- Introduction: The New Rules Have Changed the Board
- What the 2023 Prompt Pay Amendment Actually Says (and Why It Matters)
- Who Is Protected and Under What Contracts
- The GC’s Decision Point: When to Invoke the Refusal Right
- The Notice Protocol: How to Stop Work Without Creating New Liability
- Recovering Costs: Interest, Attorney Fees, and Penalty Mechanisms
- The Documentation Infrastructure That Wins Disputes
- Common Mistakes Texas GCs Make After the Amendment
- How the Amendment Interacts With Your Contract Language
- FAQ: Texas Change Order Disputes After the 2023 Amendment
- Conclusion: Your Playbook Starts With the Paper Trail
Introduction: The New Rules Have Changed the Board
Texas changed the rules on September 1, 2023. For the first time in the state’s construction history, general contractors have a codified, statutory right to stop work when an owner keeps directing scope changes without signing the paperwork to pay for them. That right isn’t a negotiating tactic. It’s the law.
Most GCs on Texas projects know the old frustration: an owner calls a site meeting, verbally orders three additional work items, then disappears when the change order lands on their desk. You keep building because the contract says you must, the unauthorized scope piles up, and six months later you’re fighting over $400,000 in work the owner now claims was “always in scope.” The dispute costs you time, legal fees, and a relationship. Sometimes it costs you the project margin entirely.
The 2023 amendment to the Texas Prompt Payment Act builds a structural fix into state law. HB 3485 added two new statutes: Texas Property Code Section 28.0091 and Texas Government Code Section 2251.0521. Together, they give contractors a clear trigger point: when unapproved change orders cross 10 percent of your original contract value, you can decline to proceed. No penalty. No liability for damages.
But the right only works if you can prove the threshold. That requires a documentation system, not a spreadsheet. This playbook walks you through the law, the decision logic, and the operational infrastructure every Texas GC needs to use these protections effectively.
What the 2023 Prompt Pay Amendment Actually Says (and Why It Matters)
The 2023 amendment gives Texas contractors a statutory right to stop work when unsigned change orders exceed 10 percent of the original contract value. It applies to both public and private contracts entered into on or after September 1, 2023, and it cannot be waived by contract. Two separate statutes cover private work and public work respectively, but the mechanism and the threshold are identical.
The Two New Statutes: Property Code 28.0091 and Government Code 2251.0521
HB 3485 created two parallel protections in the same legislative session. Texas Property Code Section 28.0091 governs private construction contracts. Texas Government Code Section 2251.0521 governs public project contracts. Both statutes use identical language on the core trigger: the contractor must lack a written, fully executed change order for the additional work, and the aggregate value of all such unapproved work must exceed 10 percent of the original contract amount.
The parallel structure is intentional. Texas lawmakers wanted no gap between public and private projects. If an owner on a $10 million courthouse project or a $10 million office development keeps directing scope changes without executing paperwork, the contractor’s right to refuse is identical in both settings. The statutes apply to subcontractors through the same framework, protecting the entire delivery chain.
The 10 Percent Threshold Explained
The threshold calculation is cumulative, not per-directive. You don’t count just the current unsigned order. You count every piece of owner-directed additional work for which no fully executed written change order exists, from the start of the project. On a $5 million contract, once unapproved directives reach $500,000 in aggregate, the refusal right activates.This matters enormously in practice. Owners often direct small changes knowing each individual item feels too minor to fight over. Ten items at $45,000 each add up to $450,000 on a $4 million project: more than 11 percent. The statute catches that accumulation. Knowing your running aggregate at any moment is what transforms the law from a theoretical protection to an operational tool.
Who Is Protected and Under What Contracts
The 2023 amendment protects general contractors on both public and private Texas projects, and extends identical protections downstream to subcontractors. Coverage applies to any contract entered into on or after September 1, 2023. Contracts signed before that date are not covered, regardless of when the disputed work occurs. Managing change order execution across your entire subcontractor chain? See how Sinq keeps every directive tracked and every signature accounted for sinq.co.uk
Private vs. Public Projects
For private projects, the governing statute is Texas Property Code Section 28.0091. The existing Chapter 28 framework, which contractors already use for prompt payment interest claims, now incorporates the change order refusal right as a companion protection. The two mechanisms work in tandem: if an owner both refuses to execute a change order and withholds payment for work already done, the GC has simultaneous triggers for both the refusal right and an interest-accrual claim under the broader Prompt Payment Act.
