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.
San Diego, California, known for its beautiful beaches, vibrant culture, and stunning landscapes, is not only a popular tourist destination but also a hotspot for real estate development and construction projects. When it comes to construction contracts, compensation for change orders and builder allowance overages are important aspects that need to be considered. Change orders, as the name suggests, refer to modifications or alterations made to the original construction plans or specifications after the construction contract has been signed. These changes can arise due to various reasons such as design modifications, unforeseen issues, or client preferences. In San Diego, compensation for change orders ensures that the builder is fairly compensated for the additional work, materials, and resources required to execute the changes. These compensations are typically agreed upon and documented in a change order agreement, which outlines the scope of the change, the cost, and any adjustments to the project timeline. Builder allowance overages, on the other hand, pertain to situations where the actual expenses incurred by the builder for items designated in the construction contract as "allowances" exceed the agreed-upon allowance amount. Allowances are usually provided for items like fixtures, finishes, and appliances, allowing the client the freedom to choose within a predetermined budget. However, if the client selects options that exceed the budgeted allowance, the builder may request compensation for the overage. In San Diego, compensation for builder allowance overages is typically negotiated between the builder and the client, with the final agreement documented in an overage agreement. It is worth noting that there are various types of San Diego compensation for change orders and builder allowance overages: 1. Fixed Percentage Compensation: In this type of compensation, the builder receives a predetermined percentage of the change order or overage amount as additional payment. This percentage can vary depending on the specific project and contract agreement. 2. Actual Cost Compensation: With this approach, the builder is compensated for change orders and allowance overages based on the actual incurred costs. Builders often provide detailed records and receipts to justify the additional expenses, and the client reimburses them accordingly. 3. Lump Sum Compensation: In certain cases, a lump sum amount may be agreed upon between the builder and the client to cover all change orders and allowance overages. This simplifies the compensation process and avoids the need for detailed cost breakdowns. 4. Time and Material Compensation: This compensation method involves reimbursing the builder for the additional work and materials based on an hourly rate for labor and the cost of materials utilized. This type of compensation ensures that the builder is compensated fairly for the actual time and resources invested in executing the changes. In conclusion, San Diego, California, like many other construction markets, employs various compensation methods to address change orders and builder allowance overages. These compensation types include fixed percentage, actual cost, lump sum, and time and material compensation. Clear documentation and mutual agreement through change order agreements and overage agreements play a crucial role in ensuring transparency and a fair resolution to compensate builders for any changes or overages incurred during the construction process.
