In this episode, Rick Bell explains how to handle Change Orders in the custom home building process. He covers the importance of documenting changes clearly, types of changes that typically occur, and how those changes are priced, approved, and incorporated into the build.
Using real-world examples, Rick explores Owner-Directed Changes, Government Requirements, Errors and Omissions, Unforeseen Conditions, and Allowance Adjustments.
The episode emphasizes the role of contingencies and the importance of transparent communication.
What You’ll Learn
- What a Change Order is — and when it's needed during construction
- How Owner-Directed Changes are identified, priced, and implemented
- The difference between minor and major changes and how they affect the schedule
- The three other common types of changes: Government Requirements, Errors and Omissions, and Unforeseen Conditions
- How contingencies and allowances are used to manage budget impact
- Why clear documentation and communication of changes is essential for a successful build
Glossary of Terms
- Change Order: A formal amendment to the construction contract to account for changes in scope, cost, or time.
- Owner-Directed Change: A change initiated by the homeowner after construction has begun.
- Contingency: A reserve fund included in the budget to cover unexpected costs or changes.
- Allowance: A placeholder budget for selections that have not been finalized at the time of contract signing.
- Errors and Omissions: Items left off or incorrectly specified in the construction documents.
- Cost-Plus Contract: A contract where the owner pays the actual costs plus a fixed fee or percentage for the contractor’s services.
- Egress: A means of exiting a room or structure, often required by building code in bedrooms.
- Subcontractor: A contractor hired by the general contractor to perform a specific task or trade, such as electrical or plumbing.
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