For public projects, Texas Government Code Section 2251.0521 mirrors the private project statute. Public work adds one practical layer of complexity: payment applications typically go through a governmental payment processing system with its own review periods. The 10 percent threshold calculation and the refusal right mechanism work identically, but GCs should document their directives against the government entity’s own project management records to build a contemporaneous record.
Subcontractors Are Covered Too
Subcontractors have the same 10 percent refusal right relative to their subcontract value. A mechanical sub on a $2 million subcontract can refuse additional work once unapproved directives from the GC hit $200,000. This creates a direct responsibility for the GC: if you’re directing scope changes to your subs without executing change orders, you’re exposing yourself to work stoppages under the same law you want to use against your owner. The amendment incentivizes disciplined change order execution all the way down the chain.
The GC’s Decision Point: When to Invoke the Refusal Right
Invoking the refusal right is a high-stakes decision with a clear analytical framework. The threshold question is whether the aggregate value of unapproved owner-directed changes exceeds 10 percent of your original contract. The secondary questions are whether you have the documentation to prove that aggregate, and whether invoking the right serves your business relationship and project objectives. The statute answers the legal question. You must answer the rest.
Building the Aggregate Value Case
Every unsigned change order directive needs a dollar value assigned to it at the time of receipt, not when the dispute matures. This is where most GCs fail: they receive verbal or written directives, proceed with the work, and only price the change when the owner eventually asks for a breakdown. By then, the contemporaneous cost record is gone, and the owner disputes the amount.
The correct approach is to price every directive as received, log it against the contract’s original value, and maintain a running aggregate total. When that total approaches 8 percent of contract value, you send an administrative notice to the owner documenting the current aggregate and requesting immediate change order execution on all open items. At 10 percent, you have the statutory right to stop. Whether you stop is a business decision. Having the documented aggregate is what gives you the leverage to negotiate the resolution.
According to a 2023 survey by the Construction Financial Management Association, contractors lose an average of 1.9 percent of annual revenue to unresolved change orders. On a $20 million project portfolio, that’s $380,000 in unrecovered scope. The 2023 Texas amendment creates the structural right to arrest that loss, but only if the aggregate is trackable in real time.
What “Fully Executed” Actually Means
The statute requires a “written, fully executed change order.” That phrase carries legal weight. An email from an owner saying “go ahead” is not a fully executed change order. A construction change directive signed only by the architect is not a fully executed change order. A verbal authorization recorded in a meeting minute is not a fully executed change order. The document must be a written change order signed by all parties with authority to bind their respective principals.
This standard creates a practical discipline: your team must know the difference between a direction to proceed and a fully executed change order. Training your project managers and superintendents on this distinction is not a legal exercise. It’s a financial protection protocol. Every item in your unsigned change order log is potential leverage under the 2023 amendment. Every item improperly treated as “approved” is leverage forfeited.
Managing your running aggregate of unsigned change orders manually is where GCs lose the thread. The complete change order software playbook for U.S. contractors shows how a centralized system tracks every directive from first instruction to final signature, so your 10 percent trigger is always visible. See how Sinq builds that infrastructure: sinq.co.uk.
The Notice Protocol: How to Stop Work Without Creating New Liability
Stopping work is not the same as abandoning a contract. Texas law requires a deliberate notice process before any work suspension under the Prompt Payment Act. Getting that notice wrong can convert your statutory protection into a breach of contract claim. The sequence and content of the notice are not formalities: they’re the load-bearing structure of your legal position.
Written Notice Requirements
Before suspending work under the change order refusal right, Texas GCs must give written notice of the intent to stop. The notice should identify the specific unapproved directives by description and dollar amount, state the running aggregate, confirm that the aggregate exceeds 10 percent of the original contract value, and state the date on which work will stop if the change orders are not executed. Ten days is the standard notice period under the broader Prompt Payment suspension framework, and applying that same window to change order refusals is prudent practice in the absence of explicit statutory guidance.
