IntroductionA variation (sometimes referred to as a variation instruction, variation order or change order) is an alteration to the scope of works in a construction contract in the form of an addition, substitution or omission from the original scope of works. Almost all construction projects vary from the original design, scope and definition. Whether small or large, construction projects will have 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-availability of specified materials, or simply because of the continued development of the 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 include: Alterations to the design. Alterations to quantities. Alterations to quality. Alterations to working conditions. Alterations to the sequence of work. Variations may also be deemed to occur if the contract documents do not properly describe the works actually required. Variations may not (without the contractors consent): Change the fundamental nature of the works. Omit work so that it can be carried out by another contractor. Be instructed after practical completion. Require the contractor to carry out work that was the subject of a prime cost sum. In legal terms, a variation is an agreement supported by consideration to alter some terms of the contract. No power to order variation is implied. Hence there should be express terms in contracts which give the power instruct variations. In the absence of express terms in the contract the contractor may reject instructions for variations without giving rise to any legal consequences. Standard forms of contract generally make express provisions for the contract administrator(generally the architect or engineer) to instruct variations (for In some contracts.Variations may also (but not necessarily) require adjustment of the completion date. such as the impact on other aspects of the works.example. If similar types of works to those instructed by a variation cannot be found in the drawings. and may propose the method of valuation. The reason for this policy is that nocompensation event for which a quotation is required is due to the fault of the Contractor or relates to a matter which is at his risk under the contract. A variation quotation prepared by the contractor and accepted by the client. By some other method agreed by the contractor and the client. even if it becomes apparent that the rates provided by the contractor were higher or lower than otherwise available commercial rates. but other expenses that may result from the variation. They do not become reasonable or unreasonable by the execution of variations (see Henry Boot Construction v Alstom (2000)). This is different from some standard forms of contract where variations are valued using the rates and prices in the contract as a basis.specification or bills of quantities. overheads and profit is necessary. This is true. The arguments come on items such as factory overheads and management which are very hard to . Such provisions enable the continued. The cost consultant. The valuation ofvariations may include not just the work which the variation instruction describes. smooth administration of the works without the need for another contract. provided the work is of a similar nature and carried out in similar conditions. then fair valuation of the contractor's direct costs." In other words the contractor can ignore their tender pricing and claim cost plus on variations. Valuation of variations Variations may give rise to additions or deductions from the contract sum.1). Variation instructions must be clear as to what is and is not included. the contractor is not able to claim for additional payments in relation to profits and overheads. It is therefore appropriate to reimburse the Contractor his forecast additional costs (or actual costs if the work has already been done) arising from the compensation event. when rates are applied to the valuation of variations. Valuations of variations are often based on the rates and prices provided by the contractor in their tender. Guidance on assessingcompensation events states: "Assessment of compensation events as they affect Prices is based on their effect on Defined Cost plus the Fee. Variations may be valued by: Agreement between the contractor and the client. FIDIC Clause 51. NB NEC contracts do not value variations based on rates in the tender. In common law this silence does not mean the contractor has an automatic right to claim for extra payment. the sub-contractor cannot expect a variation for any of the items required to fix the doors. it cannot be used to take work away from thecontractor to give it to another (for example. The client is not bound to pay for things that a reasonable contractormust have understood were to be done but which happen to be omitted from the bills of quantities. if the contract provides for secant pile shoring. In addition. Also under the pretext of variation. Conflict can also arise when a sub-contractor qualifies that. drawings orspecifications. Source of conflict Conflict can arise when work is not mentioned in the bills of quantities. the work omitted must be omitted from the contract entirely. for example. “Supply & Fixing of Door is included” but “Supply & Fixing of Ironmongery is excluded”. Unless expressly excluded. The bills of quantities and specification do not necessarily have to include “every nail to be punched in”. A reasonable subcontractorshould foresee that a door cannot be fixed without hinges – which is a part of the ironmongery. the contract administrator cannot change the nature of works.evaluate. So even if ironmongery is