What are change orders in the context of contract management?

Change orders are formal, written amendments that specifically modify the terms of an existing contract. They are typically utilized in situations where project scope adjustments, unforeseen circumstances, or necessary alterations arise, which require changes to original contractual obligations, deliverables, timelines, or costs. This written nature of change orders ensures there is a clear, documented agreement between the parties involved, reducing potential disputes and misunderstandings that could occur with less formal agreements, such as verbal modifications.

In contrast to the other options, which lack the formal and documented aspect of change orders, the correct answer highlights the importance of having a structured process in contract management when changes are needed to ensure all parties are on the same page. Oral agreements do not provide the necessary legal backing, new contracts might imply a complete replacement rather than an alteration, and performance reports focus more on monitoring and compliance rather than contract modifications.