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.
In Ohio, compensation for change orders and builder allowances can vary depending on the specific terms outlined in the construction contract. These provisions play an essential role in managing unplanned alterations to the original project scope and ensuring fair compensation for builders and contractors. This article will provide a detailed description of Ohio's compensation for change orders and builder allowances, outlining the different types and relevant keywords. Ohio Compensation for Change Orders: 1. Definition and Purpose: The compensation for change orders refers to the payment or adjustment made when there are alterations or modifications to the original construction project scope agreed upon in the contract. These changes may arise due to design revisions, unforeseen site conditions, owner requests, or other factors. 2. Change Order Process: — Change Order Request: When a change needs to be made, the party requesting the change submits a formal change order request to the general contractor or construction manager. — Assessment and Pricing: The contractor evaluates the change's scope, impact on the timeline and cost, and provides an estimate for the change order. — Negotiation: The parties negotiate the cost and schedule adjustments to accommodate the change. — Approval and Execution: Once both parties agree, the change order is documented, approved, and signed. 3. Compensation Types: — Cost-Plus: Compensation is based on the actual incurred costs, including labor, materials, and subcontractor fees, plus an agreed-upon percentage intended to cover overhead and profit. — Fixed Fee: The change order compensation includes a fixed fee agreed upon beforehand, reflecting the estimated additional costs and potential project disruption caused by the change. — Unit Price: Compensation is established based on a unit price, such as the cost per square foot or per item, for the particular change in question. Ohio Builder Allowance Underage: 1. Definition and Purpose: Builder allowance underage involves the reimbursement or adjustment provided to the contractor or builder when the actual costs associated with a particular allowance item are lower than the previously estimated or allocated amount stated in the construction agreement. 2. Allowance Items: — Material Allowances: Allowances allocated for selecting materials, such as flooring, fixtures, appliances, or finishes. — Labor Allowances: Allowances intended to cover labor costs for specific work, such as electrical wiring, plumbing, or carpentry. — Design Allowances: Allowances for expenses related to design services, architectural fees, or engineering. 3. Process and Compensation: — Actual Cost Assessment: The contractor determines and documents the actual costs expended for the allowance item, ensuring appropriate documentation for transparency. — Reimbursement or Adjustment: If the actual costs are lower than the allowance amount, the contractor is typically reimbursed for the actual expenses incurred, and the contract price is adjusted accordingly. Ohio Compensation for Change Orders and Builder Allowance Underage provide mechanisms to address unforeseen circumstances or changes in the project scope while ensuring fair compensation for contractors. Understanding these provisions within the construction contract is crucial to successfully managing construction projects in Ohio.
