What Is A Change Order From My Renovation?

Q:

What's a “change order”?

A:

A change order is a request to alter, exchange, or substitute a product or design feature that has already been approved, delivered, or installed by your contractor at your project.

A change order is the same no matter if you are renovating your home, adding an addition or having a new custom home built. Since you are asking for something that was never agreed upon a new agreement must be created and this is what a “change order” is at its essence.

The change order will state what the change is that you are asking to be completed and it will also give you a cost for that change. Once you sign it you and your contractor have agreed to amend the original contract in the stated area of work only.The rest of the original contract stays the same.

Just because a change order is created doesn’t mean that you have to sign it. A change order is also something that you can decline once you see the final cost on paper. When building a custom home your contractor will probably end up creating dozens of change orders for you. Some of these changes are asked for by the client and some are recommendations from the contractor to alter something or upgrade something in the home as the home is being constructed. Sometimes depending on the type of change you can be given several change orders all with different options on them and it is up to you to choose the one that is right for you. For example; When building a new custom home the home was estimated with typical to the minimum code batte insulation. Once the building has started your contractor will offer you the ability to change that insulation to something that is better, there are half a dozen ways that the insulation in a home can be upgraded, every different way will come with a different price. You are then presented the different options on several different change orders and choose the one that you want and also will fit into your budget. The others are filed as rejections and only kept on file to prove that you were offered them.

Occasionally you will be presented with a change order that details the changes you want but has no cost attached to it. This is because the change you are asking for will not cost you more then what the original would have cost you. You are only agreeing to the new change order so that everyone has a record of what and when you have changed something from the original contract.

A change order isn’t something that you should be scared of, it’s something that you should expect your contractor to produce every time you want to change something from the original contract. This is a sign that your contractor is a professional and is interested in keeping your project well organized and running smoothly in a timely manner.

Rob Abbott
Village Builders Inc.

What is an escalation clause in construction contract?

Q:
What is an escalation clause?

A:

In a contract with an escalation clause, the customer agrees to pay any price increases for specified items that occur between the signing of the contract and the start of construction. Volatile materials markets have made these clauses fairly common today. The alternative is for the contractor to inflate the contract price to cover possible increases. The decision to sign or not sign such a clause is basically a market bet, and will depend on whether or not the customer expects prices for the materials in question to rise.

When a general contractor receives prices for services and materials the proposals are dated the day that they were issued as a bid on the project. In the bid it will state how long the proposed price is guaranteed to stay the same. Usually the price is good for about 30 days. If the bid is successful then the bidder will be asked to hold that price until their services are required on site. When custom home building this could be up to 6 months or more after the date of the bid.

Where you get into price increases is when companies place bids on a project and because of plan changes or client indecisions the project isn’t rewarded to the general contractor until well after the 30 day limit. When this happens the client has to understand that the sub-contractors that bid on the project might have to charge them an extra because their own costs have gone up.

This can make pricing custom homes tricky because with a custom home as a general contractor working on a bid you could end up waiting 6 months to a year before you ever find out if you have won the project or have a finalized signed contract.

Rob Abbott
Operations Manager
Village Builders Inc.

Eliminate Surprises by Clearly Defining the renovation

Eliminate Surprises by Clearly Defining the Job

A major remodel is a big event for most families, and may be an even bigger financial investment. So it's no wonder that when it comes to getting their home remodeled, no one likes surprises. One way to avoid upset and frustration during the project is with a well-crafted contract. The contract is the document that spells out the detail and helps set expectations for both remodeler and client -- it's the roadmap that defines the destination, describes the detail of how the project will proceed, and steers everyone clear of obstructions and delays.

The contract is crafted so that it protects both remodeler and client, and clarifies everything about the job. It is organized into a number of sections, including information about the project, permits, contractor insurance, project timetables, and payment schedules.

While all of these details are important, most remodelers find that if conflicts arise during the project, they're usually caused by misunderstandings over the "who, what, and how" of the job. An effective contract works to clarify these issues.

Who makes the decisions?

This should be one person -- for instance, the husband or wife, but not both -- who will act as the remodeler's main contact for approvals, changes, and questions. Having one homeowner representative helps eliminate confusion and makes communication more efficient.

What, exactly, is the client buying?

The project description defines exactly what the homeowners will be getting for their money. The more detail the better. Most contracts accomplish this by referencing the project plans and specifications.
The plans are the visual description of the finished project, and include floor plans, drawings, and all electrical and mechanical systems. The plans should note who prepared them and when they were signed. They should also have gotten all necessary approvals -- for instance, from the building department and the zoning board.

The specifications, or "specs," are the written description of what will be done. They list all items that will be installed to complete the project. Depending on the project and scope of work, they may include specifics about carpeting, flooring, door hardware, and light fixtures; the model numbers of kitchen appliances, furnaces, and water heaters; and the brands and colors of paint and roof shingles. The project budget is based in part on the specs, so the clients should study these carefully to confirm that they understand what they are getting before signing the contract.

How will discretionary funds be allocated?

Discretionary funds include allowances and change orders. It's important that both be crystal clear.
Allowances cover parts of the job that have yet to be fully specified.

The contract should also clearly explain the remodeler's change-order policy, including what types of changes can be made at each stage of the project, who can sign off on changes (the owner and contractor reps), and the administrative cost for preparing change orders. It's in everyone's interest for even small changes to be documented in writing.

A contract that clearly defines the details goes a long way toward steering the project clear of the most common minefields. This will help ensure that the homeowners get the result they want, on the timetable and for the price they were expecting.

Warm Regards,

Doug Abbott
Village Builders

This is an excerpt from a newsletter that is distributed to all former, current and future clients of Village Builders Inc.  If you would like to receive this newsletter feel free to email me at www.robabbott@villagebuilders.ca

Rob Abbott
Operations Manager
Village Builders Inc