How to Handle ADU Change Orders Without Budget Blowups

Understanding ADU Change Orders and Why They Happen

If there is one thing that can derail an otherwise well-planned ADU project, it is change orders. A change order is a written modification to the original construction contract that alters the scope of work, project cost, or timeline. While some change orders are inevitable, poorly managed change orders are the number one cause of ADU budget overruns in California.

According to industry data, the average construction project experiences change orders totaling 10% to 15% of the original contract value. For a $250,000 ADU, that means $25,000 to $37,500 in additional costs. However, with proper planning and management, you can significantly reduce this number and keep your ADU project on or near its original budget.

Types of ADU Change Orders

Not all change orders are created equal. Understanding the different types will help you evaluate whether a change order is legitimate, negotiate its cost, and prevent future ones.

Owner-Initiated Change Orders

These are changes you request during construction. Common examples include upgrading materials (choosing hardwood floors instead of laminate), adding features not in the original plan (built-in shelving, additional outlets), changing the layout (moving a wall, enlarging a window), and upgrading fixtures or appliances. While these changes are your choice, they still add costs and can delay the project. The key is making as many decisions as possible before construction begins.

Contractor-Initiated Change Orders

These arise from conditions the contractor discovers during construction that were not apparent during the bidding process. Common examples include unexpected soil conditions requiring additional foundation work, hidden utility lines that need rerouting, structural issues in existing buildings (for garage conversions), and code requirements that differ from initial expectations. While some of these are legitimate, others may result from the contractor's failure to properly assess the project during the bidding phase.

Design Error Change Orders

These occur when the architectural plans contain errors or omissions that require modification during construction. Common issues include dimensions that do not work in practice, structural engineering conflicts with architectural plans, missing details in the plans, and code compliance issues not caught during plan review.

How to Prevent Unnecessary Change Orders

The best change order is the one that never happens. Here are proven strategies for minimizing change orders on your ADU project.

1. Invest in Complete Design Before Construction

The most effective way to prevent change orders is to have thoroughly detailed architectural and engineering plans before construction begins. This means not just floor plans and elevations, but also detailed electrical plans showing every outlet, switch, and fixture location; plumbing plans with specific fixture selections; HVAC layout and equipment specifications; structural engineering with connections to existing utilities; finish schedules listing every material, color, and product; and cabinet and millwork shop drawings.

Yes, investing in more detailed plans upfront costs more (typically $5,000 to $15,000 for a comprehensive plan set), but it almost always saves money by preventing changes during construction, when modifications are exponentially more expensive.

2. Make All Material Selections Before Breaking Ground

One of the biggest sources of change orders is homeowners who have not made their material selections before construction begins. When you delay choosing your flooring, countertops, tile, fixtures, and appliances, you risk selecting items that are more expensive than the allowances in your contract, require different installation methods than what was planned, have long lead times that delay the project, and do not fit the intended spaces.

3. Conduct Thorough Pre-Construction Investigation

Before construction begins, invest in a soil report (geotechnical investigation), utility location survey, environmental assessment (for older properties), and a detailed survey of existing structures (for garage conversions and attached ADUs). These investigations can reveal potential issues before they become expensive change orders during construction.

4. Build a Contingency into Your Budget

Even with the best planning, some change orders are unavoidable. Budget a contingency of 10% to 15% of the construction cost to cover unexpected expenses. This is not permission to spend more; it is insurance against surprises.

How to Evaluate a Change Order

When a contractor presents you with a change order, do not sign it immediately. Take these steps to ensure the change order is legitimate and fairly priced.

Step 1: Understand Why the Change Is Needed

Ask the contractor to explain, in detail, why the change order is necessary. Is it due to unforeseen conditions, a design error, a code requirement, or your own request? The answer determines who should bear the cost.

Step 2: Verify the Scope of the Change

Make sure you understand exactly what work is being added or modified. Ask for the change in writing with specific descriptions of the work, materials, and labor involved.

