Ep. 611 From RFI to Payment: Navigating the Full Change Order Lifecycle
Rancho Mesa's Surety Relationship Executive Anne Wright sits down with Luke Thompson of Thompson Law & Consultation to discuss full change order life cycle from a subcontractor’s perspective. They share practical guidance on identifying changes early, documenting them properly, communicating effectively with general contractors and owners, and ultimately improving the chances of getting change orders approved and paid.
Show Notes: Subscribe to Rancho Mesa's Newsletter, Thompson Law & Consultation
Host: Anne Wright
Guest: Luke Thompson
Editor/Producer: Megan Lockhart
Music: "Home" by JHS Pedals, “Breaking News Intro” by nem0production
© Copyright 2026. Rancho Mesa Insurance Services, Inc. All rights reserved.
Transcript
Anne Wright: You’re listening to Rancho Mesa’s StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your business thrive.
I’m your host, Anne Wright, and I’m joined by attorney Luke Thompson, Esquire. Today, we’re going to talk about navigating the full change order lifecycle from the subcontractor’s perspective.
Luke, welcome to the show.
Luke Thompson: Hi, good to be here.
AW: Thank you. So we know that contractors on a project are bound to face changes once they get on the job. It's almost inevitable, right?
LT: It sure is.
AW: Between recognizing that drawings may not be complete; contract documents might not be accurate. So the key here that we want to talk about is how you navigate the life cycle of a change order. Sort of a little bit of history and education on what change orders are, how you look for them, how you identify them, how you negotiate them, and how you get paid for them. So given that, can we chat a little bit about what a change order is and when one might be warranted?
LT: Yeah, well, there's a lot of factors, obviously, that go into what classifies a change order on a given project. You can have some differences between a design-build project or if you're the general contractor or subcontractor or it's a multi-prime, these things can all affect it.
But in general, a change order is any additional scope of work outside of a subcontractor's contract scope of work. And who is responsible for that change and paying for it or where the money's coming from is kind of the critical piece of the analysis and what I find sometimes is that subcontractors don't always know who the party is that's going to be ultimately responsible for the change order. If it's the general contractor it's a very different kind of conversation than then what would be the case for the owner. And for a subcontractor to properly manage the change order process to successfully secure one, they're going to need to understand what it is the general contractor is facing with the owner.
AW: So communication, as in anything, is key. And I imagine if you're a subcontractor and you've worked for this general contractor before, you're going to kind of know what the process is and the steps are. But maybe it's a new client, maybe it's a new owner. Are there some tips and techniques you can suggest for how a subcontractor sets up their file for success?
LT: Sure. Yeah, I would say that one of the more important pieces of a successful change order is catching it earlier rather than later. You know, when a subcontractor is, comes across a change and they're forced into the situation they don't want to delay the schedule, a GC wants them to proceed, there's some direction to proceed it isn't always in writing sometimes it comes from the superintendent out in the field that creates a host of problems. A project manager who's ahead of the curve and is going to be more successful in securing this change orders--they're familiar with the project schedule they know the plans they know what's being expected and what's being actually produced out in the field they're familiar with all those components and so when they see a change they see it on the horizon and critically they're either putting an RFI in place or they're preparing the GC, the general contractors, project manager to make the pitch to the owner that might need to be made earlier rather than later.
And in those situations you're far more likely a to get your change order approved but to get it at a rate and markup that you're hoping for. It's just a much taller order when you come to a change order after the fact, and suddenly the owner's wanting to know, or even the GC is wanting a breakdown in their tracking at, say, on a time and material basis. It's very difficult in those situations to capture the kind of margins that are necessary for a subcontractor to really even cover their costs. It's kind of a misconception that subcontractors make all their money on change orders.
AW: In the old days.
LT: Yeah, maybe in the old days. But now almost every subcontract you read has a prescribed overhead and profit markup 15%.
AW: You're stuck, yeah.
LT: You're pretty much stuck.
And because everybody knows how to track the material and costs, and it's just got a lot more paperwork intensive. The scrutiny on the material and labor that you're listing on your change orders is scrutinized at a level it just wasn't ten years ago.
AW: Yeah. And the general contractor is tasked with bringing that job in on budget.
LT: Right.
AW: Minimizing the grief to the owner.
LT: Right.
AW: You mentioned a couple of key things, you know, early, right. Get it in early. I know we've talked about, I think, before and we've all heard the stories of, you know, sometimes subs don't want to rock the boat. So they're not saying anything. And they're just, you know, like all of a sudden the owner gets frustrated if all of a sudden these lump sum numbers come in. with all these changes towards the end of the job, but there might not be contingency left in the budget. So there's lots of reasons why you want to get in early.
LT: And a subcontractor is almost never going to know where the contingency number is at or what the board might approve if it's a public works kind of situation. They have so little insight and visibility on those types of issues. And it's highly unlikely that that information is going to be turned over to you in a timely fashion, it's going to allow you to capitalize on that for your change order. It just isn't going to work that way.
