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.
Texas Compensation for Change Orders and Builder Allowance Overages refers to the payment and reimbursement structures in place for construction projects in the state of Texas when changes or allowances exceed the original estimates or allowances provided by the builder. In such cases, additional costs are incurred due to modifications or selections made by the homeowner or client. Change Orders typically arise when the owner requests modifications to the original plans or specifications of the project. These changes may include alterations to the scope of work, materials, or design elements. When a change in the project occurs, the builder submits a change order request detailing the additional work or expenses required. Compensation for change orders is governed by various methodologies and contracts, such as lump sum agreements, cost-plus contracts, or time and material rates. In Texas, builders are typically entitled to seek compensation for change orders through a process called Change Order Markup. This refers to a percentage or markup added to the actual cost of labor, materials, and equipment used to complete the change order work. Common markups range from 10% to 20%, although they may vary based on the builder's contract and negotiation. Regarding Builder Allowance Overages, allowances are predetermined budgets allocated for specific items or selections within the construction project. These allowances are provided to cover the cost of items, such as flooring, fixtures, appliances, and finishes, where the final selection and cost may not be known at the time of the contract. If the homeowner's selections exceed the allocated allowance, a Builder Allowance Overage occurs. Builders in Texas usually handle Builder Allowance Overages by issuing a Change Order for the incremental cost. Compensation for Builder Allowance Overages is similar to compensation for change orders and may follow the same markup approach, where the additional expenses incurred beyond the allowance amount are calculated at a markup percentage agreed upon in the contract. It's important to note that Texas Compensation for Change Orders and Builder Allowance Overages may vary depending on the specific agreements, contracts, and negotiations between the builder and the homeowner. An experienced construction attorney or professional can offer guidance and clarify the compensation structure for each specific project.
