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Methodology

Construction Change Order Pricing Planner methodology

Build a change-order amount that contains only the added scope and does not silently absorb disruption cost. Price incremental construction scope from site labour, materials, subcontractors, plant and travel, sequencing overhead, contingency and protected margin.

Educational only: Business decision support, not accounting, tax or legal advice.

Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral small-business planning using your own assumptions.

1. Formulas and units

Added direct cost
addedDirectCostExTax = added labour + materials + subcontractors + equipment and travel

Where

equipmentAndTravelCostExTax
Equipment and travel (currency units/change order, ex tax)Source: Business record
addedDirectCostExTax
Added direct cost (currency units, ex tax)Source: Calculated output
Schedule delay cost
scheduleDelayCostExTax = site overhead per day * delay days

Where

siteOverheadPerDelayDayExTax
Site overhead per delay day (currency units/delay day, ex tax)Source: Business record
scheduleDelayDays
Schedule delay days (whole delay days/change order)Source: Business record
scheduleDelayCostExTax
Schedule delay cost (currency units, ex tax)Source: Calculated output
Change contingency
contingencyExTax = (added direct cost + delay cost) * contingency rate

Where

taxRate
User-entered tax rate (decimal fraction of change-order price added as tax)Source: Business record
addedDirectCostExTax
Added direct cost (currency units, ex tax)Source: Calculated output
contingencyExTax
Change contingency (currency units, ex tax)Source: Calculated output
Protected change cost
protectedChangeCostExTax = added direct cost + delay cost + fixed overhead + contingency

Where

fixedOverheadExTax
Fixed change overhead (currency units/change order, ex tax)Source: Business record
addedDirectCostExTax
Added direct cost (currency units, ex tax)Source: Calculated output
contingencyExTax
Change contingency (currency units, ex tax)Source: Calculated output
protectedChangeCostExTax
Protected change cost (currency units, ex tax)Source: Calculated output
Required change-order price
requiredChangeOrderPriceExTax = protected change cost / (1 - target margin)

Where

targetChangeOrderMargin
Target change-order margin (decimal fraction of change-order price)Source: Business record
protectedChangeCostExTax
Protected change cost (currency units, ex tax)Source: Calculated output
requiredChangeOrderPriceExTax
Required change-order price (currency units, ex tax)Source: Calculated output
Required price including tax
requiredChangeOrderPriceIncTax = required change-order price * (1 + entered tax rate)

Where

taxRate
User-entered tax rate (decimal fraction of change-order price added as tax)Source: Business record
requiredChangeOrderPriceExTax
Required change-order price (currency units, ex tax)Source: Calculated output
requiredChangeOrderPriceIncTax
Required price including tax (currency units, ex tax)Source: Calculated output
Retention held from change
retentionHeldExTax = required change-order price * retention rate

Where

taxRate
User-entered tax rate (decimal fraction of change-order price added as tax)Source: Business record
requiredChangeOrderPriceExTax
Required change-order price (currency units, ex tax)Source: Calculated output
retentionHeldExTax
Retention held from change (currency units, ex tax)Source: Calculated output
Initially collectible amount
initialCollectibleExTax = required change-order price - retention held

Where

requiredChangeOrderPriceExTax
Required change-order price (currency units, ex tax)Source: Calculated output
retentionHeldExTax
Retention held from change (currency units, ex tax)Source: Calculated output
initialCollectibleExTax
Initially collectible amount (currency units, ex tax)Source: Calculated output
Revised contract value
revisedContractValueExTax = original contract value + required change-order price

Where

originalContractValueExTax
Original contract value (currency units/original contract, ex tax)Source: Business record
requiredChangeOrderPriceExTax
Required change-order price (currency units, ex tax)Source: Calculated output
revisedContractValueExTax
Revised contract value (currency units, ex tax)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.

2. Worked example

Input assumptions

The worked rows below are evaluated at render time by the same shared engine and visible default fixture as the interactive workflow.