Step 3: Review the Pricing

A change order should include a detailed cost breakdown, not just a lump sum. Check that material prices are reasonable (compare with retail prices plus contractor markup), labor hours are realistic for the scope of work, the contractor's markup is consistent with what was agreed upon in the contract (typically 15% to 20%), and the total cost makes sense relative to the scope of the change.

Step 4: Assess the Timeline Impact

Every change order should include an assessment of how it will affect the project schedule. Some changes are time-neutral, while others can add days or weeks to the project.

Step 5: Get It in Writing

Never approve a change order verbally. California law requires all contract modifications to be in writing and signed by both parties. The written change order should include a description of the changed work, the cost of the change, the time impact, signatures of both the homeowner and the contractor, and the date of approval.

Negotiating Change Order Costs

Change order costs are negotiable. Here are strategies for ensuring you pay a fair price.

Challenge the Markup

If your contract specifies a 15% markup on change orders but the contractor is charging 25%, push back. The markup should be consistent with what was agreed upon in the original contract.

Request Competitive Pricing

For large change orders (over $5,000), consider getting a separate estimate from another contractor to verify the pricing. While you cannot easily switch contractors mid-project, having a second opinion gives you negotiation leverage.

Explore Alternatives

Before approving a change order, ask the contractor if there are less expensive ways to achieve the same result. Value engineering during construction can sometimes cut change order costs by 30% to 50% without sacrificing quality or functionality.

Bundle Changes

If you have multiple changes to make, present them to the contractor as a bundle rather than individually. Bundling changes allows the contractor to plan the work more efficiently, which can reduce the overall cost.

Tracking Change Orders Throughout Your Project

Maintaining a detailed change order log is essential for budget management. Create a spreadsheet that tracks each change order with the following information:

Review this log weekly and compare your cumulative change order costs against your contingency budget. If change orders are eating into your contingency faster than expected, it is time to have a serious conversation with your contractor about what is driving the changes.

Contract Provisions That Protect Against Change Orders

The best time to protect yourself from change orders is before you sign the contract. For a complete guide to contract provisions, see our article on what your ADU contract should include.

Key Contract Clauses for Change Order Protection

• Change order cap: Some contracts include a clause that limits total change orders to a percentage of the original contract value (e.g., 10%). Any changes beyond this threshold trigger a renegotiation of the contract.
• Pre-approval requirement: Require that no change order work begin until you have signed written approval.
• Markup limits: Specify the maximum markup the contractor can charge on change order materials and labor.
• Dispute resolution for change orders: Include a specific process for resolving disagreements about change order costs or necessity.

Most Common ADU Change Orders and How to Avoid Them

Soil and Foundation Issues

Average Cost: $3,000 to $15,000

Prevention: Get a geotechnical soil report before starting design. This $2,000 to $4,000 investment can prevent five-figure change orders by identifying soil conditions that require special foundation designs.

Utility Connection Surprises

Average Cost: $2,000 to $10,000

Prevention: Have the contractor verify the exact location and capacity of all utility connections before finalizing the bid. Contact LADWP, SoCal Gas, and the sewer department to confirm connection requirements.

Material Upgrades

Average Cost: $1,000 to $20,000

Prevention: Select all materials before construction begins. If you know you want premium finishes, make sure your budget reflects those choices from the start rather than upgrading mid-construction.

Code Compliance Issues

Average Cost: $1,000 to $8,000

Prevention: Work with an architect and contractor who are deeply familiar with California ADU regulations and your local building codes. Pre-construction plan review by the building department catches most code issues before construction begins.

Frequently Asked Questions About ADU Change Orders

What percentage of my ADU budget should I set aside for change orders?

Plan for a contingency of 10% to 15% of the construction cost. For a $250,000 ADU project, that means $25,000 to $37,500 in reserve. If your project involves working with existing structures (garage conversion, attached ADU), lean toward the higher end. For new detached ADUs with well-detailed plans, 10% is usually sufficient.

Can I refuse a change order from my contractor?

