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.
Vermont Compensation for Change Orders and Builder Allowance Overages refers to a specific set of policies and procedures that dictate how additional costs related to change orders and builder allowance overages are addressed and compensated within the construction industry in Vermont. Change orders typically arise when there is a need for modifications or alterations to the originally agreed-upon scope of work, while builder allowance overages occur when the costs associated with a particular item or feature exceed the allocated budget. In Vermont, there are several types of compensation methods and approaches when it comes to handling change orders and builder allowance overages. These include: 1. Fixed Percentage Markup: This method involves applying a predetermined percentage markup on the original contract price to cover any change orders or builder allowance overages. For example, if the agreed-upon markup is 10%, any additional costs resulting from changes or overages would be calculated by adding 10% to the original cost. 2. Cost-Plus Method: Under this approach, the contractor is reimbursed for the actual costs incurred, including labor, materials, and subcontractor expenses, while a predetermined fixed fee or percentage is added to cover general overhead and profit. This method offers more transparency as it clearly outlines the costs associated with the change orders and overages. 3. Time and Material (T&M) Basis: This compensation method involves billing the client for the actual time spent on change orders and overages, along with the materials used. Hourly rates for labor and markups on materials are typically established in advance. T&M compensation allows for flexibility, especially when the nature or extent of the changes is uncertain. 4. Negotiated Settlements: In some cases, compensation for change orders and builder allowance overages is based on a negotiation between the contractor and the client. The parties discuss the additional costs incurred and reach an agreed-upon amount that reflects a fair and reasonable resolution. Vermont Compensation for Change Orders and Builder Allowance Overages aims to ensure that the parties involved in a construction project are fairly compensated for any additional work or unexpected costs that arise throughout the course of the project. The chosen method of compensation often depends on factors such as the project size, complexity, and the contract terms agreed upon between the parties. By implementing these various compensation methods, Vermont seeks to establish clear guidelines and promote transparency in addressing change orders and builder allowance overages, ultimately fostering better communication and trust between contractors and clients.
