Change Orders are instructions to revise construction plans after they have been completed. Change orders are common to most projects, and very common with large projects. After the original scope (or contract) is formed, complete with the total price to be paid and the specific work to be completed, a client may decide that the original plans do not best represent his definition for the finished project. Accordingly, the client will suggest an alternate approach.
Common causes for change orders to be created are:
" The project's work was incorrectly estimated;
" The customer or project team discovers obstacles or possible efficiencies that require them to deviate from the original plan;
" The customer or project team are inefficient or incapable of completing their required deliverables within budget, and additional money, time, or resources must be added to the project; and
" During the course of the project, additional features or options are perceived and requested.
Alaska Compensation for Change Orders and Builder Allowance Overages: A Detailed Description In the construction industry, change orders and allowances are inevitable occurrences that often lead to modifications in project plans, specifications, or budget allocations. Alaska, like other states, has compensation guidelines and regulations established to address change orders and builder allowance overages. These provisions ensure fair and reasonable compensation for both contractors and clients involved in construction projects. Compensation for Change Orders in Alaska: Change orders refer to modifications made to the original construction plans, typically initiated by the client or due to unexpected circumstances that arise during the project. The Alaska State law recognizes that these changes may necessitate additional labor, materials, or design alterations, thereby affecting construction costs. Different Types of Compensation for Change Orders in Alaska: 1. Time and Material (T&M) Pricing: This form of compensation involves paying for changes based on the actual time spent and materials used, inclusive of an agreed-upon profit margin and overhead expense. 2. Unit Price Adjustment: In this method, the Alaska Compensation for Change Orders is determined by adjusting the pre-determined unit pricing for construction elements affected by the change. 3. Cost-Plus-Fee Method: Under this approach, the contractor is reimbursed for all direct expenditures, including labor, materials, equipment, and subcontractors, along with an agreed-upon fee. 4. Lump Sum Agreement: In certain instances where the changes are well-defined, a fixed lump sum may be agreed upon that covers the entire scope of the change order. Builder Allowance Overages in Alaska: Builder allowances are predetermined amounts set aside in the contract to cover specific building materials, fixtures, or finishes. However, if the actual costs incurred surpass the original allotted amount, a builder allowance overage may occur. In such cases, Alaska provides compensation guidelines to address these overages, considering the extra expenses incurred by the contractor. Different Types of Builder Allowance Overages in Alaska: 1. Material Overages: This type of overage arises when the actual cost of specified materials exceeds the initial builder allowance, resulting in additional costs for the contractor. 2. Fixture Overages: Fixture allowances cover items like plumbing fixtures, lighting, and appliances. If the actual costs for these items go beyond the allocated allowance, a fixture overage occurs. 3. Finish Overages: Finish allowances are intended to cover expenses related to the final aesthetic aspects of the construction project, including flooring, paint, or countertops. If the actual costs exceed the original allowance, a finish overage is incurred. To ensure transparency and fairness when dealing with builder allowance overages, it is essential to have clear provisions in the contract specifying how these overages will be addressed and compensated. In conclusion, Alaska's Compensation for Change Orders and Builder Allowance Overages serves to establish a fair and equitable framework for compensating contractors when modifications or unexpected expenses arise during construction projects. By providing various compensation methods for change orders and addressing different types of overages, Alaska aims to maintain balance and uphold the interests of both contractors and clients in the construction industry.
