What You Need to Know About Change Orders Part 4
In this six-part article, we are discussing contract amendments via the change order. As we discussed in the first, second, and third sections, if your project needs adjustments beyond the original scope of work defined in your contract, you need to make a change order request and should seek the counsel of a Miami contractor attorney. As we will discuss in this section, there are several types of change orders a contractor can utilize.
Lump Sum Change Order
A lump sum change order is when a project needs adjustments and that specific price total can be determined at a fixed price. The change order features an itemized list of the modifications needed to the project as well as the exact cost for this work.
- Cost Plus: If a change order requires an increase in the fiscal amount, this is a “cost plus” change order. These additional expenses are generally for increased labor, building materials, and equipment needed to complete the additional work.
- Credit: A “credit” change order is when a project’s finances need to be scaled down. Perhaps the original design was too ambitious or cheaper materials will be utilized.
No-Cost Change Order
When adjustments are needed but there will be no change to the total cost of the project, this is called a no-cost change order. Because all significant changes to a project should be documented, this is a mutually agreed upon adjustment to the original design that does not impact the overall cost of the project. Whether the no-cost change order is simply an aesthetic modification (like a different color of paint) or substituting materials, equipment, or labor costs of equal value, it’s important for contractors to submit a change order to ensure that the owner agrees to these changes in writing.
Time and Material Change Order
If the total cost for the full scope of work cannot be determined at the time that the adjustments need to be made, this is a time and material change order. If this is the case, the owner will want the contractor to keep close track of their time worked and the materials purchased to correct the issue. The final cost of the change order can be determined at a later date when the adjustments are nearing completion. It’s important for contractors to include the option of a time and material change order in their contract as this clause should also include the altered labor rate and material price if this type of change order needs to be implemented into the project.
If you would like to speak with one of our Miami contractor attorneys, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.