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.
Montana Compensation for Change Orders and Builder Allowance Underage: In Montana, compensation for change orders and builder allowance underage is an important aspect of construction contracts. Change orders refer to modifications made to the original scope of work agreed upon between the contractor and the client. Builder allowance underage, on the other hand, relates to situations where the contractor exceeds the budgeted amount for certain materials or items specified in the contract. When it comes to compensation for change orders in Montana, there are two types commonly recognized: fixed price change orders and time and material change orders. 1. Fixed price change orders: In this type, the contractor and client agree on a fixed price for the changes made to the initial contract. The change order outlines the specific modifications, associated costs, and any adjustments in the construction timeline. The client typically pays the agreed-upon amount upon completion of the change order work. 2. Time and material change orders: Time and material change orders consider the actual time spent and materials used during the modification process. This type of compensation ensures that the contractor is compensated fairly for the additional labor and materials involved. The contractor keeps track of the time spent, hourly labor rates, and material costs, which are then presented to the client for approval before the work commences. The final compensation is calculated based on the actual time and materials used, along with any agreed-upon markups or profit margins. In terms of builder allowance underage, it refers to situations where the contractor exceeds the specified budget for certain materials outlined in the contract. Montana recognizes three types of allowance underage: 1. Change order allowance underage: When the contractor exceeds the budgeted amount for specific items or materials due to unforeseen circumstances or client requests, a change order allowance underage may occur. This means that the contract needs to be adjusted to accommodate the additional costs incurred. 2. Contingency allowance underage: A contingency allowance is an amount set aside for unexpected costs that may arise during construction. If the contractor exceeds this budgeted amount, a contingency allowance underage scenario happens. The contractor submits a change order outlining the reasons for the variance and seeks client approval for additional reimbursement. 3. Specification allowance underage: Specification allowances are allotted for specific items in the contract with an estimated cost. If the actual cost surpasses the allotted amount, a specification allowance underage occurs. The contractor presents a change order outlining the reasons for the discrepancy and requests additional compensation to cover the excess expenses. In Montana, compensation for change orders and builder allowance underage requires thorough documentation and agreement from both the contractor and the client. It is essential to maintain clear communication and detailed records to ensure fairness and transparency throughout the construction process.