The notice goes to the owner, with a copy to the owner’s representative and the architect or engineer of record. Document the delivery method. Certified mail or a trackable electronic delivery system with read receipts creates the proof of notice you’ll need if the matter reaches arbitration or litigation.
What to Include and What to Avoid
The notice should be factual and non-adversarial in tone. State the law, state the aggregate, state the request, state the timeline. Do not characterize the owner’s conduct as bad faith, fraudulent, or intentional. Do not make threats beyond the statutory right to stop work. Do not include monetary demands for damages not yet calculated. The goal of the first notice is resolution: executed change orders within 10 days. Save the adversarial posture for the dispute phase, if it gets there.
The notice must not contain any statement that could be read as waiving future rights. Avoid language like “we are willing to continue work if you sign at least some of the change orders.” Partial execution restarts the aggregate calculation for signed items only. The right to refuse remaining unsigned items persists. Your notice should not muddy that clean analytical framework.
Recovering Costs: Interest, Attorney Fees, and Penalty Mechanisms
The 2023 amendment’s refusal right operates alongside the Texas Prompt Payment Act’s existing financial penalty structure. When an owner owes money for completed work and fails to pay within statutory deadlines, interest accrues at the prime rate published in the Wall Street Journal plus 1 percent per year. Attorney fees are recoverable by the prevailing party. Together, these mechanisms make delay expensive for owners and create real financial incentive to resolve disputes quickly.
Prime Rate Plus 1 Percent: The Math That Motivates Owners
Under Chapter 28 of the Texas Property Code, a private project owner must pay the GC within 35 days of receiving an invoice. If payment is late, interest accrues on the unpaid amount starting the day after the due date at the prime rate plus 1 percent per year. With prime rates in the 7 to 8 percent range in recent years, that’s an 8 to 9 percent annual penalty on withheld funds.
On a $500,000 disputed change order held for 12 months, that’s $40,000 to $45,000 in statutory interest before attorney fees. Add 12 months of litigation costs and the owner’s own legal fees, and the financial argument for executing change orders promptly becomes compelling. Your job as the GC’s commercial manager is to make that math visible to the owner early in the dispute, ideally before the notice period expires and work stops.
Good Faith Dispute Defense: How to Beat It
Texas law allows an owner to withhold payment if there is a “good faith dispute” about whether the amount is owed. This is the most common defense owners deploy against change order claims. The good faith dispute standard requires an honest, legitimate disagreement over entitlement, not mere reluctance to pay. An owner cannot withhold 100 percent of a change order simply by asserting the dispute is in good faith while providing no factual basis for the disagreement.
The mechanism for breaking a good faith dispute defense is documentation. If your change order log shows the date of the directive, the authorizing individual, the scope described, the cost estimated at time of receipt, and the date the executed change order was requested and refused, you have a contemporaneous record that the owner’s team knew about the change, knew about the cost, and chose not to execute. That record makes the good faith defense difficult to sustain. Manufactured good faith disputes built on an owner’s hope that you didn’t document the conversation collapse under a well-maintained change order log.
GCs across the country are rethinking how they manage change order documentation after legislative changes like these. See how California GCs avoid 2%/month penalties under PCC §7107 for a parallel framework that shows why documentation infrastructure is now the most important risk management investment a contractor can make.
The Documentation Infrastructure That Wins Disputes
Texas law now rewards GCs who maintain a real-time, centralized log of every unsigned change order. The amendment is architecturally sound, but it assumes you know your aggregate at any given moment. Without a system that tracks every directive from first instruction to final signature, you cannot invoke the refusal right with confidence, you cannot calculate interest accrual accurately, and you cannot produce the contemporaneous evidence that defeats good faith dispute defenses.
The Audit Trail as Your Primary Weapon
An audit trail in the change order context is not just a record of what happened. It’s a timestamped, party-attributed sequence of every action taken on every change order: who issued the directive, when, by what method, what the cost estimate was at receipt, when the draft change order was sent to the owner, when the owner responded, what the response said, and what happened next. That sequence is your evidence file in any dispute.
Law firms representing Texas GCs in construction disputes routinely cite the absence of a contemporaneous change order log as the single biggest factor in poor dispute outcomes. It’s not that the GC didn’t do the work. It’s that the GC can’t prove the work was owner-directed at the time it was performed. The 2023 amendment gives you the right to stop work: the audit trail gives you the evidence to recover costs for work already done.
