Difficulty: Easy

Average Score: 75%

If an owner exceeds the amount of the allowance,

Rationale

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

When an owner exceeds the allowance amount specified in a contract, the typical procedure is to create a change order. This official document details the additional costs incurred and serves to modify the original contract to reflect the new financial obligations.

A (the contractor may choose less expensive items.) YOUR ANSWER

This option suggests that the contractor has the discretion to substitute items to avoid exceeding the allowance. However, this is not a standard practice; the original terms of the contract dictate the items and any changes must be agreed upon, typically through a change order if the allowance is exceeded.

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

This is the correct response. When the owner exceeds the allowance, a change order is necessary to document the additional expenses and amend the contract accordingly. This ensures that both parties are aware of the new costs and agree to the changes.

C (the owner may request that the overage be arbitrated.) YOUR ANSWER

While arbitration could be an option for resolving disputes, it is not a common or immediate response to exceeding an allowance. Instead, a change order is the standard procedure to manage additional costs directly related to the project.

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

This choice implies an immediate cash payment requirement, which may not be stipulated in all contracts. Payment terms for overages are typically outlined in the contract, and a change order would address how and when additional costs are to be paid.

Conclusion

In construction contracts, exceeding an allowance necessitates a formal change order to amend the contract and account for additional expenses. This process ensures clarity and agreement between the owner and the contractor regarding the financial implications of exceeding the initial allowance, while the other options fail to accurately represent standard industry practices.

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