How to Invoice a Change Order: Put It on the Schedule of Values Before the Next Pay App

Signed, filed and unbilled: why an approved change order misses the pay app

A pay application asks for payment on what it lists, and nothing else. On federal work, FAR 52.232-5 requires a contractor’s progress-payment request to include an itemization of the amounts requested, related to the various elements of work the contract requires. On private work in Texas, Property Code §28.002 gives the owner until the 35th day after it receives a written payment request to pay amounts allowed under the contract, and gives the contractor until the 7th day after it is paid to pay each subcontractor its share. Every one of those clocks starts with a request. An approved change order that sits on no request starts no clock.

The ways a signed change order falls off the application are specific, and each one is a hand-off between two people:

• Executed after the cutoff. The change order is signed on the 26th, after this month’s application went in, and next month’s application is built by copying this month’s.
• Filed, not forwarded. The project manager files the executed change order in the job folder; the person who builds the pay app works from the last application and never sees it.
• A locked SOV. The GC’s pay-app portal only lets the GC add lines, and nobody asked the GC to add this one before the cutoff.
• Folded into a base line. The change order amount was added to an existing line to save time, so the line no longer matches the original contract and the change can’t be traced.
• Billed under the wrong line. The crew did the work before the change order was executed, and its progress went onto a base line. When the change order arrives, nobody moves the billing, and the base line shows more progress than the base work has.
• Combined or split. One change order replaced three CORs, or one COR became two change orders, and the log still carries the old numbers.

The 10-minute reconciliation: CO log against the latest G703

Once a month, before the pay app goes out, one person runs a check that takes about ten minutes per job. It starts with one subtraction: the original contract sum plus every executed change order on the CO log should equal the contract sum to date on the latest application. If the two numbers differ, a change order is missing from the SOV, or the SOV carries a line with no executed change order behind it.

Then go line by line. A free reconciliation table needs seven columns:

• Change order number and date executed, from the CO log
• Change order amount
• The SOV line where it appears on the latest G703 — blank if none
• Billed to date on that line
• Percent of the change order work actually complete, from the project manager or the foreman
• Balance left to bill
• Action and owner: add the line, bill the progress, or correct an overbilled line — with a name and a date

Three flags come out of the table. A blank SOV line means the change order is unbilled and needs a line before the next cutoff. A line at zero while the work is done means billable progress is sitting idle. A line billed ahead of the work means the next application should correct it before the GC does. One more check while the log is open: every COR pending more than 30 days goes back on the follow-up list, because a COR that never becomes a change order never reaches this table.

Who owns the SOV line

The change order belongs to the project manager; the pay application belongs to the billing desk. The gap between them opens the moment a change order is executed, and it belongs to nobody unless someone writes it down. The fix is one rule with a name on it: the day a change order is executed, the project manager sends it to billing with a proposed SOV line and the percent complete. Billing confirms the line exists — in the shop’s own SOV and, where the GC controls the portal, in the GC’s — before the next cutoff.

Then make it visible. On the job list the owner reads each week, show one number per job: executed change orders not yet on a pay app, in dollars. The free Friday Ledger asks a broader version every Friday — work done beyond the original scope, and how much of it was in writing. A number that is read aloud every week gets a name next to it.

Adding a change order to the schedule of values: own line, separate sheet, or folded in

Three formats exist, and the GC’s pay-app instructions decide which one applies. Where the shop has a choice:

• Its own numbered line at the bottom of the SOV, one per change order, labeled with the change order number. Every change order can be traced from the log to the application and back. This is the format to ask for.
• A separate change-order continuation sheet. Clean, as long as the summary page carries its total and the sheet goes out with every application, not only the first one after the change.
• Folded into an existing base line. Faster on the day, and the reason a change order can disappear: the base line no longer matches the original contract, retainage and percent complete get mixed, and a closeout reconciliation has to rebuild the history.

If the GC’s portal locks the SOV, request the new line in writing as soon as the change order is executed, and keep the request with the change order. A line requested five days before the cutoff is a routine task; a line requested on cutoff day can cost a month.

Illustrative example: one approved change order, a month late

Illustrative example: a GC executes an $18,000 change order for a relocated panel on the 12th of the month. The crew finishes the work by the 20th. The pay-app cutoff is the 25th. Nobody adds the line, so the application goes in on the original SOV.

Had the line been added, $16,200 would have been billed that month — the $18,000 less 10 percent retainage under this hypothetical subcontract. Instead, the change order is caught at the next month’s reconciliation, billed a cycle later and paid a cycle later. The shop carried the labor and material for an extra month, and it found out only because someone ran the subtraction. If nobody had, the change order would surface at closeout, when the GC’s project team has moved on and every open item takes longer to settle.

The numbers are hypothetical and round. The mechanism is not: a change order starts moving toward cash only on the day it becomes a line.

When this needs no outside help

Skip outside help if the subtraction already ties out every month on every job, every executed change order shows a pay app number within one cycle, and someone reads the unbilled-change-order number weekly. Skip it for one-truck shops and for residential work for a single builder, where the SOV is not where the money waits. And if the question is whether a GC owes for a change it never executed, that is a question for a construction attorney.

For a shop with GC work where the subtraction has never been run, run it this week on the three largest open jobs; it costs an hour. If the answer is uncomfortable, the Revenue Review is two weeks of read-only access to the CO log, pay apps, the SOV and the books, ending in a written report that puts a monthly dollar figure on each leak. Implementation is scoped and priced separately, and the first step is a free 20-minute call.