When a change order comes in priced with rates we already agreed to, I check the quantities and it moves. When it comes in priced some new way, I have to check everything. Same work, same dollars, very different amount of time on my desk.
That difference is what this post is about.
I worked the tinner trade for about four years and I have not taken a side job in fifteen. I have been in construction about 23 years, and I manage projects for a general contractor in Salt Lake. I review subcontractor change orders every week. I also write the agreed labor, material and equipment unit rates into our contracts, after the owner approves them.
The numbers here are Salt Lake in 2026 and they are examples, not a price list. The examples are ductwork because that is my trade, but the method works for any sub who prices changes, whether you pull wire, run pipe or hang board.
In the last post I went through what a change order costs to produce and review, and I called the review side the time value of money. Every person who touches a change is time somebody pays for. Unit rates are how you cut down the touching.
If you’re pricing the change itself, start with how I price an HVAC change order.”
What is a unit price change order?
It is a change priced as a quantity times a rate. On my jobs, the rates are agreed labor, material and equipment rates, or unit rates for types of scope, that the owner approved and that I wrote into the contract. When a change comes in using those rates, the reviewer only checks the quantities. Nobody argues the rates, because that negotiation already happened before the job started.
Why agreed rates move a change faster
Here is how it works on my side.
Before the contract is signed, the subcontractor’s labor, material and equipment rates, or production unit rates, get reviewed. The owner approves them. I write them into the contract. From then on, those are the rates.
Now a change comes in. If it is built on the contract rates, my review is short. Are the hours reasonable for the work? Is the material quantity right? Is the equipment time right? Did that many units get installed? That is it. I am checking the count, not the price of each thing being counted.
If it is built some other way, I cannot do that. I have to figure out what the rate is, whether it matches anything we agreed to, and whether it lines up with what the subcontractor charged before. That is a longer review, more questions, and sometimes a trip back to the sub for backup. Every one of those steps is cost on both sides.
Same work, same rate
I check a subcontractor’s change pricing against the history of changes from that same sub. My project engineer does too.
If your rate for a register was one number on the last three changes and it is a different number on this one, it gets a closer look. There may be a good reason. Different ceiling, different access, different duct. Say so on the change. If there is no reason, expect a question.
Consistent rates are the easiest thing to approve. The history backs you up without you having to explain much.
What an L/M/E breakdown looks like
L/M/E is labor, material and equipment. When a breakdown is required, every change gets priced in those three pieces.
| Piece | How it is priced | Your rate | Your quantity |
|---|---|---|---|
| Labor | Hours times the burdened rate for each personnel type (foreman, journeyman, apprentice) | ||
| Material | Quantity times unit cost | ||
| Equipment | Time on the equipment times its rate | ||
| Subtotal | Labor plus material plus equipment | ||
| Tax | Per your contract and your state | ||
| Markup | Your O&P*, as its own line | ||
| Total | What goes on the change |
*Overhead and Profit.
For ductwork, labor is the hours to fabricate and hang it. Material is the duct, fittings, hangers and whatever else goes into it. Equipment is anything you rent or run to do the work, like a lift. Those three add up to a subtotal. Then tax, then markup, then the total. Overhead and profit always go on as their own line at the bottom, never buried in a rate. That is the way Steven Peterson lays it out in Estimating in Building Construction, and it is the way I want to see it.
On labor, I use $85 an hour as my example burdened rate. I worked that number out in what an hour actually costs you. Yours will be different, and on a commercial job it should be the rate that is in your contract. On my contracts the labor rates are usually split by personnel type, so a foreman hour, a journeyman hour and an apprentice hour each have their own rate.
Fully burdened cost per unit, when you don’t need a breakdown
Not every change has to be broken into labor, material and equipment. When your contract or your GC does not require the breakdown, you can quote a fully burdened cost per unit.
Cost per unit means the cost of the work is rolled into one number per unit. The labor, the labor burden, the material and the equipment. What is not in it is your overhead and profit. That still goes on separately at the bottom, the same as any other change: subtotal, tax, markup, total. The reviewer sees one rate, one quantity and one markup, and he can check all three.
The units are the ones you already think in:
- Each (EA). Per register or diffuser.
- Linear foot (LF) (depending on your region, “lineal foot”). Per foot of duct.
- Square foot (SF). Per square foot.
