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.
California Compensation for Change Orders and Builder Allowance Overages refers to the process and mechanisms through which additional payments are made to contractors, builders, and construction professionals for any changes or modifications made to the original scope of work or for exceeding the predetermined allowance amounts. Change Orders: In construction projects, change orders often arise when modifications are required due to client requests, design alterations, or unforeseen project requirements. California Compensation for Change Orders entails the payment made to contractors to cover the additional costs, labor, and materials associated with these changes. It ensures that contractors are adequately compensated for the extra work and resources invested in accommodating any variations from the original plans. Builder Allowance Overages: Builder allowance is a predetermined sum agreed upon between the client and the contractor to cover specific items or materials within the project, such as fixtures, finishes, or appliances. If the actual cost of these items exceeds the initial allowance, the contractor may face what is known as allowance overages. California Compensation for Builder Allowance Overages involves reimbursing contractors for the additional expenses incurred when the actual costs surpass the agreed-upon allowances. Different types of California Compensation for Change Orders and Builder Allowance Overages: 1. Fixed Compensation: In some cases, compensation for change orders and allowance overages can be pre-determined and defined in the construction contract. This type of compensation ensures transparency and clarity by specifying a fixed sum or percentage that will be added to the original contract price or allowance amount. 2. Time and Material (T&M) Basis: Alternatively, compensation for change orders and overages can be calculated on a time and material basis. Under this approach, contractors are entitled to payment for labor and materials expended in fulfilling the change or allowance overage. The rates for labor and materials are commonly prenegotiated in the contract. 3. Cost-Plus Compensation: In certain situations, compensation for change orders and allowance overages may utilize a cost-plus approach. This means the contractor is entitled to reimbursement for the actual cost of labor, materials, and overhead, plus an agreed-upon percentage as a fee or profit margin. This method allows for greater flexibility and accounts for unforeseen expenses that may arise during the project. In conclusion, California Compensation for Change Orders and Builder Allowance Overages involves providing additional payment to contractors for modifications to the original scope of work or exceeding predetermined allowance amounts. This compensation can be fixed, calculated on a time and material basis, or based on a cost-plus approach during construction projects in California.
