Question 30

A change order will be written to cover the additional cost.

When an owner exceeds the amount of the allowance, a change order will be created to document and authorize the additional costs incurred. This process ensures that all parties agree on the new financial terms before proceeding.

A) the contractor may choose less expensive items.

This option is incorrect because it implies that the contractor has the authority to modify project specifications unilaterally. The allowance is a predetermined budget, and if it is exceeded, a change order is necessary to address the additional costs rather than simply opting for cheaper alternatives.

B) a change order will be written to cover the additional cost.

This option is correct as it accurately reflects the standard procedure followed when an allowance is exceeded. A change order serves as a formal amendment to the original contract, allowing for the adjustment of costs related to the project.

C) the owner may request that the overage be arbitrated.

This option is incorrect because arbitration typically pertains to disputes rather than cost overruns. While arbitration could be a means of resolving disagreements, it does not apply to the straightforward process of managing budget excesses through change orders.

D) the owner must pay the overage in cash within 30 days.

This option is incorrect as it misrepresents the contractual process. While the owner will ultimately be responsible for the additional costs, the proper procedure involves issuing a change order rather than an immediate cash payment within a specific timeframe.

Conclusion

The correct answer, a change order will be written to cover the additional cost, accurately reflects the necessary procedure when the allowance is exceeded. All other options fail to capture the proper contractual process, either misrepresenting the authority of the contractor or the responsibilities of the owner. Understanding the significance of change orders is essential in managing project budgets effectively.