Change Order pricing - Case Study Example

Some states, particularly Washington does not require the local government “to pay contractors for higher labor rates on change orders” (Sonntag 12). 5. If a composite labor rate, developed on the basis of the overall mix of work on the entire contract, was used in the original estimate, should the same composite rate be used in pricing the work associated with the change? Answer: Yes. Since the man hours are already extended because of the change, charging the same composite rate for the additional work to be done is justifiable to be applied.

The paid longer working hours will already take care of the cost of the additional work needed. Answer: Yes. The contract between the contractor and the buyer has already been established long before the change so the workers assigned for the said job have committed their time to the length of the contract. Therefore, the workers are entitled to be paid throughout the whole time that the agreement is in effect regardless of any downtime as a result of the change as requested by the buyer. Answer: Yes.

The contractor can charge the difference to the cost of change in order to recover the losses brought by the downtime. Since the workers are committed to the length of the contract between the contractor and the Air Force, any downtime as caused by the change will not affect the labor rate that they are entitled to receive. Answer: Yes. It is appropriate to apply a learning curve, or the “period of orientation to become familiar with changed condition” (“Change Order Protocol” 4) to work affected by the change because of the new skills that the workers imbibed through the change. 9. Is the contractor entitled to claim the costs associated with the affect of the change on the rate of improvement for the changed work for the units on which none of the changed work has been performed?

Answer: Yes. Depending on the degree