Cost of Change Order Sum. Do we include Labor Specified in Question or just Contractors Overhead Rate?
I saw a question in the Ballast practice test book about a desk that asks how much the change to the contract sum that should be recorded on the change order is. I got this question wrong because I added the labor and not sure why it shouldn't be included...
In the proposal allocated a $5000 allowance for the cost of the desk. The manufacturer of the said desk, the total cost of the desk was $7767.
"The contractor receives the desk at the site. Installing the desk and connections to power and data systems took two laborers 3 hours at $50 per hour. The Contractors overhead and profit rate is 15%"
So the easy math is $7767 - $5000 = $2767
Then $2767 x 0.15 = $415
$2767+$415=$3,182 at the correct answer.
I got this question wrong because I added the 3 hours of labor. So why isn't the correct answer $3,182+$150=$3332 ???
was this just extra information? I've seen questions from YoungArchitect where they do include this labor to the cost of the "change order sum" and then I see Ballast book questions where they do not include the labor and just add the Contractor overhead of in this case 15%
Is there a specific reason for when the labor would be added on or it just should not?
Appreciate any clarity on the issue. Thank you!
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Hey Michael -
The key here is that the proposal allocated a $5000 allowance for the cost of the desk (i.e. the material cost) and then the actual cost of the desk ended up being higher. The original proposal already included (or should have included) the labor to install the desk - just because the desk is now more expensive, the labor cost doesn't necessarily increase. If this question said 'it took the laborers an additional X hours at $Y per hour' then I'd add that additional labor to the change order cost.
Therefore, this particular change order should include only the cost of the desk itself, plus contractor OH&P. There's no formula that you can always use - each situation is different so it's really important to understand the facts and ask yourself 'what is being added to the contractor's original scope of work, that they haven't already included?'
Chris Hopstock RA
Black Spectacles
ARE Community -
I do understand that each situation is different but I wasn't sure why the labor wasn't included in the Change order sum for this question. I now understand that the question was just providing extra information that was not needed. I will be on the lookout for "Additional Labor" in future questions like this. Appreciate your time! Thank you!
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