does cost of change order include GC's overhead and profit?

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    Rubi Xu (Edited )

    David Kaplan the allowence part of A201 i refered is actually for the question before the change order one , but again one of the  answer saying change to contract sum is material+labor+profit which seem to fit into 3.8.2.2 . but the answer is wrong .

    I am not sure this is just an error or I misunderstood the contract. ( below a is the correct answer)

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    David Kaplan

    Rubi,

    Admittedly I'm a little confused by the answer myself so I'll let others chime in on whether or not overhead and profit should be included (which I gotta tell you, I sure as hell thought that answer was "yes - it should be included" but according the what you are saying the correct answer is here, it is not).  I wanted to offer to you though that the AIA Contract portion you have provided is for allowances, not Change Orders. Different thing.  you are referring to the wrong part of the AIA Contract.  Allowances are not Change Orders.  Allowances are a set amount of money that one includes in a bid for an item whose quantity and/or design is to be included in the job but is not finalized in the drawings.  One example could be door hardware.

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    Kun Wu

    604 and 603 are a little different.

    For question 604, the GC already took the labor, overhead and profit into account when sending the bid, because he know there was a desk to install, whether cheap or expensive. So the cost of the desk itself wont affect GC's labor, overhead and profit.

    I will let others to answer for question 603, but I tend to say C is correct.

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    Philip Li

    Anyone got a solution to 603?

    3.8.2.2 allowances does not include site, labor, installation costs, overhead, profit and other expenses and shall be included in the contract sum.

    Wouldn't it be 7767.25-5000?

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    Matthew Mead

    For 603, how are you able to answer if you don’t know what the original construct sum was? The only way A could be correct is if you disregarded the language in the A201 about allowances. If labor is included in the allowance then you’d also have to include the $300 to install on site which would make the answer B. Something is off here...

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    Gregory Brown

    Not completely sure about this, however after reading through the question #603 two times step-by-step ~ (likely not what would happen in the actual exam scenario) I believe the answer would be (D).

    Here is what I came up with:

    1. The Allowance = $5000, (this is an allowance by definition "each contractor instructed to include") it is assume to be a component of the total cost of the project w/o/ question.
    2. The invoice from Meridian Millwork Company = $7767.25 as provided (does not include contractors overhead and profit rate of 15%). So, this will need to be applied at the end.
    3. The question goes on to state that two workers worked to install the custom desk three hours at a rate of $50.00 / hour = (2 workers) x (($50 / hr)/3 hrs) = $300.00
    4. Finally the total = $7767.25 + $300.00 = $8067.25 + (15% overhead & profit) = $9277.33 - $5000 = $4277.34 ~ (answer D).

    Ballast sometimes as you are aware does have questions that are more detailed (intentionally designed to help). This question actually could show up on the CE exam. IF it did and I didn't have time to give it enough thought I'd either flag it, or guess and move on. Hope this helps.

     

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    Jinliang Chen

    Hi Gang, thank you for your clarification! It helped a lot. I just erased my answer since they were so misleading. Btw, I just got a likely pass today for CE. Start to dig more comments from you on PA!

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    Divyang Panchal

    Hello everyone, 
    Just leaving this comment here so anyone referring to this in future has a proper source to look at for the correct response. (just spent 1 hour confused in this section, so substantiated my understanding by some research) 

    When I read both the questions, I did select the answers highlighted. 
    For change orders, refer to section 7.3.8 of A201 on how to prepare for amount. Even though it is for CCD, we can apply for change order as well since a CCD after approval from all becomes a change order and is mostly used in absence of one. 

    If that is still not satiating, then here is a link from AIA explaining why we choose Net decrease vs add overhead and profit during increase in amount. 

    https://www.aiacontracts.org/articles/6535513-contractors-overhead-and-profit-on-deduct

    For the allowance question my thought process was, the contractor has already included his labor + profit in the base bid per A201 3.8.2 section. He is receiving a finished product from a manufacturer which costs 7767.25. The allowance for this finished furniture product was set at $5000. So the difference in estimate and actual would be recorded as change order. 

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