← Change order margin calculator
Change orders get quoted in the least favourable conditions available: on site, under time pressure, usually from wage and materials in someone's head. The base contract was costed carefully with burden, overhead, and margin; the change often is not — and since added scope consumes exactly the same supervision, insurance, and vehicles as contracted work, every change priced that way quietly dilutes the profit on a job that was priced right.
Open the free change order calculator
Eight added hours at a $28 wage with 25% burden is $280.00 of loaded labour. With $350.00 of materials the direct cost is $630.00; 10% overhead adds $63.00, putting the walk-away price at $693.00. At a 20% target margin the price to propose is $866.25. The instinctive quote here — eight hours at $28 plus materials, or $574.00 — is $119.00 below the point at which the work merely breaks even. And note the markup trap: adding 20% to $693.00 gives $831.60, which is a 16.7% margin, not the 20% intended.
Cost the added scope the same way you costed the original contract. Load the wage with payroll burden to get a real hourly cost, multiply by the added hours, add materials and any subcontractor cost for a direct cost, apply your overhead percentage, and that total is the walk-away price — the number below which the change loses money. Then divide the walk-away price by one minus your target margin to get the price to propose. Quoting from wage and materials alone skips burden, overhead, and margin.
The walk-away price is cost recovery: direct cost plus overhead, with no profit at all. Accepting it means the added work is done for nothing, and anything under it is done at a loss. The target price is the walk-away price grossed up for the margin you intend to earn. Knowing both is what makes a negotiation possible — you can concede toward the floor deliberately, and see exactly how much margin each concession costs, instead of discovering afterwards that you went under it.
Yes. Added scope consumes the same supervision, insurance, vehicles, and office time as contracted work, and it usually consumes more scheduling attention per dollar because it is unplanned. Many standard contracts and public-works schedules explicitly allow a stated overhead and profit percentage on change orders for exactly this reason. Omitting them prices the change below the cost of performing it and dilutes the margin on the base contract every time one is signed.
Because a markup on cost and a margin on price are different arithmetic. Marking a $693.00 cost up by 20 percent gives $831.60, which is a margin of about 16.7 percent, not 20. To earn a 20 percent margin you divide by 0.8, which gives $866.25. On a single change order the difference is small; applied to every change across a year of jobs it is a meaningful share of the profit that was supposed to be there.