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.
Oakland Michigan Compensation for Change Orders and Builder Allowance Overages: In Oakland Michigan, compensation for change orders and builder allowance overages refers to the financial arrangements made between builders and clients to account for modifications or upgrades requested during the construction process. Change orders typically occur when homeowners decide to alter the original plans, specifications, or materials after construction has begun, while builder allowance overages appear when the cost of selected items goes beyond the allocated budget. The compensation process for change orders and builder allowance overages in Oakland Michigan can be categorized into different types: 1. Change Order Negotiated Compensation: This type of compensation involves a negotiation between the builder and the homeowner regarding the cost of the change order. The builder may provide an estimate for the additional work or materials needed, taking into consideration the labor, materials, and other relevant factors. The homeowner and builder then discuss and agree upon a fair compensation amount for the change order. 2. Allowance Overage Reconciliation: Allowance overages occur when the cost of selecting certain items, such as appliances, fixtures, or finishes, exceeds the initial budgeted allowance. To address this, the builder may provide the homeowner with a reconciliation statement detailing the overage costs. The homeowner and builder work together to determine how the overages will be compensated, which may involve adjusting other budgeted items or paying the difference directly. 3. Contingency Allocation Compensation: In some cases, builders may include a contingency budget as part of the original construction contract. This allows for unforeseen expenses, such as change orders or allowance overages. The contingency allocation compensation involves utilizing the funds from the contingency budget to cover the additional costs incurred due to changes or budget overruns. The builder and homeowner need to agree on the proper use of the contingency funds and how to handle any remaining amount. 4. Lump Sum Compensation: This type of compensation involves a predetermined lump sum amount agreed upon by both parties to cover potential change orders and allowance overages. The homeowner pays this amount upfront, and any necessary changes or budget adjustments are deducted from the lump sum. If the lump sum is exhausted before the completion of the project, further compensation discussions are required to address additional costs. In conclusion, compensation for change orders and builder allowance overages in Oakland Michigan requires open communication and negotiation between homeowners and builders. The different types of compensation methods mentioned above allow for flexibility and fairness, ensuring that modifications and budgetary adjustments during the construction process are appropriately accounted for.
