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.
Virginia Compensation for Change Orders and Builder Allowance Overages can vary depending on the specific circumstances of each construction project. Change orders refer to modifications requested by the owner or the construction team during the course of a project. These changes often involve additional work, materials, or design alterations, which result in extra costs and time. In Virginia, construction contracts typically include provisions that outline how change orders will be handled, compensating the builder for the additional work and expenses incurred. The compensation for change orders can be based on various factors such as labor rates, material costs, equipment rentals, and overhead expenses. Builders in Virginia may also encounter situations where the allowances provided for specific items or materials during the initial contract negotiations are exceeded. These overages are known as builder allowance overages. For example, if the homeowner selects pricey tiles that surpass the original tiling allowance, the builder would need compensation for the difference. There are a few different types of compensation methods for change orders and builder allowance overages in Virginia: 1. Lump Sum Compensation: This method involves agreeing to a fixed amount for the change order or overage. The builder and homeowner negotiate a fair payment upfront based on estimated costs and adjustments required. 2. Time and Material Compensation: With this approach, compensation is determined based on the actual time spent and materials used for the change order or overage. The builder keeps track of labor hours and material expenses, including receipts and invoices. 3. Percentage Markup Compensation: The builder may apply a predetermined percentage markup (often referred to as an overhead and profit margin) on the actual cost of labor and materials incurred during the change order or overage. This method allows the builder to cover overhead expenses, such as administrative costs, insurance, equipment, and utilities. It is vital for both parties to have a clear understanding of the compensation methods stated in the construction contract before proceeding with any change orders or encountering builder allowance overages. Open and transparent communication plays a crucial role in negotiating fair compensation and avoiding disputes. Overall, Virginia Compensation for Change Orders and Builder Allowance Overages ensures that builders are fairly compensated for the additional work and expenses incurred throughout a construction project when changes or overages arise.