So the earlier you are to the process and if you're solving problems rather than being an additional budget item. It's incredibly powerful when I would say an electrical subcontractor says hey you have a major problem here there's not enough feeders going to you know this to support the load that this building is going to demand, this is what we propose you're going to need. Rather than coming to that after the fact you know the underground hasn't been performed yet all those things you have all those advantage. And yes your change order won't be as large but you're probably going to have better margins on it and ultimately…
AW: Better chances of negotiating something meaningful
LT: Right.
AW: And will the subcontracts that these people enter into initially be pretty clear usually on who has the responsibility with that general contractor, say, to be the contact person to submit those change orders to? I mean, do you know what that chain of command is going in or is that something you should make sure you know?
LT: You generally will know. I mean, most, you know, once you get into the project, you have a key point of contact from the GC side that is handling you know project manager to project manager almost always. Maybe on a smaller project there might be some ambiguity there but in general it's not hard to figure that piece out but it is important to establish the relationship. My buddy Ryan always says like San Diego is the biggest small town you'll ever see absolutely, you're going to run into these people over and over and over again and it's really critical that you pick up the phone that you have phone calls and lunches and those kinds of things.
Obviously, you've got to maintain ethical boundaries and all of that. But it's still important to establish professional rapport that is going to pay off over the long term. You have to have a sense, and I think this is probably the biggest piece that subcontractors really don't understand is that the GC has to sell it to the owner.
AW: That's the thing, yeah.
LT: It's a really awkward conversation, it's really hard on them and when it's just change after change after change. So even just bundling your change orders together in a tidy package ahead of time so it's one instead of 20. There's all those dynamics that go on and if you haven't been in that seat with the owner it's just very difficult for a subcontractor to understand.
And then of course owners have a budget they have to abide by. So being sensitive to those things and knowing the sort of middle position that that PM's going to be pinched in. That's just the reality. And then the GC, like you said, sometimes they run out of money. There's no space for them to move. And then subcontractors feel deeply offended. But you probably would have avoided a lot of those problems had you got to the punch early.
If there's a contingency, obviously, if you're there first, that's great for you.
AW: Good for you, yeah. So how then would you track it as a subcontractor to make sure that once you've submitted your request for change order to the general contractor that they're actually getting it to the owner? What's the communication level like
LT: Yeah, that really is tough. Again, obviously, the rapport is key. You need to have solid documentation. If you're going to produce a change order, it needs to have the supporting documentation that's going to allow that PM to successfully present it.
If it's missing some key piece of information and that GCPM has to go and track it down and figure it out, You're delaying the submission of your change order. You might have got it in early, but now he can't get it in early. And that's a real problem. So making sure your change order is complete, that you've thought it through carefully, like, are all my numbers defensible here? Do they make sense have I properly referenced the right documents have I included the right supporting documentation all of those things are essential and also just something I hammer on a lot because I see this all the time almost no subcontractors submit requests for additional time in the midst of it and that's really important too because they're that PM is going to have to go back at the end of the project; Look, you have 20 change orders, I need additional time.
AW: Yeah.
LT: Well, it'd be very helpful if that was included.
AW: Right. That was explained. You'd think it would be kind of understood. But yeah, again, documentation, communication, can't stress it enough.
LT: Yep. And so it typically will start with an RFI and maybe an email. And a lot of times I see. subcontractor project managers relying on their emails a little too heavily. Getting a well-crafted RFI that you've coordinated with the general contractor’s project manager as well can be really critical in this process. It helps pave the way. And so having that
RFI, doing your change order request, there's a bunch of different names: PCO, COR, whatever it is, subcontract modification. Whatever it is, that request goes in play and then you need to track it. If you're not getting a response within, I would say, 10 days, you need to follow up.
And the question to always ask is, what can I do to help facilitate the submission of this? What do you need from me? What's missing? What's key? And so many subcontractors, they get into a document battle. We're not providing this. We're not providing that. You're just delaying the process. You're sinking your own ship. It's just not, in my opinion, it's not the right approach. There are some things that are proprietary. You want to protect those things. I understand that. But in general, take the time to build your supporting documentation.
One, it's going to help you with that change order, but two, you're going to use it all the time. When you have, for instance, your overhead, you're trying to establish your overhead rate or your burden, your labor burden. That's a really good one. Well, once you've figured out how to demonstrate that this is your actual labor burden and you have all that supporting documentation, you can use that for a long, long time. Things will change, insurance and all those rates change but you'll know how to do it every time it's enormously beneficial for securing that. A lot of subcontractors miss that they don't realize there's a labor burden on top of the labor that they're requesting, it's not just a straight hourly rate and they need to capture that that's where a lot of money gets lost on change orders and they have overruns in their labor so that process is really critical.
And then following up, I don't think there's a better way to do it than phone calls. I know we live in a very digital, very modern age, but at the end of the day, a phone call is the key piece in getting your change order approved.
AW: It almost feels like, as we're talking this through, that the best way to understand what best practices are for getting from A to Z on an issue on a job to a change order and getting paid for it is to have a problem.
And then you know what hurdles are out there and how to overcome them. So is there some way to educate subcontractors, again, on a checklist, on a how to set up the job file kind of process?
