Change order
A change order formally modifies an existing purchase order or contract on its commercial terms: quantity, price, delivery schedule, or scope of work. It is distinct from an engineering change order, which modifies the product's design definition; in practice an ECO frequently triggers a change order to reprice and reschedule the affected parts.
Examples
ECO flows downstream: An ECO moves a bracket from 5052 to 6061 aluminum at revision C. The change order reprices the part from $3.84 to $4.02, pays a $9,500 tooling modification, sets revision C effective at the 14,000-unit break, and dispositions 2,300 obsolete units at material cost.
Schedule pull-in: A buyer needs 8,000 units six weeks early. The change order documents a one-time $6,200 expedite fee and premium freight terms rather than leaving the favor informal, so the next pull-in has a precedent and a price.
Cumulative creep: A test stand quoted at $310,000 absorbs seven change orders averaging $11,000 over four months. The program tracker shows 25% cost growth, which forces a scope review before change order eight instead of a surprise at final invoice.
Definition
The distinction worth keeping sharp: an engineering change order changes what the part is; a change order changes what the deal is. When engineering revises a drawing, procurement's job is to convert that technical change into a commercial one: new price, effective date, disposition of obsolete inventory, and an amended purchase order.
Discipline lives in three rules. Price the impact before authorizing the work, because a change priced after execution is priced by the supplier alone. Put every change in writing, since verbal changes are how a $40,000 dispute is born. Track cumulative impact: five changes of 2% each is 10% cost growth that no single approval ever saw. On projects and services, tie each change order back to the statement of work so scope growth stays visible against the baseline.
Change orders are also a supplier-side margin strategy. A thin bid followed by aggressive change-order pricing is standard practice in construction and not rare in manufacturing, which is why change pricing rules (labor rates, markups, turnaround times) belong in the original contract and get enforced through routine contract management.
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