Is a PCO a contract document?

No. A potential change order is a project-management record, not an AIA contract instrument. It is how a contractor logs, prices, and submits a possible change so it can be tracked while the parties decide what to do with it. If the owner approves it, the PCO becomes the basis for an executed change order, which is the contract document. If it is rejected or withdrawn, the PCO still serves a purpose: it documents that the item was raised, priced, and resolved, which matters if the same issue resurfaces in a later dispute. The PCO log is essentially the pipeline of everything that might change the contract but has not yet.

Can a contractor refuse a construction change directive?

Generally not. Under the standard AIA general conditions, the owner can issue a construction change directive without the contractor's signature, and the contractor is required to proceed with the directed work. That is the point of the directive: it lets critical work continue while the price and schedule impact are still being negotiated, rather than stalling the job over a number. What the contractor keeps is the right to be compensated. The directive obligates the owner to pay a reasonable adjustment, and the contractor preserves that right by tracking the actual cost and time of the directed work carefully, since the directive will later be converted into a change order at an agreed amount.

Why track potential change orders if they aren't approved yet?

Because the pipeline of unapproved changes is real financial exposure, even though none of it has changed the contract yet. A project with several hundred thousand dollars of priced-but-unapproved PCOs has that much potential cost and potential revenue sitting in limbo, and ignoring it until the change orders are signed hides the true position of the job. Disciplined teams watch the PCO log the way they watch the budget: aging the oldest items, chasing decisions, and forecasting how much of the pipeline is likely to convert, so the executed change orders are the confirmation of a known exposure, not a surprise.

Construction Glossary · Change Management

PCOs &Change Directives

The two ways a change reaches a contract. One prices the work before it starts; the other starts the work and settles the price later. Both end in a change order.

Definition

A potential change order (PCO) is a logged, priced proposal for a change that has not yet been approved. A construction change directive (CCD) is the owner ordering the contractor to proceed with changed work before the price and time impact are agreed. Both are steps on the path to an executed change order.

Price first, or work first

A PCO is negotiated to agreement before the work proceeds. A directive flips the order: the owner starts the work, and the price is settled afterward. Both converge on an executed change order.

Potential Change Orderprice first

1Log the potential change

2Price cost and time

3Negotiate with the owner

4Owner approves

Executed change order

Change Directivework first

1Owner directs the work

2Contractor proceeds now

3Track actual cost and time

4Settle the price

Executed change order

The PCO log is exposure, not noise

Say three PCOs sit on our project, priced at $220K in total, none yet approved. That is $220K of potential cost and revenue in limbo. Treating the log as a to-do list instead of a financial position is how a job gets surprised at closeout.

Disciplined teams age the oldest PCOs, chase the decisions, and forecast how much of the pipeline will convert, so the executed change orders confirm a known number rather than reveal a new one.

How POD tracks the pipeline

POD keeps a change-order log that holds potential changes alongside executed ones, so the priced-but-unapproved pipeline is visible as its own figure rather than hidden until a change order is signed. When a potential change is approved it becomes a change order linked back to the PCO, and an approved client change can then be applied to the current project budget, so the move from pipeline to executed is a tracked transition rather than a manual re-entry.

Change order management guide

Frequently asked questions

When the pipeline becomes the contract

Once a PCO is approved or a directive is settled, it executes as a change order and the contract moves. See where it lands.

The Change Order Back to the Glossary