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 York Compensation for Change Orders and Builder Allowance Underage Change orders refer to modifications or alterations requested by the owner or the client during the construction process. These changes might be due to design revisions, unforeseen circumstances, or additional requirements that arise after the initial plans have been agreed upon. In New York, compensation for change orders and builder allowances can vary depending on the circumstances, contract terms, and legal regulations. Certain types of compensation for change orders and builder allowances underage in New York can be categorized as follows: 1. Cost-Plus Contracts: In a cost-plus contract, the builder is reimbursed for the actual costs incurred for the change order. This includes labor, materials, and overhead expenses, plus a predetermined percentage or fee for profit or management. 2. Fixed-Priced Contracts: Under a fixed-priced contract, a set price is agreed upon for the construction project. Change orders are priced separately and can be determined using one of the following methods: — Unit Pricing: This method assigns a fixed unit cost to each task or item involved in the change order. — Time and Material (T&M) Pricing: T&M pricing reimburses the builder for the actual time spent on the change order, along with the materials used. This approach often includes an agreed-upon hourly rate for labor and the cost of materials. — Lump-Sum Pricing: Lump-sum pricing establishes a fixed price for each change order, typically negotiated between the client and the builder. 3. Allowance Contracts: Allowance contracts allow for flexibility regarding unforeseen costs or items that cannot be accurately predicted upfront. A specified budget, or allowance, is allocated for certain project aspects, such as fixtures, finishes, or equipment. If the actual cost exceeds the allowance, the client or the builder covers the additional expenses. 4. Contingency Funds: Contingency funds are a pre-determined sum of money that is typically included in the project budget to cover unexpected changes or unforeseen events. They act as a safety net to mitigate potential financial risks associated with change orders during construction. Under New York State law, it is crucial for both parties — the buildeacclaimeden— - to have a clear understanding of the compensation methods and terms specified in the construction contract. These terms should be negotiated and agreed upon before commencing the construction project to avoid disputes or confusion later on. Seeking legal counsel or advice from a construction professional can be beneficial when drafting or reviewing the contract to ensure compliance and protection of both parties' interests. Understanding the various types of compensation for change orders and builder allowances in New York helps contractors, property owners, and developers navigate the construction process and foster transparent communication when modifications or alterations to the project are required.
