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.
Louisiana Compensation for Change Orders and Builder Allowance Overages refer to specific provisions in construction contracts that address additional costs incurred due to changes in project scope or allowances exceeding the initial estimates. These compensation mechanisms ensure that contractors and builders are fairly remunerated for the extra work or expenses arising during the course of the construction project. In Louisiana, there are various types of compensation for change orders and builder allowance overages that can be included in construction contracts. Some common ones are: 1. Change Order Compensation: A change order is an official document issued by the project owner or architect instructing a change to the original project plans or specifications. This can result from design modifications, unforeseen site conditions, or client requests. Louisiana's compensation for change orders ensures that contractors are entitled to additional payment for labor, materials, and equipment necessary to implement the change. 2. Time-Based Compensation: In some cases, change orders or allowance overages may cause delays in the project schedule. Time-based compensation allows the contractor to seek compensation for extended project duration and related costs, such as additional labor and overtime expenses caused by the change. This compensation helps mitigate the financial impact of project disruptions. 3. Materials and Equipment Allowance Overages: Builder allowances are pre-determined budgets allocated for certain materials, fixtures, or equipment specified in the construction contract. If the actual cost of these items exceeds the assigned allowance, builder allowance overages compensation ensures that contractors are reimbursed for the difference. This provision protects contractors from incurring unexpected expenses due to price fluctuations or changes in client preferences. 4. Overhead and Profit Compensation: When compensating for change orders and allowance overages, it is essential to consider the indirect costs associated with managing and administering the changes. Overhead and profit compensation covers the additional overhead expenses and allows for a reasonable profit margin for the contractor, ensuring sustainable business operations. It is crucial for both the project owner and the contractor to clearly define the compensation mechanisms for change orders and allowance overages in the construction contract. The contract should outline the specific procedures for requesting and approving change orders, documenting cost overruns, and determining fair compensation. By establishing transparent and equitable compensation terms, both parties can effectively address unforeseen changes and protect their respective financial interests during the construction process.
