Prospective Pricing. Where the change calls for only added work, the EA should be priced prospectively (i.e. before the added work is performed). The amount should be based on estimates available at the time the estimate is submitted. Cost estimates can be based on actual costs of doing similar work taking into account special circumstances of the contract that may change the costs. An allowance for profit is added to any cost estimates even when the contract is otherwise in a loss position.

When there is a change to contract work, some part of the original contract is usually deleted and different work is added. There can be actual cost experience for either the deleted or changed work and when this happens the EA is calculated by determining the difference between (1) an estimate of the total reasonable costs to perform the contract as changed and (2) the total reasonable costs the contractor would have estimated for performing the changed (rather than original) contract at the time the contract was awarded.

Retrospective Pricing. When a change order involves added work and the EA is priced retrospectively, actual cost data for the changed work is used and the adjustment is based on actual costs plus an allowance for profit. For substituted work, actual cost data for the changed work should also be used and the EA is calculated by taking the difference between (1) actual costs of performing the contract as changed and (2) a reasonable estimate of total costs to perform the contract at the time the contract was entered into. For example, if performance of the original contract was estimated to cost $25,000 while performing the contract as changed (including the substituted work) actually cost $30,000 the the EA would equal $5,000 plus profit even if the contract may otherwise be in a loss position.

When there is a change to a contract in a loss position, the government is still entitled to a downward price adjustment when it issues a change order to delete work or substitute work costing less than the original work contemplated. Such a downward adjustment (sometimes called a "deductive change") should neither increase nor reduce a contractor’s expected loss on the remainder of the contractor, leaving the contractor in the same position it was in before the change.

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