Companion Guide to Video August 2012

www.fhwa.dot.gov/federal-aidessentials

Project Construction and Contract Administration

Contract Administration

Change Orders

You may have heard the saying, “The best laid 

plans . . . often go awry.” The highway 

construction industry recognizes that it is 

unrealistic to expect that a construction project 

can be built without changes to the original 

project plans. Although designers and engineers 

prepare project plans with diligence and great 

care, unforeseen conditions, utility conflicts, or 

unknown geology are items that often can’t be 

anticipated and factored into project design and 

specifications. 

It may also become apparent after a 

construction project has begun that design 

alterations are needed to make the constructed 

work a better fit for the field conditions. When 

this happens on your construction project, the 

project contract needs to be modified to 

accommodate the required changes. However, 

contract changes need to be approved as part of 

the Federal funding procedures. Properly 

executing contract changes is critical to a 

project’s success.

What is a Change?

A change is any alteration to the original 

construction contract. Change orders are 

negotiated agreements with the contractor that 

affect the cost, schedule, design details or 

specification requirements, or any combination 

of these. Not every agency uses the same 

terminology for contract changes. Other 

common terms used to refer to contract changes 

are change order, contract change order, 

supplemental agreement, contract modification, 

work order, and time adjustment or time 

extension. 

A claim is also processed as contract change. A 

claim is formal request for additional 

compensation that is a step beyond the normal 

change order process. Claims are usually the 

result of unresolved modifications to a contract 

that have been previously denied in the change

order process. 

Processing Changes for Implementation

Generally, the reason change orders are needed 

is to make contract adjustments, such as plan or 

specification corrections, or changes to cost or 

time allowed to complete the work.

Regardless of the reason for the change, initiate 

a change request and follow the appropriate 

procedures to obtain approval by your oversight 

agency. The oversight agency is either the State 

department of transportation (State DOT) or the 

Federal 

When contract changes are needed, approval from the oversight 

agency must be obtained as part of Federal funding procedures
Federal-aid Essentials for Local Public Agencies

Highway Administration (FHWA). Changes to a 

contract require the same level of approval as 

the initial contract.

Upon receipt of the request for approval of a 

contract change, the oversight agency will 

assess your request to determine whether the 

proposed changes are eligible for continued 

Federal-aid participation. Depending on the 

magnitude of the proposed changes, the level of 

detail of information needed for analysis may 

increase. When developing a change request, at 

a minimum, be sure to assess these four issues 

for every proposed change:

1. Why is the change necessary?

2. What will the impact be on the original scope 

of work?

3. Who is responsible for costs or delays?

4. Who should pay for the changes?

Supporting Documentation

To ensure that proposed changes are allowable 

and accepted for your federally funded project, 

there are three activities that must occur.

Documentation

Prepare documents that justify the need for the 

contract 

modification 

and the 

proposed cost 

changes. 

Examples of documentation include; 

• Accurate records that show the time, 

labor, equipment, and materials

• Cost estimates prepared by the agency 

that can be compared to the costs in the 

proposed change order submitted by the 

contractor

• Evaluation of construction schedule 

modifications needed and incorporated 

into the change

• Court orders or other legal agreements 

that are used to resolve a claim

Negotiation

A change is 

normally 

negotiated with the 

contractor. The 

change order will 

reflect the final 

agreements on:

• What work 

will be completed

• Any specifications that are modified, 

deleted, or added

• Cost revisions, and time adjustments.

Approval

Finally, a change order must have the approval 

of the oversight 

agency for it to 

be accepted as 

part of a 

revised 

contract. At this 

stage the 

oversight 

agency makes a determination of allowable 

Federal-aid participation. 

The actual procedures for approval of contract 

changes by an oversight agency vary based on 

the impact the changes may have on a contract. 

Refer to the Stewardship and Oversight 

Agreement between the State DOT and FHWA 

or detailed procedures for all change orders. 

Agreements for project funding between your 

agency and the oversight agency also may 

contain separate procedures. 

Summary

Change happens! How you handle contract 

changes for your Federal-aid project can 

substantially impact the funding participation for 

those changes. Just remember, whether you 

have a change to the time allowed for 

completion or make a major specification 

modification, make sure to get oversight agency 

approval for all proposed changes to your 

Federal-aid contracts.
Federal-aid Essentials for Local Public Agencies

The content of this 

document is not a 

substitute for 

information obtained 

from State departments 

of transportation, 

appropriate FHWA 

Division Offices, and 

applicable laws. 

Scenarios have been 

simplified for emphasis 

and do not necessarily 

reflect the actual range of 

requirements applicable 

to the scenario or this 

topic. This document

was created under 

contract number

DTFH63-11-F-00066 by 

the Federal Highway 

Administration, U.S. 

Department of 

Transportation, and is 

offered to the public to 

heighten and focus 

awareness of Federal-aid 

requirements within the 

local public agencies 

community and 

reinforces the 

importance of these 

necessary policies, 

procedures, and 

practices.

This companion resource 

is the script content for 

the video production of 

the same name. 

Additional Resources

• FHWA's contract administration guidance including parts 11.B.7 and III.B.6 

regarding contract changes and claims

http://www.fhwa.dot.gov/programadmin/contracts/coretoc.cfm

• Federal regulation (Subparts 120-124) on how to process proposed contract 

changes

http://www.ecfr.gov/cgi-bin/textidx?c=ecfr&SID=168f75d324ce934ea14ab47b16c08d22&rgn=div5&view=text&

node=23:1.0.1.7.23&idno=23

• Link to an example change order for a cardinal change in the scope of the work 

authorized for construction

http://www.fhwa.dot.gov/programadmin/contracts/111596.cfm

• Form FHWA-1365 for documenting major contract revisions authorization

http://www.fhwa.dot.gov/programadmin/contracts/fhwa1365.cfm