Original contract value
480,000 currency units/original contract, ex tax
Incremental site labour
4,200 currency units/change order, ex tax
Incremental materials
7,600 currency units/change order, ex tax
Incremental subcontractors
3,100 currency units/change order, ex tax
Equipment and travel
1,800 currency units/change order, ex tax
Fixed change overhead
1,200 currency units/change order, ex tax
Site overhead per delay day
850 currency units/delay day, ex tax
Schedule delay days
3 whole delay days/change order
Sequencing and delay contingency
0.1 decimal fraction of changed-scope direct cost
Target change-order margin
0.22 decimal fraction of change-order price
Contract retention rate
0.05 decimal fraction of approved change-order price withheld
User-entered tax rate
0 decimal fraction of change-order price added as tax

Calculation and outputs

  1. Added direct cost

    addedDirectCostExTax = added labour + materials + subcontractors + equipment and travel
    Incremental site labour
    4,200 currency units/change order, ex tax
    Incremental materials
    7,600 currency units/change order, ex tax
    Incremental subcontractors
    3,100 currency units/change order, ex tax
    Equipment and travel
    1,800 currency units/change order, ex tax

    Engine result: 16,700 money

  2. Schedule delay cost

    scheduleDelayCostExTax = site overhead per day * delay days
    Incremental site labour
    4,200 currency units/change order, ex tax
    Fixed change overhead
    1,200 currency units/change order, ex tax
    Site overhead per delay day
    850 currency units/delay day, ex tax
    Schedule delay days
    3 whole delay days/change order
    Sequencing and delay contingency
    0.1 decimal fraction of changed-scope direct cost

    Engine result: 2,550 money

  3. Change contingency

    contingencyExTax = (added direct cost + delay cost) * contingency rate
    Equipment and travel
    1,800 currency units/change order, ex tax
    Site overhead per delay day
    850 currency units/delay day, ex tax
    Schedule delay days
    3 whole delay days/change order
    Sequencing and delay contingency
    0.1 decimal fraction of changed-scope direct cost
    Contract retention rate
    0.05 decimal fraction of approved change-order price withheld
    User-entered tax rate
    0 decimal fraction of change-order price added as tax
    Added direct cost
    16,700 money
    Schedule delay cost
    2,550 money
    Protected change cost
    22,375 money

    Engine result: 1,925 money

  4. Protected change cost

    protectedChangeCostExTax = added direct cost + delay cost + fixed overhead + contingency
    Equipment and travel
    1,800 currency units/change order, ex tax
    Fixed change overhead
    1,200 currency units/change order, ex tax
    Site overhead per delay day
    850 currency units/delay day, ex tax
    Schedule delay days
    3 whole delay days/change order
    Sequencing and delay contingency
    0.1 decimal fraction of changed-scope direct cost
    Added direct cost
    16,700 money
    Schedule delay cost
    2,550 money
    Change contingency
    1,925 money

    Engine result: 22,375 money

  5. Required change-order price

    requiredChangeOrderPriceExTax = protected change cost / (1 - target margin)
    Equipment and travel
    1,800 currency units/change order, ex tax
    Fixed change overhead
    1,200 currency units/change order, ex tax
    Target change-order margin
    0.22 decimal fraction of change-order price
    Added direct cost
    16,700 money
    Schedule delay cost
    2,550 money
    Change contingency
    1,925 money
    Protected change cost
    22,375 money
    Required price including tax
    28,685.897436 money
    Retention held from change
    1,434.294872 money

    Engine result: 28,685.897436 money

  6. Required price including tax

    requiredChangeOrderPriceIncTax = required change-order price * (1 + entered tax rate)
    Fixed change overhead
    1,200 currency units/change order, ex tax
    Sequencing and delay contingency
    0.1 decimal fraction of changed-scope direct cost
    Target change-order margin
    0.22 decimal fraction of change-order price
    Contract retention rate
    0.05 decimal fraction of approved change-order price withheld
    User-entered tax rate
    0 decimal fraction of change-order price added as tax
    Change contingency
    1,925 money
    Protected change cost
    22,375 money
    Required change-order price
    28,685.897436 money
    Retention held from change
    1,434.294872 money