LT: Oh, sure. There's a ton of great, you know, online resources. Yeah, at a certain budget level, you know, the documentation and the change order process is pretty rudimentary. But once you step into, you know, major construction projects, you know, 10 million plus. You're going to find that the procedures and processes that are involved there are pretty much ubiquitous. It's the same everywhere. And you can find almost all that information on YouTube.
AW: Okay.
LT: It's really quite straightforward.
AW: So there's no reason not to be educated.
LT: No, it really isn't.
AW: Yeah. And be caught in a situation where you didn't see it coming, or you shouldn't be in a situation.
LT: Right. I think most of the time people just are very busy trying to keep their foot on the gas with the project. And these changes come pretty quick. But if you're ahead of the curve on your paperwork and your schedule and you know what's going on in the project, you will save enormous amounts of time on the back end.
I mean, even on a public works subcontract change order I have been in and seen many of my clients in the midst of a negotiation at the very end take 50 cents on the dollar. And it all really could have been avoided had they gotten the approval earlier on. It was something that took place at almost the beginning of the project, sometimes in the underground. This is a major area for change orders. And it doesn't even get resolved until the end. And it's easy to blame the GC or the owner, but you have to own it.
AW: It's your job.
LT: Yeah.
AW: Yeah. So I know there have been some recent changes in the law in California when it comes to processing and getting paid for change orders. Can you speak to that just a little bit?
LT: Yeah. It's, you know, with any new law, how it's going to affect the industry, you know, we had some changes on retention and almost everybody immediately just went to 5%, even though that retention law doesn't necessarily require all contracts to be at 5%.
AW: But that's okay.
LT: That's, yeah. I know subcontractors aren't complaining.
So I don't know the effect yet that all of this will produce, but essentially what the California legislature is trying to do is to help subcontractors with the change order approval process. What has been happening in the industry is that these change orders pile up and owners and sometimes the GC is a part of this, but they bulk all these change orders together and they don't get processed for months at a time. Well, you pay your guys in the field every week. No, you can't. That's not how it works. And so they're doing all this change order work and you become the bank. And that's insane. And so the legislature has rightly stepped in to try to mitigate that and require owners to process change orders, especially ones that are not undisputed in a timely fashion. So these 30-day requirements, 60-day requirements for payment on undisputed items, hopefully that helps adjust the entire industry. Because there's a ton of exceptions. You know, this is more than four-story buildings and multi-use and all of that. But my hope is that it sets the course for the rest of the industry, that these insane delays I've seen six months before a change order is processed. Easy. And that is really devastating to subcontractors. And it doesn't help the owner in the long run either because the pricing for that is, I mean, the subcontractors, they know how to bid their work.
AW: Yeah, and they want to get their job done, closed. You know, move on too.
LT: So I'm hoping that's the net effect of the law over time. We'll see.
AW: Yeah.
LT: It doesn't always pan out that way, but that's the hope.
AW: Okay. Any other tips you want to pass on real quick as far as what subcontractors need to know?
LT: Yeah, I think just the two things I'd like to highlight is knowing your schedule. This is where you're probably losing money. And you can use change orders and RFIs in that process to recapture and get the project back on schedule and produce more efficient project there's an art to that. And knowing how to use a change order and an RFI and all of that to keep the project on track in the way that's beneficial to you as a subcontractor is essential for efficiency and that's maybe something that's it's sort of meta in that analysis but it is actually incredibly important. So the benefit of getting ahead of the curve on the change orders is that you know your project and that pays off bigger than any change order really will.
Your change order rates are prescribed. You're unlikely to make much on it. If you get it in early, you can make more. But if you can produce the project in a more efficient way, that's where your real money is. And so that's important. And then the other part of it, which we've said a bunch of times, but it's phone calls. It's a professional occupation. It requires careful decision making and there are people involved and you're not going to get through that with an email.
AW: And documentation right make sure
LT: It does require documentation yeah but I think everybody knows that. And what I see in the industry is that most project managers have gotten much better at the documentation.
AW: They're taught that.
LT: They're almost at a lawyer level it's crazy.
But they can't pick up the phone and say I need you to do this I need you to make this happen and that's such a key component. So don't be a keyboard warrior. You need to build those relationships. It's super important.
AW: You're absolutely right. In this day and age, building relationships means different things to different people. But what's effective is actually talking to people.
LT: Absolutely. Yeah.
AW: Okay. Great. Well, it's been wonderful having you back here again. Appreciate your expertise. You've served a lot of my clients well over the years.
LT: Appreciate that.
AW: Yeah. We're glad to have you as a trusted partner.
LT: Well, it's been great. Thank you very much.
AW: If anyone wants to reach out to you directly, how can they do that?
LT: Well, we have a website, thompsonlawconsultation.com and LinkedIn, social media, all the normal stuff. Just search my name. You'll probably find me.
AW: You can always reach out to me as well and I'll get you in touch with Luke anytime.
LT: Sounds great.
AW: All right. Thanks again.
LT: Thanks Anne.
AW: Thanks for tuning in to our latest episode produced by StudioOne™. If you enjoyed what you heard, please share this episode and subscribe. For more insights like this, visit us at RanchoMesa.com and subscribe to our weekly newsletter.