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.
When it comes to construction projects in Hawaii, it is crucial to understand the compensation for change orders and builder allowance overages. These terms refer to the financial aspects associated with any modifications, alterations, or additions to the original contract scope of work. Compensation for change orders and builder allowance overages ensures that the parties involved are fairly compensated for any unforeseen circumstances or requested changes during the construction process. In Hawaii, compensation for change orders typically involves the adjustment of the contract price to cater to changes in the project's scope that were not initially accounted for. It is important to note that change orders usually arise due to unexpected events, design modifications, or revisions requested by the owner, architect, or other stakeholders involved in the project. The compensation for change orders primarily covers the additional labor, materials, or services required to accommodate these changes. There are various types of compensation for change orders in Hawaii, such as: 1. Fixed Sum Change Orders: In this case, the compensation is determined by a predetermined fixed sum agreed upon by all parties involved. This fixed sum is usually established considering the estimated cost and impact of the change order. 2. Time and Material Change Orders: With this type of compensation, the cost of the change order is based on the actual time spent, including labor and materials required, plus any applicable overhead and profit margins. It is vital to maintain proper documentation of all time and material expended for accurate compensation. 3. Unit Price Change Orders: This compensation method is commonly used when the change order involves a specific quantity or unit of work. The unit price is predetermined, and the compensation is based on the unit price multiplied by the additional quantity required. Moving on to builder allowance overages in Hawaii, it refers to any amount that exceeds the original allowance or budget allocated for certain items in the construction project. Builder allowances are predetermined amounts assigned to specific items like fixtures, finishes, or materials, allowing the owner to make selections within a defined budget. However, if the owner chooses items that exceed the predetermined allowances, builder allowance overages come into play. In Hawaii, overages related to builder allowances can vary depending on the project's specific terms, but some common types include: 1. Owner-Funded Overages: In this case, the owner is responsible for covering the additional cost resulting from exceeding the predetermined builder allowance. This ensures that the contractor is compensated for the increased expense beyond the initially budgeted amount. 2. Shared Overages: Shared overages involve both the owner and the contractor sharing the additional cost resulting from exceeding the predetermined allowance. The specific breakdown of cost sharing is usually detailed in the contract or change order agreement. Understanding the compensation for change orders and builder allowance overages is essential for both the contractor and the owner in Hawaii. It helps maintain transparency, avoid disputes, and ensure fair compensation for any modifications or exceeding allowances during the construction process. Proper documentation, clear communication, and a comprehensive contract are crucial in effectively managing these aspects of a construction project in Hawaii.