A McKinsey analysis of large construction projects found that inadequate documentation and poor change management contribute to cost overruns on roughly 98 percent of projects. The documentation problem is not unique to Texas. But Texas law now creates a financial reward for solving it and a financial penalty for ignoring it.
Real-Time Financial Dashboards and Threshold Monitoring
The 10 percent threshold is a mechanical calculation. Original contract value is a fixed number. Aggregate unapproved change order value is a running sum. The ratio between them is the trigger. That calculation should not live in a project manager’s notebook or a shared spreadsheet someone updates monthly. It should live in a system that updates every time a directive is logged, a change order is submitted, or a signature is received or withheld.
Real-time financial dashboards that surface the current unsigned aggregate as a percentage of original contract value accomplish two things simultaneously. They tell your project team when they’re approaching the 10 percent threshold, so notice can be prepared before the trigger is actually breached. They tell your commercial manager the current cost exposure across all open change orders, so financial reporting to leadership reflects actual project economics rather than lagged accounting data.
This is the operational case for purpose-built change order software on Texas projects. Not because it’s convenient, but because the 2023 amendment requires an accuracy of tracking that manual systems cannot reliably deliver. Why NYC contractors now treat real-time change order tracking as mandatory illustrates how jurisdictions with strong financial penalty frameworks for disputed changes have already made this shift, and why Texas GCs should follow the same logic.
Common Mistakes Texas GCs Make After the Amendment
The 2023 amendment protects contractors who use it correctly. It doesn’t protect contractors who know about it but implement it sloppily. The most costly mistakes are not legal errors: they’re operational failures that undermine legal rights that would otherwise be available.
Proceeding Without Monitoring Aggregate Value
The most common mistake is continuing to perform owner-directed work while failing to track the aggregate value of unsigned change orders. By the time the GC realizes the aggregate has crossed 10 percent of contract value, the work is done. The refusal right exists as a prospective tool: it protects you from future scope creep once the threshold is crossed. It does not retroactively convert completed work into leverage for stopping the project. If you’ve already done the work, your recovery mechanism shifts to the interest and attorney fee provisions of the Prompt Payment Act, which are powerful but slower and more expensive than a properly timed stop-work election.
Informal Authorizations That Waive Your Rights
A second major mistake is accepting informal authorizations as substitutes for executed change orders while continuing to work. When a superintendent accepts a verbal “go ahead” from the owner’s representative and logs it as an approved change in the project management system, that log entry may be treated as evidence of a course of dealing that waives the written change order requirement. The amendment protects against the absence of a fully executed written change order, but informal practices that create the appearance of an alternative approval mechanism can undermine that protection in arbitration.
The fix is a firm internal protocol: only a written, fully executed change order by authorized signatories counts as approved. Every other instruction, regardless of who gave it, goes into the unsigned change order log and counts toward the aggregate. That protocol needs to be in your project execution standards and trained into your field team before work starts, not retrofitted after a dispute emerges.
How the Amendment Interacts With Your Contract Language
The 2023 statutes contain a non-waiver provision: owners cannot contractually eliminate the protections through contract language drafted before the dispute arises. This is a significant protection in Texas, where sophisticated owners sometimes use contract terms to limit contractor rights that would otherwise exist under statute.
Can Owners Waive the Protections by Contract?
The short answer is no. Texas Property Code Section 28.0091 and Government Code Section 2251.0521 apply to contracts entered into on or after September 1, 2023, and the statutory right to refuse additional work is not waivable by contract. An owner who inserts a clause requiring the contractor to perform all directed work regardless of change order status cannot use that clause to eliminate the statutory refusal right. The statute supersedes conflicting contract language on this specific point.
This does not mean all contract language is irrelevant to your change order rights. Notice requirements, time periods for claiming additional cost, and the definition of “additional work” are all contract-specific issues that the statute does not override. Reading your contract’s change order article alongside the new statutes is essential, because the contract may create procedural requirements that, if not followed, give the owner grounds to dispute the entitlement even when the statutory right to refuse exists.
