That is $1 .9 billion in Department of Energy funding sitting
there in 47 days. Huge opportunity there. September 30th, the IIJA expires. That's 180 days away. Right. The Infrastructure Investment and Jobs Act. It needs reauthorization. Then in November, CMMC Phase 2 audits begin for cybersecurity. And finally, December 31st, that work zone safety compliance deadline we talked about at the top of the show. When you lay it out sequentially like that, you just have to ask the logical follow -up question. Which is? How does a firm scale without drowning in the admin work required to manage all of this? Well, yeah. I mean, we've talked about AI and software a lot today, but I know a lot of project managers who just... roll their eyes at new software. They're like, great, another dashboard. Tech fatigue is real. But the difference now is that these platforms act as project -aware assistants. They integrate
with your existing ERPs. You aren't doing manual data entry. Right, like searching project data using natural language instead of hunting through folders for an hour. Exactly. From a high -level risk management perspective, the AI extracts details from complex specs to ensure compliance. Like those new DEI or safety rules. It evaluates change, order impacts, and detects schedule risks automatically. It basically allows project managers to handle more jobs safely. It does. But you know, it brings me to a final thought I want to leave everyone with today. Something to mull over this weekend. Oh, let's hear it. So we've spent this whole time talking about using AI to perfectly optimize your compliance to track market signals. But if every major contractor adopts the exact same AI tools over the next
two years, does perfection just become the new baseline? Oh, wow. That is interesting. Right. If everyone's compliance is flawless and everyone's bids are perfectly optimized, how will you actually differentiate your firm in 2027? When technology levels the playing field completely, does winning a project circle all the way back to just having the strongest, most authentic human relationships? That is a phenomenal question. When perfection is standard. The human element is the only premium left. Wow. If you know a contractor, a PM, or an executive who's dealing with this specific wave of federal compliance right now, send them this deep dive immediately. Do not let them get blindsided on April 25th. Seriously, share this with your team. Make sure to like, share, comment,
and subscribe from whatever platform you are listening on. Have a great weekend, stay safe out there, and we'll see you on the next one.
