We use cookies to ensure we glve you the best experience on our website, You can find out about our cookies and how to disable cookies in our Privacy Policy. Ifyou continue to use this website without disabling cookies, we will assume you are happy to receive them. Close. Designing Buildings Wiki Share your construction industry knowledge www designingbuidings.co.uk IHBC pe Last edited 20 Jul 2021 Variations in construction contracts Contents 1 Introduction | 2 Valuation of variations 3 Source of confit 4 Extension of time | 5 Conelusion |B 6 Related articles on Designing Buildings Wiki 7 External references Introduction ‘A vatiation (sometimes referred to asa variation instruction, variation order (VO) or change Corder), is an alteration to the scope of works in @ construction contract inthe form of an ‘adktion, substitution of omission from the original scope of works. ‘Atmost al construction projects vary rom the original design, scope and defntion, Whether ‘small or large, construction projects will inevitably depart from the original tender design, specifications and drawings prepared by the design team. This can be because of technological advancement, statutory changes or enforcement, change In conditions, geological anomalies, non-avallabllty of speciied materials, or simply because of the continued development ofthe design after the contract has been awarded. In large civil engineering projects variations can be very significant, whereas on small building contracts, they may be relatively minor. Variations may incude: Alterations tothe design ‘Alterations to quanties. Alterations to quay ‘Alterations to warking conditions 1H Alterations tothe sequence of work Variations may also be deemed to occur the contract dacuments do not propery describe the works actually required. Related articles Extension of ime EOT in construction contracts Architoets instruction Campaign for cash retentions reform. Change order for construction contracts Alterations to existing buildings Prime cost sum Liquidated damages in construction contracts, Construction contract Want complements o writing? complimeVariations may not (witout the contractors consent) Change the fundamental nature ofthe works. (Omit work so that it ean be carried out by anther contractor. Be instructed atter practical completion Require the contractor to cary out work that was the subject of a prime cost sum. Inlegal terms, a variation is an agreement supported by consideration to alter some terms of the contract. No power to order variation fs implied, and so there must be express terms in Contracts which give the power instruct variations. In the absence of such express terms the contractor may reject instructions for variations without any legal consequences. ‘Standard forms of contract generally make express provisions forthe contract administrator (generally the architect or engineer) to instruct variations (for example, FIDIC Clause 51.1). ‘Such provisions enable the continued, smooth administration of the works without the need for another contract, Variation instructions must be clear as to what is ands not included, and may propose the ‘method of valuation. Valuation of variations Variations may give ris to additons or deductions from the contract sum. The valuation of ‘variations may include not just the work which the variation instructon describes, but other ‘expenses that may result from the variation, such as the impact on other aspacts of the works. Variations may also (out not necessarily) require adjustment of the completion date. Variations may be valued by: ‘Agreement between the contractor and the client. The cost consultant. ‘A atlaton quotation prepared by the contractor and accepted by he cent By some other method agreed by the contractor and the cent. Valuations of variations are often based on the les and prlces provided by the contractor In ‘heir lender, provided the workis ofa similar nature and carted out in similar conditions. This 's true, even ftbecames apparent that the rates provided by the contractor were higher or lower than otherwise available commercial rates, ‘The contractor's rates do nol become reasonable or unreasonable by the execution of variations, as stipulated by the ruling in the case of Henry Boot Construction Lid v Alstom (1999), If simitar types of works to those instructed by a variation cannot be found in the drawings, specification or bils of quantities, then fair valuation ofthe contractor's direct costs, overheads ‘and proftis necessary However, NEC contracts do not value variations based on rates in the tender. Guidance on assessing compensation events states: ‘Assessment of compensation events as they affect Prices is based on their effect on Defined Cost plus the Fae. This is diferent from some standard forms of contract where variations are valued using the rates and prices in the contract as a basis. The reason for this polley is that no ‘compensation event for which a quotation is require is due to the fault of the Contractor or ‘olates to a matter whichis at his risk under the contract. tis therefore appropriate to reimburse the Contractor his forecast addtional costs (or actual costs i the work has already been done) arising from the compensation event, Featured articles and news "Newsnight report - Trapped: the UK's building safety esis CCIOB responds to programme broadcast on 2 September 2021, Remotely piloted aircraft Using drones for inspection and survey of historic structures, Seaside piersIn other words, the contractor can ignore thei tender pricing and claim cost plus on vaiatons. 