AIA Contract Clauses and the Amendment
Many Texas commercial projects use AIA contract forms, particularly the AIA A201 General Conditions. The AIA A201 contains a detailed change order procedure in Article 7, including provisions for construction change directives that allow the owner to direct work before the cost is agreed upon, subject to later resolution. These clauses remain valid and govern the change order process. But they cannot override the statutory trigger: if the aggregate unapproved cost under any pending construction change directives exceeds 10 percent of the original contract sum, the statutory refusal right still applies.
GCs working under AIA contracts should maintain parallel tracking: the AIA change order log for contract administration purposes, and a statutory compliance log that measures aggregate unapproved cost against original contract value for the 10 percent calculation. Both logs should be maintained in the same system to ensure consistency. Conflicting numbers between your contract administration record and your statutory compliance record are a source of confusion in disputes that purpose-built change order software eliminates entirely.
FAQ: Texas Change Order Disputes After the 2023 Amendment
Can a Texas GC stop work if unsigned change orders exceed 10 percent of the original contract?
Yes. Under Texas Property Code Section 28.0091 (private projects) and Texas Government Code Section 2251.0521 (public projects), a GC may elect not to proceed with additional owner-directed work when the aggregate value of fully unsigned change orders exceeds 10 percent of the original contract amount. The GC is not liable for damages from that election.
Does the 10 percent threshold apply per change order or in aggregate?
The threshold is aggregate. It applies to the combined value of all unsigned, owner-directed additional work orders outstanding at any given time, not to any single change order. You add the value of every unapproved directive together and compare that sum to your original contract value. The refusal right activates when that aggregate sum crosses 10 percent of the original contract.
What interest rate applies to late-paid change orders under the Texas Prompt Payment Act?
Under Chapter 28 of the Texas Property Code, late payments accrue interest at the prime rate published by the Wall Street Journal plus 1 percent per year, starting the day after payment is due. If the matter proceeds to litigation or arbitration, the prevailing party is also entitled to reasonable attorney fees on top of the interest accrued.
Can an owner’s “good faith dispute” defense block a Texas GC’s change order claim?
An owner can withhold up to 100 percent of a disputed amount if there is a genuine good faith dispute over entitlement. However, a good faith dispute requires a legitimate factual basis for disagreement. A GC with a contemporaneous, timestamped change order log showing the owner-directed work, the cost estimate, and the owner’s failure to execute significantly weakens the good faith defense. Documentation is the primary tool for defeating it.
Do the 2023 change order protections apply to subcontractors in Texas?
Yes. Both Texas Property Code Section 28.0091 and Government Code Section 2251.0521 extend the same 10 percent refusal right to subcontractors relative to their subcontract value. A subcontractor can refuse additional work from the GC when unapproved directives exceed 10 percent of the subcontract amount. This creates a symmetrical obligation for GCs to execute change orders with their subs as promptly as they expect the owner to execute change orders with them.
Your Playbook Starts With the Paper Trail
The 2023 Texas Prompt Pay Amendment doesn’t give you a legal argument. It gives you a legal right. The distinction matters. An argument requires a lawyer, a brief, and a timeline measured in months. A right requires a trigger, a notice, and a documented log that proves the trigger was met. Your ability to use this right quickly and confidently depends entirely on the quality of your change order documentation system.
The GCs who will benefit most from the 2023 amendment are not the ones who call their construction attorney when the dispute explodes. They’re the ones who already know their aggregate unsigned change order value on every active project, who send the threshold notice before the situation becomes adversarial, and who walk into any dispute with a timestamped record that makes the owner’s position difficult to maintain without looking unreasonable to a neutral arbitrator.
That infrastructure is not expensive. It’s a disciplined system, properly implemented before the project starts. Sinq builds exactly that infrastructure: a single source of truth for every change order on every project, from first site instruction to final executed signature, with a built-in audit trail and real-time financial dashboards that surface your aggregate exposure before it becomes a problem. Every Texas GC running projects under contracts signed after September 1, 2023 should be operating this way now.
See how Sinq supports Texas GCs in building a change order management system that turns the 2023 amendment into a daily operational advantage: sinq.co.uk. No demo call required to explore. No sales pressure on the first visit.
The law gave you the right. The paper trail makes it real.