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Change Orders 101: How They Affect Your Pay Application

How an approved change order changes your contract sum, your SOV, and the numbers on your next G702/G703.

Last updated 2026-08-17

What a change order is

A change order is a formal, signed adjustment to your contract - additional scope, removed scope, or a change to the price or schedule. It's different from a verbal request or an unsigned proposal: until it's approved, it doesn't touch your billing at all.

Additive vs. deductive

An additive change order increases your contract sum (extra work added). A deductive one decreases it (scope removed, or a credit issued). Both flow through the same line on the G702 - "Net Change by Change Orders" - as a running total, so a job with several of each nets them against one another.

Only bill what's approved

This is the rule that trips people up most: never include a change order on your pay application until it's actually signed. Billing a pending change order - even one you're confident will be approved - inflates your contract sum ahead of the paperwork and creates a mismatch the GC has to chase down. If it's still under negotiation, leave it off this period's billing and add it once it's executed.

How it updates your numbers

Once approved, a change order does three things:

• Adds (or subtracts) from your contract sum - reflected on the G702's "Net Change by Change Orders" line.
• Updates your Schedule of Values - either as a new line item for genuinely new scope, or as an adjustment to an existing line if it's changing the value of work already on the SOV.
• Changes the total your retainage is calculated against going forward, since retainage is a percentage of total completed and stored value.

Example

Say your original contract sum was $200,000, and a GC approves a $15,000 additive change order for extra electrical rough-in in period 3. Your next pay application shows: Original Contract Sum $200,000, Net Change by Change Orders $15,000, Contract Sum to Date $215,000. Your SOV picks up a new $15,000 line (or an increase to an existing electrical line), and that line starts accumulating its own "completed to date" and retainage from that period forward.

Keeping change orders from breaking your totals

The most common failure mode is a change order that updates the G702 summary line but never makes it into the SOV, so the two documents stop agreeing with each other. This tool ties change orders directly to your contract sum and SOV, so approving one updates both consistently.

This is a free tool, currently in development. Numbers should be accurate, but don't rely on it for anything legally binding yet. Privacy & Terms.