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.
Chicago, Illinois Compensation for Change Orders and Builder Allowance Overages: A Comprehensive Guide In the construction industry, change orders and builder allowance overages are common occurrences that may require compensation. Specifically focusing on Chicago, Illinois, this detailed description aims to explore the various types of compensation available for change orders and builder allowance overages in this area. Change orders are modifications made to the original construction plans and specifications after the contract has been signed. They often arise due to revisions requested by the client, design errors, or unforeseen site conditions during the construction process. In Chicago, compensation for change orders typically involves additional costs incurred as a result of these modifications. 1. Cost-Plus Compensation for Change Orders: This method involves reimbursing the builder for the actual costs incurred in making the change, including labor, materials, and overhead. A predetermined percentage may also be added to cover administrative expenses and profit. 2. Unit Cost Compensation for Change Orders: In this approach, compensation is based on a predetermined unit cost agreed upon by both parties. The unit cost is applied to quantify the additional work required by the change order, ensuring transparency and fairness in the compensation process. 3. Fixed Fee Compensation for Change Orders: With this method, a fixed fee, usually a percentage of the original contract value, is predetermined for any change order. The fee remains unchanged regardless of the actual cost incurred in implementing the change. This type of compensation provides certainty and simplicity, especially for smaller change orders. Builder allowances are predetermined amounts included in the construction contract to cover the cost of certain materials, finishes, or fixtures, allowing clients to personalize their project. However, if the client exceeds these allowances, compensation for overages may be necessary. 1. Deduct from Final Payment: In cases where the builder has overages due to exceeding the allowance, the excess amount can be deducted from the final payment owed to the builder. This method ensures that the builder is not compensated for the extra costs incurred beyond the original agreement. 2. Negotiated Compensation for Overages: Another approach involves negotiating compensation for the overages between the builder and the client. If the client is pleased with the upgraded materials or finishes that caused the overages, they may be more inclined to compensate the builder accordingly. Chicago, Illinois has several compensation methods in place to handle change orders and builder allowance overages effectively. By adhering to these approaches, construction projects in Chicago can remain fair, transparent, and mutually beneficial for all parties involved. Keywords: Chicago, Illinois, compensation, change orders, builder allowance overages, cost-plus compensation, unit cost compensation, fixed fee compensation, deduct from final payment, negotiated compensation.