Here is a template. I am not going to put commercial rates in it. Fill in yours.
| Unit | What it covers | Your fully burdened rate | Quantity on this change |
|---|---|---|---|
| Register or diffuser, EA | The cost to install one, rolled in | ||
| Duct, LF | The cost of one foot of that duct, rolled in | ||
| Area, SF | The cost of one square foot, rolled in | ||
| Subtotal | Rate times quantity, added up | ||
| Tax | Per your contract and your state | ||
| Markup | Your O&P, as its own line | ||
| Total | What goes on the change |
For scale only: in how to price a side job I put an added diffuser at about $200 to $300 on an open floor, and about $350 to $500 in an attic or through gypsum board. Those are side-job prices to a homeowner. They are not commercial unit rates, and I would not send them to a GC. They are there to show what a per-unit number looks like. Material, labor, trips and time, all in one price per diffuser. A side-job price to a homeowner also has my markup in it. On a commercial change, the markup comes back out and goes on its own line.
Back up every piece of your burden rate
Here is a story, with the names and numbers taken out.
On one job, the rates were already in place. Agreed, approved and in the contract. Then the owner went back and audited them after the fact, and struck part of the sub’s burden rate. The burdened rate came down at the owner direction and agreed to by the sub, on a rate everybody thought was settled.
The lesson is simple. An agreed rate is not the end of the conversation if you cannot show where it came from. Back up every piece of your burden rate.
An owner expects to see base wage, PTO, holidays, insurance, and payroll taxes like federal and state unemployment tax (FUTA and SUTA). A real burden rate usually carries more than that, and every piece of it is a real cost of putting that person on the job. Whatever rides along in your burdened rate, have the paper for it. In the hour-cost post I listed the kinds of things that do: self-employment tax, insurance, the truck payment, fuel, tool replacement, consumables, the phone, and the estimating time. A company with employees will have its own list. The point is the same. If it is in the rate, you should be able to show it.
Whether an owner can audit your rates, and how far back, depends on your contract. Read it. I am not a lawyer, and this is not legal advice.
Management time and O&P
One more thing that changes how your rates get read.
Some subs break out hours for field coordination and management on a change, then put overhead and profit on the whole change. Some owners strike that management time and count the O&P as what covers it. I went through both in the FAQ on what a change order costs. Find out which way your job goes before you build your rates around it.
What to say
My rules do not change. Nothing gets agreed out loud. When somebody asks for a price, give a number or say you need to check. Do not start until the price and the time are in writing.
Before the contract is signed: “Can we get our labor, material and equipment rates into the contract? Then every change after that is just quantities.”
When somebody asks in the field: “I would really love to help. I need to check on the material before I guess. I will email it or text it to you tonight.”
When you send the change: “This is [quantity] diffusers at our unit rate price of [your rate] each, same rate as our last change, with tax and our markup below the subtotal. Let me know if this is approved and I will get the material to start [insert date].”
Once you have the number, you still have to hand it to somebody. I built a free estimate and invoice tool for tradespeople, no signup, no subscription: quickdrawinvoice.com
Common questions
What is a unit price change order?
A change priced as a quantity times an agreed rate. When the rates are already in the contract, the reviewer only has to check the quantities, which is why these tend to move faster.
What is a fully burdened labor rate?
It is what an hour of labor costs once everything that rides along with it is loaded in. Taxes, insurance, the truck, tools, the phone. It is not take-home pay. I use $85 an hour as my example, and I showed the work in the hour-cost post.
What is labor burden in construction?
Labor burden is everything an hour costs beyond the wage itself. It is the part of the rate an owner may ask you to back up, so keep the paperwork that shows where each piece comes from.
Unit price vs lump sum, which is better for a change?
When your rates are already in the contract, unit pricing gives the reviewer something he can check against what you agreed to and against your past changes. A lump sum with nothing behind it has to be taken apart before anybody can approve it.
Can an owner audit a change order?
Every contract that I can recall, the owner has the option to audit all change orders. On the job I described, the owner audited the rates after they were already in place and struck part of the burden. Read your contract, and back up every piece of your rate before somebody asks.
What is a price per unit rate?
A price per unit rate is the combined cost of the labor, material and equipment to produce one unit, such as a linear foot, a square foot or each. Your overhead and profit stay out of the rate and go on their own line at the bottom. It’s different from a lump sum, which gives one number for the whole change with nothing broken out.