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.
Title: Understanding Arizona Compensation for Change Orders and Builder Allowance Overages Introduction: In the construction industry, change orders and builder allowance overages can often lead to additional expenses and adjustments to a project's budget. It is vital for both contractors and clients in Arizona to comprehend the various types of compensation and allowances associated with these changes. This article aims to provide a detailed description of Arizona's compensation methods for change orders and builder allowance overages, highlighting different types when applicable. 1. Change Orders Compensation: Change orders occur when modifications or alterations are requested after the initial construction project has begun. The compensation for change orders in Arizona typically involves: a) Additional Work Compensation: Contractors generally charge for extra labor, materials, and equipment required to complete the change order. This compensation often reflects the contractor's standard rates or predetermined pricing described within the initial contract. b) Time Extensions: In cases where change orders result in project delay, contractors may be entitled to additional compensation for extended project duration. Proper documentation and agreement from both parties are crucial to avoid disputes. 2. Builder Allowance Overages Compensation: Builder allowances are pre-determined amounts within a contract set aside for specified project aspects such as finishes, fixtures, or materials. If these allowances are exceeded during construction, compensation for overages may be discussed. Arizona's approaches to builder allowance overages compensation are as follows: a) Reimbursement for Overages: When the cost of a selected item exceeds the allowance limit, the client may be required to pay the difference. This compensation method is commonly used when the client's choices exceed what was initially budgeted. b) Allowance Contingency: Some contracts include an allowance contingency to accommodate unforeseen overages. If the total allowance surpasses this contingency, additional compensation negotiations may be initiated. c) Change Order for Overages: In certain cases, if the builder allowance overages result from client-requested changes, a change order can be issued to modify the contract accordingly. Compensation for these changes follows the guidelines mentioned earlier in the "Change Orders Compensation" section. Conclusion: Managing change orders and builder allowance overages is crucial for a successful construction project in Arizona. Understanding the different types of compensation methods associated with these changes allows both contractors and clients to make informed decisions and maintain a fair and transparent project environment. By adhering to the appropriate compensation guidelines, construction projects can proceed smoothly, ensuring client satisfaction and minimizing potential conflicts.