You can refuse owner-initiated change orders (since you requested them, you simply withdraw the request). For contractor-initiated change orders due to unforeseen conditions, refusal is more complex. You can challenge the pricing, request alternatives, or seek a second opinion, but if a legitimate code requirement or safety issue underlies the change order, the work must be done regardless. What you can negotiate is the cost and approach.

How quickly should I respond to a change order?

Aim to respond within 48 to 72 hours. Delayed responses can halt construction, which adds time to your project and may give the contractor grounds for a delay claim. If you need more time to evaluate a large change order, communicate this to the contractor and agree on a review timeline.

What if my contractor does work without a signed change order?

Under California law, contract modifications must be in writing and signed by both parties. If your contractor performs work without a signed change order, you may not be obligated to pay for it. However, this creates a contentious situation. The best approach is to have a clear contract clause stating that no change order work will be compensated unless a written change order is signed before the work begins.

Are change orders more common with fixed-price contracts or cost-plus contracts?

Change orders are more visible in fixed-price contracts because each modification requires a formal change order document. In cost-plus contracts, scope changes are absorbed into the running cost and may not be as clearly documented. However, cost-plus contracts carry their own risks, including less cost certainty overall. For most ADU projects, a fixed-price contract with clear change order procedures provides the best budget protection.

Want help managing your ADU project budget? Our team provides project oversight services that help keep change orders under control.

Change Order Negotiation Strategies for California ADU Projects

Even with the best planning, change orders are a reality of ADU construction. The key is knowing how to negotiate them effectively so you maintain control of your budget. Here are proven strategies that California homeowners can use when faced with a change order request.

Get Everything in Writing Before Approving

Never approve a verbal change order. Insist that every change order includes a detailed written description of the new work, an itemized cost breakdown showing materials and labor separately, the impact on the project timeline, and any effect on previously completed or upcoming work. A well-documented change order protects both you and the contractor by creating a clear record of what was agreed upon.

Request Competitive Pricing

For significant change orders (over $2,000), consider getting an independent estimate from another contractor to verify that the pricing is fair. While you likely will not switch contractors mid-project, having a comparison bid gives you leverage to negotiate. Many homeowners are surprised to find that change order pricing from their current contractor is 20 to 40 percent higher than typical market rates because the contractor knows you have limited alternatives mid-build.

Negotiate the Markup

Contractors typically apply their standard markup to change orders, but this is negotiable. If your original contract included a 20 percent markup on materials and labor, you can negotiate a reduced markup on change orders as a goodwill gesture. Some homeowners successfully negotiate a flat fee for change order management rather than a percentage markup, which removes the incentive for contractors to inflate costs. For more on managing contractor relationships, see our guide on when to fire your ADU contractor.

Frequently Asked Questions About ADU Change Orders

What is a reasonable change order markup for an ADU project?

In California, change order markups typically range from 15 to 25 percent on top of direct costs for materials and labor. Some contractors charge a flat management fee per change order instead. The markup should be clearly defined in your original contract so there are no surprises during construction. If your contractor is charging more than 30 percent markup on change orders, that is above the industry norm and worth negotiating.

Can I refuse a change order from my ADU contractor?

You can refuse discretionary change orders, such as upgrades or design modifications you did not request. However, some change orders are necessary and cannot be avoided, such as those required by code compliance discoveries or unexpected site conditions like poor soil or hidden utility lines. If a change order is required for safety or code compliance, refusing it could result in failed inspections and project delays. Work with your contractor to find the most cost-effective solution rather than refusing outright.

How many change orders are normal during an ADU build?

Most ADU projects in California experience 3 to 8 change orders during construction. Projects involving garage conversions or renovations of existing structures tend to have more change orders because hidden conditions are discovered during demolition. New ground-up ADU builds typically have fewer surprises. If your contractor is submitting change orders every week, that may indicate poor initial planning or an attempt to increase the project cost beyond the original bid. Review our article on reading and comparing ADU bids for tips on selecting contractors with thorough initial estimates.