Change Order Pricing When the Contract Rate Is Silent
On a fixed-price hospital renovation, the owner directs added receptacles and a new panel in a corridor that was not in the original drawings. Your contract has a unit-price schedule for branch wiring but is silent on panel installation and on overtime. The work must be done on night shifts because the corridor serves an active unit. Your crew's straight-time rate is $62/hour loaded; night-shift premium is 1.5× for hours after 7 p.m. The original estimate carried 5% contingency, of which 3% remains unspent. The owner's rep says 'just use your normal rates.' The change is roughly 40 hours of electrician time plus a $9,500 panel and gear package.
1. How do you price the change, and what governs the labor rate when the contract is silent?
Read the worked answer
Price the change to reflect the actual conditions the owner directed.
- Panel and gear: $9,500 direct, plus applicable markup per contract or your standard policy.
- Labor: 40 hours at the loaded straight-time rate of $62 = $2,480. But the work is directed at night. The 1.5× premium applies to hours after 7 p.m. If all 40 hours fall in the premium window, labor becomes 40 × $62 × 1.5 = $3,720. If only part does, split the hours.
- Markup: apply overhead and profit per the contract's change-order clause, or your standard rate if silent.
On the rate question: 'normal rates' is ambiguous and the contract is silent on overtime. The defensible position is that the owner directed the night work for operational reasons, so the premium is a direct consequence of the owner's direction and is recoverable. Do not silently absorb it. Document the direction (who ordered night work and why) and price the premium as a separate line so it is visible and negotiable, not hidden in a blended rate.
2. The owner pushes back on the overtime premium. How do you use the remaining contingency, and what is your fallback?
Read the worked answer
Contingency is for the contractor's own risk, not for funding owner-directed scope. Using the 3% remaining contingency to eat the overtime premium would silently transfer owner cost to you and set a precedent on future changes.
Fallback sequence:
- Show the owner the direction that required night work and the cost delta (roughly $1,240 premium on 40 hours).
- Offer alternatives: perform during a planned unit shutdown at straight time, or accept a reduced premium if the owner shares scheduling risk.
- If the owner insists on night work and refuses the premium, escalate per the contract's dispute/change-order process rather than conceding quietly.
Keep contingency untouched for its intended purpose. Document the negotiation and any concession as a deliberate management decision, not an estimating error.