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.
Tennessee Compensation for Change Orders and Builder Allowance Overages: Explained Change orders and builder allowance overages are common aspects of construction projects in Tennessee. These terms refer to additional costs incurred due to modifications or upgrades requested by the homeowner during the construction process, or when the budget allocated for specific allowances exceeds its limit. Understanding how these compensations are handled in Tennessee is crucial for both homeowners and builders. This article will provide a detailed description of Tennessee's compensation policies surrounding change orders and builder allowance overages. 1. Change Orders in Tennessee: — Definition: Change orders are modifications to the original construction plans or scope of work requested by the homeowner after the contract has been signed. — Compensation for Change Orders: In Tennessee, compensation for change orders is typically negotiated between the homeowner and the builder. The additional costs incurred due to change orders are the responsibility of the homeowner and are usually paid through a change order agreement or amendment to the original contract. — Builder's Role: Builders in Tennessee are required to provide homeowners with detailed estimates or quotes for change orders before any work is performed. Both parties must agree upon the cost and scope of the change order before it is executed. 2. Builder Allowance Overages in Tennessee: — Definition: Builder allowance overages occur when the budget allocated for specific allowances, such as flooring, fixtures, or other finishes, exceeds its original limit. — Compensation for Allowance Overages: In Tennessee, the responsibility for allowance overages is typically divided between the homeowner and the builder. The exact allocation may vary, but common practices include the builder covering a percentage of the overage while the homeowner assumes the remaining cost. This allocation is usually outlined in the original contract or a change order agreement. 3. Types of Tennessee Compensation for Change Orders and Builder Allowance Overages: — Fixed Percentage Allocation: Under this compensation type, the builder and homeowner agree upon a fixed percentage that each party will bear if change orders or allowance overages occur. — Prior Agreement: Some contracts may specify a pre-determined compensation arrangement for change orders or allowance overages. For example, the contract could state that all change orders are homeowner's responsibility or that certain allowance overages are covered by the builder. — Custom Negotiation: Compensation methods can be tailored to each specific construction project. Builders and homeowners can negotiate compensation terms that suit their unique circumstances, ensuring a fair and satisfactory agreement. It's important for both parties involved in a construction project in Tennessee to carefully review and understand the compensation policies for change orders and builder allowance overages. Open communication, detailed documentation, and mutual agreement on compensation terms can help prevent disputes and ensure a smooth construction process.