    Engine result: 28,685.897436 money

  7. Retention held from change

    retentionHeldExTax = required change-order price * retention rate
    Fixed change overhead
    1,200 currency units/change order, ex tax
    Sequencing and delay contingency
    0.1 decimal fraction of changed-scope direct cost
    Target change-order margin
    0.22 decimal fraction of change-order price
    Contract retention rate
    0.05 decimal fraction of approved change-order price withheld
    User-entered tax rate
    0 decimal fraction of change-order price added as tax
    Change contingency
    1,925 money
    Protected change cost
    22,375 money
    Required change-order price
    28,685.897436 money
    Required price including tax
    28,685.897436 money

    Engine result: 1,434.294872 money

  8. Initially collectible amount

    initialCollectibleExTax = required change-order price - retention held
    Fixed change overhead
    1,200 currency units/change order, ex tax
    Target change-order margin
    0.22 decimal fraction of change-order price
    Contract retention rate
    0.05 decimal fraction of approved change-order price withheld
    Change contingency
    1,925 money
    Protected change cost
    22,375 money
    Required change-order price
    28,685.897436 money
    Required price including tax
    28,685.897436 money
    Retention held from change
    1,434.294872 money

    Engine result: 27,251.602564 money

  9. Revised contract value

    revisedContractValueExTax = original contract value + required change-order price
    Original contract value
    480,000 currency units/original contract, ex tax
    Fixed change overhead
    1,200 currency units/change order, ex tax
    Target change-order margin
    0.22 decimal fraction of change-order price
    Contract retention rate
    0.05 decimal fraction of approved change-order price withheld
    Change contingency
    1,925 money
    Protected change cost
    22,375 money
    Required change-order price
    28,685.897436 money
    Required price including tax
    28,685.897436 money
    Retention held from change
    1,434.294872 money

    Engine result: 508,685.897436 money

Example

The worked rows below are evaluated at render time by the same shared engine and visible default fixture as the interactive workflow.

Added direct cost
16,700 currency units
Schedule delay cost
2,550 currency units
Change contingency
1,925 currency units
Protected change cost
22,375 currency units
Required change-order price
28,685.9 currency units
Required price including tax
28,685.9 currency units
Retention held from change
1,434.29 currency units
Initially collectible amount
27,251.6 currency units
Revised contract value
508,685.9 currency units

The exact engine-derived outputs are shown in the labelled rows below.

Interpretation

A defensible change price includes incremental sequencing and delay effects, not direct inputs alone.

