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.
North Dakota Compensation for Change Orders and Builder Allowance Underage: In North Dakota, compensation for change orders and builder allowances plays a crucial role in construction contracts. There are various types of compensation methods available to address these circumstances: 1. Change Orders: Change orders refer to modifications or alterations made to the original construction plans agreed upon between the builder and the owner. North Dakota recognizes the importance of change orders and provides clear guidelines regarding compensation for such changes. — Lump Sum Change Orders: This type of compensation involves a fixed amount agreed upon between the owner and builder for any requested changes. — Time and Material Change Orders: Compensation for change orders is based on the actual costs incurred by the builder, including labor, materials, and subcontractor expenses. These costs are sometimes subject to a pre-negotiated markup. — Percentage of the Contract Sum Change Orders: Compensation is determined by a percentage of the initial contract sum, usually outlined in the contract terms. 2. Builder Allowance Underage: Builder allowance underage refers to a situation where the actual construction costs exceed the budgeted builder allowance. It often occurs when unforeseen circumstances or upgrades increase the project's expenses. North Dakota provides certain provisions for compensating the builder in such cases. — Additional Compensation: If the total construction costs exceed the builder allowance, the owner and builder can negotiate additional compensation to cover the underage. — Change Order Negotiation: The owner can request changes to the original plans, reallocating the budget to cover the underage. In such cases, the compensation for Change Orders discussed above becomes relevant. It is important to emphasize that North Dakota law mandates clear documentation and agreement between the owner and builder regarding these compensation methods. Contracts should explicitly outline the accepted types of compensation for change orders and builder allowance underage, ensuring fair payments and avoiding any disputes. Keywords: North Dakota, compensation, change orders, builder allowance underage, lump sum change orders, time and material change orders, percentage of the contract sum change orders, additional compensation, change order negotiation, construction contracts, unforeseen circumstances, budgets, fair payments, legal provisions.