7 However, there may be cisagreements about ems suchas factory overheads and THE ARCHITECTURE ‘management which ae very hard o evaluat. In adston, given the complexty and length of OF BRITISH ‘he supply chain in major buldng works, getting forecast pricing from athe partes afected takes time, often beyond the date by which the contract administatr has to make the decsion as to wheter or nt instruct the variation They may then have to decide whether or not to proceed witha variation based on estimates ‘rom the cost consultant which in due course get replaced by the actual cost. thas been argued that this practicality defeats the some of the rationale ofthe NEC contracts in relation to cost control and decision making, Source of conflict Conflict can arise when work is not mentioned in the bills of quantities, drawings or specifications. In common law this silence does not mean the contractor has an automatic right te claim for extra payment. The client is not bound to pay for things that a reasonable Contractor must have understood were to be done but which happen tobe omitted from the bills of quantities, Walking on water. Book review. Where there are tems that, whist thay are not expressly mentioned, are nonetheless required EWS! guidance from CIAT in order to complete the works, then the contractor should have included them in thet price ‘The bills of quantities and specification do not necessary have to inlude ‘every nal to be punched in: For example, in king GRC facades itis necessary to have steel supports, and a reasonably experienced contractor must make provision for this in the contract price. Unless ‘expressly excluded, such supports are not paid for asa variation. Conflict can also arse when a sub-contractor qualifies that, for example, ‘Supply & Fixing of oor is included! but ‘Supply & Fixing of Ironmongery is excluded! A reasonable sub-contractor should foresee that a door cannot be fixed without hinges — which is a part of the ironmongery. ‘So even if ronmongery is excluded, the sub-contractor cannot expecta variation for any ofthe items requited to fix the doors, Pil coverage recommendations offered to architectural technologists |Also, under the pretext of variation, the contract administrator cannot change the nature of ‘works. For example, ifthe contract provides for secant pile shoring, they cannot ask for siaphragm wall sharing as it wll entirely change the nature ofthe work Burrell Collection reapens in March Further, ifthe contract administrator omits work from contractor's scope, such an omission ‘must be genuine: thats, the work omitted must be omitted from the contract entirely, it cannot be used to take work away from the contractor to give it to another (for example, see FIDIC Clause 51.1) Similar, the contract administrator is not empowered to order variations to help ‘he contractor ifthe contract works are proving too dificult or expensive for ther. Extension of time Many construction contracts alow the construction period to be extended where there are delays that ae not the contractor's fault, This is described as an extension of time (EOT). £68 millon refure nears completion. Variations may (but do not necessarily) constitute relevant events that can merit an extension ‘high road! skits dovelopment of time and so adjustment of the completion date. See Extension of ime for more information. ConclusionVariations are often sources of clsoute, elther in valuing the variation, or agreeing whether part of the works constitute a variation at all, and can cost a lat of time and money during the course of 8 contract. Whilst some variations are unavoidable, itis wise to minimise potential variations and subsequent claims by ensuring that uncertainties are eliminated before ‘awarding the contract. This can be done by: = Undertaking thorough site investigations and condition surveys, Ensuring thatthe project brief is comprehensive and is supported by stakeholders. Ensuring that legislative requirements are properly integrated into the projec. Ensuring that risks are properly identified. Ensuring that designs are properly coordinated before tender. Ensuring the contract ls unambiguous and expt Ensuring the contractors rates are clear. 1B Preparing concise drawings, bills of quantites and specifications, providing fo all situations ‘hich are reasonably foreseeable, pI} ¢-134 PMI'S GUIDE to Strategic Ris! Management read Related articles on Designing Buildings Wiki Extension of time EOT in construction contracts Architects instruction ‘Campaign for cash retentions reform. Change order for construction contracts ‘Alterations to existing buildings Prime cost sum Liguidates damages in construction contracts, Construction contract Change control procedure for building design and construction ‘Compensation event Aborive workin building design and construction Payment for extra work Bil of quantities BOQ Confirmation of verbal instruction ‘Scope of work Dayworks in construction How to prepare a claim for an extension of time Contract sum FIDIC Loss and expense Contract documents for construction Relevant event Fluctuations in construction contracts Valuation Valuation of interim payments External references = The JCT 05 Standard Building Contract: Law and Administration By Issaka Ndekugr, Michael Rycrot Investing in talent through ongoing training Demolition, infting and historic ral structures. Proposing more sensiive treatment of outdated infrastructure. Enhancing user experience with assisted realty Ths handsfree technology projects information into the user's fel of vision PAS 2038 and historic buildings How the standard will impact energy retrofits for older buildings. Construction Knowledge Task GroupHow digital krowedge can catch up with data {and information. ‘See more features and news, © Designing Buildings Ltd, 2021