3. Validation and boundary checks

  • All inputs must be finite and inside the visible validation boundaries.
  • Rates are retained as decimal values and shown as percentages only at the presentation boundary.
  • The worked fixture must expose every declared result: addedDirectCostExTax, scheduleDelayCostExTax, contingencyExTax, protectedChangeCostExTax, requiredChangeOrderPriceExTax, requiredChangeOrderPriceIncTax, retentionHeldExTax, initialCollectibleExTax, revisedContractValueExTax.
  • Scenario comparison changes one declared driver while holding the remaining industry records constant.
Original contract value minimum
originalContractValueExTax โ‰ฅ 0 currency units/original contract, ex tax โ€” A lower value is rejected before calculation.
Original contract value maximum
originalContractValueExTax โ‰ค 10,000,000 currency units/original contract, ex tax โ€” A higher value is rejected before calculation.
Incremental site labour minimum
incrementalSiteLabourExTax โ‰ฅ 0 currency units/change order, ex tax โ€” A lower value is rejected before calculation.
Incremental site labour maximum
incrementalSiteLabourExTax โ‰ค 10,000,000 currency units/change order, ex tax โ€” A higher value is rejected before calculation.
Incremental materials minimum
incrementalMaterialsExTax โ‰ฅ 0 currency units/change order, ex tax โ€” A lower value is rejected before calculation.
Incremental materials maximum
incrementalMaterialsExTax โ‰ค 10,000,000 currency units/change order, ex tax โ€” A higher value is rejected before calculation.
Incremental subcontractors minimum
incrementalSubcontractorsExTax โ‰ฅ 0 currency units/change order, ex tax โ€” A lower value is rejected before calculation.
Incremental subcontractors maximum
incrementalSubcontractorsExTax โ‰ค 10,000,000 currency units/change order, ex tax โ€” A higher value is rejected before calculation.
Equipment and travel minimum
equipmentAndTravelCostExTax โ‰ฅ 0 currency units/change order, ex tax โ€” A lower value is rejected before calculation.
Equipment and travel maximum
equipmentAndTravelCostExTax โ‰ค 10,000,000 currency units/change order, ex tax โ€” A higher value is rejected before calculation.
Fixed change overhead minimum
fixedOverheadExTax โ‰ฅ 0 currency units/change order, ex tax โ€” A lower value is rejected before calculation.
Fixed change overhead maximum
fixedOverheadExTax โ‰ค 10,000,000 currency units/change order, ex tax โ€” A higher value is rejected before calculation.
Site overhead per delay day minimum
siteOverheadPerDelayDayExTax โ‰ฅ 0 currency units/delay day, ex tax โ€” A lower value is rejected before calculation.
Site overhead per delay day maximum
siteOverheadPerDelayDayExTax โ‰ค 10,000,000 currency units/delay day, ex tax โ€” A higher value is rejected before calculation.
Schedule delay days minimum
scheduleDelayDays โ‰ฅ 0 whole delay days/change order โ€” A lower value is rejected before calculation.
Schedule delay days maximum
scheduleDelayDays โ‰ค 10,000 whole delay days/change order โ€” A higher value is rejected before calculation.
Sequencing and delay contingency minimum
sequencingAndDelayContingencyRate โ‰ฅ 0 decimal fraction of changed-scope direct cost โ€” A lower value is rejected before calculation.
Sequencing and delay contingency maximum
sequencingAndDelayContingencyRate โ‰ค 1 decimal fraction of changed-scope direct cost โ€” A higher value is rejected before calculation.
Target change-order margin minimum
targetChangeOrderMargin โ‰ฅ 0 decimal fraction of change-order price โ€” A lower value is rejected before calculation.
Target change-order margin maximum
targetChangeOrderMargin โ‰ค 0.99 decimal fraction of change-order price โ€” A higher value is rejected before calculation.
Contract retention rate minimum
contractRetentionRate โ‰ฅ 0 decimal fraction of approved change-order price withheld โ€” A lower value is rejected before calculation.
Contract retention rate maximum
contractRetentionRate โ‰ค 1 decimal fraction of approved change-order price withheld โ€” A higher value is rejected before calculation.
User-entered tax rate minimum
taxRate โ‰ฅ 0 decimal fraction of change-order price added as tax โ€” A lower value is rejected before calculation.
User-entered tax rate maximum
taxRate โ‰ค 1 decimal fraction of change-order price added as tax โ€” A higher value is rejected before calculation.

4. Assumptions and source classification

  • Costs, capacity, contract terms, tax rates and targets are supplied by the user.
  • No provider default, jurisdictional rule or industry benchmark is embedded.
  • The shared engine retains full precision and display formatting never feeds calculation.

This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.

5. Limitations

  • Results are only as reliable as the timing, scope and basis of the entered records.
  • The workflow does not predict demand or establish accounting, tax, contractual or legal treatment.

This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.

Change history

  1. : Initial public release of the planner and methodology after pre-launch calculation, content, source and interaction review.

Guides to interpret the decision and its assumptions.

  • Scope Change Quote Checklist

    Record and cost added work, compare absorb, partial-charge and full re-quote paths, then stop for approval.

    Read guide

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