excluded. If the value of the contract increases or decreases by more than 15% of the net contract sum (excludingprovisional sums and day works) then the contract administrator can add or deduct from thecontract sum a determined value upon consultation with the contractor. Further. getting forecast pricing out of all the parties affected takes time. Similarly. For example in fixing GRC façades it is necessary to have steel supports. see FIDIC Clause 51. they cannot ask for diaphragm wallshoring as it will entirely change the nature of the work. if the contract administratoromits work from contractor’s scope. are nonetheless required in order to complete the works. often beyond the date by which the contract administrator has to make the decision as to whether or not to instruct thevariation. given the complexity and length of the supply chain in major building works. whilst they are not expressly mentioned. having due regard to their site expenses . the contract administrator is not empowered to order variations to help the contractor if the contract works are proving too difficult or expensive for them. For example.1). Limits on variations FIDIC forms of contract put limitations on variations that can be instructed. such supports are not paid for as a variation. then the contractor should have included them in their price. and a reasonable experienced contractor must make provision for this in the contract price. They may then have to decide whether or not to proceed with a variation based on estimates from the cost consultant which in due course get replaced by the actual cost. Where there are items that. such an omission must be genuine: that is. It has been argued that this practicality defeats the rationale of the NEC contracts in relation to cost control and decision making. This can be done by: Undertaking thorough site investigations and condition surveys. Whilst some variations are unavoidable. Variations may (but do not necesarily) constitute relevant events that can merit an extention of time and so adjustment of the completion date. it is wise to minimise potential variations and subsequent claims by ensuring that uncertainties are eliminated before awarding the contract. Ensuring that risks are properly identified. This is described as an extension of time (EOT). Ensuring the contractor's rates are clear. then it will constitute a variation (see Clause 60. Ensuring that legislative requirements are properly integrated into the project.5% of the priced total of the bill at the contract date. Ensuring the contract is unambiguous and explicit. Ensuring that designs are properly co-ordinated before tender.4) Extension of time Many construction contracts allow the construction period to be extended where there are delays that are not the contractor's fault. providing for all situations which are reasonably fore-seeable. See extension of time for more information. Ensuring that the project brief is comprehensive and is supported by stakeholders. In NEC3 (Option B) if the rate in the bill multiplied by the final total quantity of work done is more than 0. Preparing concise drawings.and other general overheads. bills of quantities and specifications. . or agreeing whether part of the works constitute a variation at all) and can cost a lot of time and money during the course of a contract. but the total contract sum at completion. Conclusion Variations are often sources of dispute (either in valuing the variation. Note that this 15% increase or decrease is not for a single item of work. Not all variation orders require a variation in the contract cost e. In very rare cases it might have neither cost nor time impacts. increasing or decreasing the quantity of any work. . bad weather. particularly where concurrent delays (a delay caused by the Contractor and a delay caused by the Principal both negatively affecting the critical path occur simultaneously) are concerned as these often have significant cost attached.A variation order is issued whenever there is a variation to the contracted works. substitution of similar materials or a change in the colour of a material.g. The method to calculate or estimate cost and time impacts are normally mentioned in the contract. In construction projects the most disputed variation orders are extensions of time. Variations can be requested by either the Contractor or Principal or come about as a result of conditions outside the control of either party e. In some cases it is not easy to determine whether an order from the owner (or client) is a variation to the original Scope of Work or a part of the original Work which is stated in the contract and its attachments or specifications. How and who values variation orders should be included in the contract documents. changing the character or quality of any material or work. It could have positive or negative time or cost impact. Any variation to the original Scope of Work is called Variation Order. This may include adding or omitting work. Many construction specialists say as a rule of thumb anything beyond the contractor's control which might affect cost and time delivery targets could be a variation order. they need to find a way to calculate or estimate its cost and time impacts. To me it is not true and might mislead everyone. execution methods could be considered as variation order. the order in which the works proceed etc.g. It might be necessarily essential to mention that even changing the specifications.) As soon as both parties (contractor and owner) agree that an order is a variation to the originally mutually agreed scope of work.