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.
North Carolina Compensation for Change Orders and Builder Allowance Overages In North Carolina, the construction industry follows specific rules and regulations when it comes to compensation for change orders and builder allowance overages. Change orders and allowance overages are common occurrences in construction projects, and understanding how they are handled in this state is crucial for builders, contractors, and homeowners alike. Change Orders in North Carolina: Change orders refer to alterations or modifications to the original scope of the construction project. They may occur due to design changes, unforeseen issues, or client requests. When a change order is requested, it is essential to address the associated compensation adequately. North Carolina recognizes two main types of change orders: 1. Directed Change Orders: These change orders are initiated by the project owner or architect and typically involve modifications that the builder or contractor must implement. The compensation for directed change orders is typically negotiated between the parties involved, and it can vary based on the complexity and impact of the requested changes. 2. Constructive Change Orders: These change orders occur when the builder makes modifications that are necessary to complete the project, but were not explicitly requested by the owner or architect. In such cases, the builder is entitled to additional compensation for the changed work. However, the builder must demonstrate that the change was reasonable and necessary for completing the project as per the original plans and specifications. Builder Allowance Overages in North Carolina: Builder allowances are predetermined amounts set aside for specific construction materials, finishes, or fixtures that a homeowner can choose from. Overages occur when the chosen items exceed the predetermined allowance amount. The handling of builder allowance overages in North Carolina may vary depending on the contract terms agreed upon by the parties involved. There are generally two approaches to addressing builder allowance overages: 1. Change Order Approach: When the homeowner selects items that exceed the predetermined allowance amount, the builder may treat it as a change order. The homeowner will be responsible for covering the additional cost above the allowance, including materials, labor, and any related expenses. 2. Homeowner's Expense Approach: Some contracts may specify that if the homeowner exceeds the builder's allowance, they will be responsible for paying the difference out-of-pocket. This approach requires the homeowner to finance the additional cost on their own and does not involve classifying it as a change order. It is crucial for both parties to include clear provisions regarding builder allowances, overages, and their treatments in the construction contract. Transparency and communication between builders, contractors, and homeowners are key to avoid confusion and disputes regarding compensation for change orders and builder allowance overages. Overall, North Carolina's compensation practices regarding change orders and builder allowance overages aim to ensure fair and equitable solutions for all parties involved in construction projects, promoting smooth project execution and homeowner satisfaction.
