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.
Michigan Compensation for Change Orders and Builder Allowance Overages refers to the policies and regulations that govern additional payments made to contractors or builders when there are changes or overages in construction projects in the state of Michigan. Change Orders occur when adjustments or modifications need to be made to the original scope of work specified in the construction contract. These changes may arise due to unforeseen circumstances, design modifications, or client preferences. In Michigan, compensation for change orders is regulated to ensure fair reimbursement for contractors or builders. The Michigan Compensation for Change Orders can be broadly classified into two types: 1. Fixed Compensation: This type of compensation provides a predetermined amount of additional payment to the contractor for each change order issued. The compensation is agreed upon and documented before the commencement of the project and is calculated based on factors such as labor costs, material costs, and project complexity. Fixed compensation helps in providing clarity and transparency to the change order process. 2. Time and Material Compensation: This type of compensation is based on actual incurred costs due to change orders. The contractor is compensated for the additional labor, materials, and overhead expenses required to implement the changes. Time and material compensation is calculated through hourly rates for labor and material costs, which might include specific markups for overhead and profit. In addition to Change Order Compensation, Michigan also regulates Builder Allowance Overages which involve additional costs incurred when the price of specified materials or fixtures exceeds the initial budgeted allowance. This typically occurs when the homeowner selects higher-priced materials or fixtures than originally allocated in the contract. The compensation for Builder Allowance Overages is handled separately from change orders and is agreed upon in the contract terms. It is essential for contractors and builders in Michigan to thoroughly understand the compensation regulations for change orders and builder allowance overages. They should carefully document all change orders, maintain transparent communication with clients, and ensure proper approval processes are followed. By adhering to Michigan's Compensation for Change Orders and Builder Allowance Overages regulations, contractors and builders can effectively manage project modifications, maintain positive client relationships, and ensure fair compensation for additional work and materials beyond the original contract scope.
