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.
In the state of Colorado, compensation for change orders and builder allowance overages is a crucial aspect of construction contracts. Understanding these provisions is essential for both contractors and property owners to navigate construction projects effectively. Change Orders: Change orders are modifications made to the original construction contract. They represent any changes in the project scope, specifications, or design that arise after the initial agreement has been signed. In Colorado, compensation for change orders is typically negotiated on a case-by-case basis, considering factors such as labor costs, material expenses, and the overall impact on the project timeline. Builders and contractors may incur additional costs or savings due to change orders, thus necessitating appropriate compensation adjustments. There are different types of Colorado compensation for change orders, including: 1. Cost-Plus: Under this arrangement, the owner compensates the builder or contractor for actual expenses incurred, including direct costs (labor, materials, etc.) and indirect costs (overhead, fees, etc.). A predetermined fee or percentage is added to the actual costs as contractor compensation. 2. Fixed Price Adjustment: In some cases, a fixed sum or percentage is agreed upon for potential change orders. This predetermined amount helps simplify the compensation process and provides stability by considering anticipated changes in the project. Builder Allowance Overages: Builder allowances refer to a specific amount of money allocated to a specific item or category in a construction project. These allowances are designed to allow flexibility for the owner to choose certain items, such as fixtures or finishes, within a certain budget. However, when the chosen items exceed the allocated budget, builder allowance overages come into play. Colorado's compensation for builder allowance overages follows a similar approach to change orders, ensuring fair compensation for the contractors. Common methods of addressing builder allowance overages include: 1. Direct Billing: When the owner chooses items that exceed the allowance, contractors bill the owner directly for the difference. This method requires open communication and agreement on the overage expenses. 2. Change Order Process: In some cases, builder allowance overages may be treated similar to change orders, initiating the negotiation and compensation process outlined earlier. The additional costs resulting from allowance overages may be factored into the project's overall budget. It is crucial for all parties involved in a construction project in Colorado to have a clear understanding of the compensation for change orders and builder allowance overages. By including these provisions in the contract, both parties can prevent disputes, ensure fair compensation, and maintain transparency throughout the construction process.
