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.
Puerto Rico Compensation for Change Orders and Builder Allowance Overages is a term used in the construction industry that refers to the payment or reimbursement provided to contractors or builders for any additional work or expenses incurred due to changes requested by the client or exceeding the originally allotted budget for allowances. Change Orders, in the context of construction projects in Puerto Rico, typically occur when the client decides to alter certain aspects of the initial project plans, such as modifying the design, materials, or scope of work. These changes may arise due to client preference, unforeseen site conditions, or adjustments necessary to meet building codes or regulations. Contractors are entitled to compensation for executing these alterations, either through negotiated prices or on a time and material basis. Builder Allowance Overages occur when the client's choices for finishes, fixtures, or materials exceed the budgeted allowance amounts specified in the construction contract. For example, if a homeowner selects a more expensive flooring option than the allotted allowance amount, the builder may charge the client for the difference in cost as an overage. In Puerto Rico, there are variations in how Compensation for Change Orders and Builder Allowance Overages are handled in construction projects. These variations can be influenced by factors such as the size and complexity of the project, the contractor's agreement with the client, and the governing laws and regulations of Puerto Rico. Some different types of compensation or reimbursement include: 1. Fixed Fee Change Orders: This type of compensation involves a predetermined fixed fee that contractors receive for executing change orders. The fee may be based on a percentage of the original contract value or a specific lump-sum amount. 2. Time and Material Change Orders: In this arrangement, contractors are compensated for change orders based on the actual hours worked and materials used, as well as an agreed-upon markup or overhead and profit percentage. Detailed documentation, such as timesheets and receipts, is usually required to justify the reimbursement. 3. Unit Cost Change Orders: When a change order involves adding or removing a specific unit of work, a unit cost-based compensation method can be used. The contractor is reimbursed based on a predetermined unit price specified in the contract. 4. Negotiated Change Orders: In some cases, compensation for change orders and allowance overages is determined through a negotiation process between the contractor and the client. This method allows flexibility and can be influenced by factors like the urgency of the change, complexity, and the impact on the project schedule. It is essential for contractors and clients in Puerto Rico to have clear and comprehensive agreements in place to address Compensation for Change Orders and Builder Allowance Overages. This ensures transparency, avoids disputes, and provides a fair resolution for additional work and expenses incurred throughout the construction process.
