Cost Plus Change Orders Q

mdshunk

If the contract documents call for change order to be completed on a cost + 10% basis,

-and-

if your normal practice is to get paid for change orders when they are signed,

-then-

how can you be paid ahead of time for these cost plus change orders?

denick

You can't.
And it depends on how you show your cost.

Many times it's your labor and burden cost. Plus 10% no allowance for overhead and profit except that 10%. So it needs to be built in before hand some how.

__________________
Nick

"Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

Double-A

Depending on how large a company you're working for and the number of expected change orders, you can ask to have a w.i.p. account set up for the changes.

Bill as closely as you can and collect, but be ready to resubmit with actual numbers to settle the w.i.p. account at the end of the job.

This is a messy way to get paid for the COs as they occur.

__________________
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New York Times, July 20, 2006

Leo G

On MOST change orders the change is relatively small compared to the scope of the original job. You should have a good knowledge of what the materials are going to be and a what the time frame will be. I would guess that if you needed to be paid up front for this type of change order it would be the materials +10%, you would need to bill them for the cost of labor, at which time the labor should be paid when the job is completed. So in essence you cannot be paid for the change order, in full up front, if there is an unknown labor charge to be involved. If in your case, you have a standard charge to do a specific job, say add an outlet, you would be able to get paid in full before the job was started. If the change was more complex, such as rewire an entire room up to code, then because of the nature of the job, work hidden behind walls with unknowns then you would only be able to charge for the known components such as lights, outlets, boxes and wiring. The unknown(s) behind the wall will need to be determined after the wall was taken down and the situation of the job considered. This would have to be materials paid up front and labor upon completion. Everything should be done with a signed change order to protect both parties.

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PipeGuy

A more accurate description of such a requirement would be the ESTIMATED cost plus 10%. Some specs even go as far as to spell out what factors may (and may not) be considered in valuating the cost.

One of the thinks I enjoy arguing about with certain customers is the definition of the term "markup". In the strictest sense "mark up" (or mark down for that matter) is a percentage of the PRICE not a percentage of the COST. A $1,000 change order that includes a 10% "markup" has $900 worth of costs and $100 OH&P. The same $900 in costs yields only $90 profit if simply adding 10% to it.
If the term "markup" is used in the specs I'll try to take the extra $10 per thousand and throw it out as 'a bone' when someone wants a concession.

__________________
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voltamp

If you signed a subcontract or contract for changes to be cost plus 10% you can't. And in order to get paid at all on this you have to have very detailed backup including down time, off time and expidating time. Cost plus 10% on change orders noone know the cost, so noone wants to pay for it, even if they agree. Document, document, and include everything as if going for a claim in court. It will go there.