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.
New Mexico Compensation for Change Orders and Builder Allowance Overages: In New Mexico, compensation for change orders and builder allowance overages is a crucial aspect of construction contracts. Change orders refer to modifications made to the original construction plans and specifications during the course of a project. Builder allowance overages, on the other hand, pertain to the situation where the cost of materials or products exceeds the initially agreed upon allowance amount. There are a few different types of compensation for change orders and builder allowance overages in New Mexico, including: 1. Time and Materials (T&M): This type of compensation is based on the actual time spent and materials used to complete the change order or cover the allowance overage. The contractor is reimbursed for their labor, equipment, and materials at an agreed-upon markup percentage. 2. Fixed Price: In some cases, a fixed price compensation method may be used. Here, the contractor and client agree on a set amount to cover the change order or allowance overage, regardless of the actual costs incurred. This can provide a level of predictability and certainty in terms of project costs. 3. Cost-Plus: Under the cost-plus compensation method, the contractor is reimbursed for their actual costs incurred, including labor, materials, and overhead, and is additionally paid a predetermined percentage or fee as profit. This approach ensures that the contractor is compensated fairly for the additional work or expense. 4. Negotiated Compensation: In certain situations, the compensation for change orders and builder allowance overages can be negotiated between the contractor and client. This allows for flexibility in finding a mutually agreeable solution that considers the specifics of the project and the parties involved. When dealing with compensation for change orders and builder allowance overages in New Mexico, it is essential for all parties to have a clear understanding regarding the method of compensation and any limitations or conditions that may apply. Proper documentation, such as written change orders or amendment agreements, should be used to ensure transparency and avoid disputes. Effective management and communication between the contractor and client throughout the project are vital to address potential changes or allowance overages promptly. By carefully considering the compensation methods available and selecting the most suitable one for each situation, the construction process in New Mexico can proceed smoothly and provide fair compensation to all parties involved.
