Variations – essential dos and don’ts
The chances of a contract being completed without any variations is very slim. Not impossible, but let’s be honest, there are always changes. Variations can mount up in many ways from client changes, missed items, omissions, VE and design changes. Variations can come from any party involved and need to be dealt with in line with the contract’s dictated procedure, to avoid potential disagreements.
Whether design & build, traditional, lump sum or re-measurable, depending on what your contract is based on will change the outcome of what variations you can apply for. Design & build contracts often pass the risk from the client to the main contractor; for example, if something is not shown in the tender information but is required to meet regulations and/or required to allow complete function to the end user, this is likely to be deemed the main contractor’s responsibility.
Re-measurable contracts allow you to review the measure at any point during the project, regardless of whether an item is re-measured to be more or less than stated in the contract. It is likely this will need to be changed to reflect the actual measure, and the BoQs rates used to calculate any change in cost.
These can (and are encouraged to) be included within the contract to help add clarity to the scope of works. However obvious or simple a clarification may sound, it’s much better to raise and discuss these before entering into contract, as it could mean the difference between entitlement and no entitlement to a variation post-contract. Examples could be working hours, multiple visits and anything you expect the other party to carry out or provide. Once clarifications and/or exclusions are agreed, you need to ensure these are reflected within the contract and take the correct order of precedence to avoid problems later down the line.
Instructions for variations
Not everyone within the client team is contractually authorised to issue an instruction under the contract. Ensure the person you are taking the instruction from, is the person stated within the contract and/or you have it in writing from the individual(s) stated in the contract giving them authority for issuing such instructions.
“What about verbal instructions?”, I hear you ask… Carrying out variation works on a verbal instruction even from the authorised person within the contract is a risk. Always get the instruction in writing before progressing ,and in the correct format if possible. This will help reduce the risk of disagreements later on. Whilst you may have an excellent long-standing relationship with a respected client you’ve never had any issues with, what if they move on next month or in 6-months time? That verbal agreement may not mean much to their successor. Therefore, always get it in writing.
When it comes to pricing variations, depending on whether the change is an item already detailed within the contract sum, then the same rate will be applied to the variation where applicable. If it is a similar item but different in condition or quantity, then the contract rate will be the basis with an uplift/pro-rata rate, and adapted to suit the difference.
If the variation is different from anything in the contract sum breakdown, then using fair and reasonable rates and pricing will be required. You may be requested to prove how you arrived at your cost. As such you should demonstrate your breakdown with supporting evidence where required. It is good practice to keep records of invoices for materials and dayworks for the duration, to further substantiate your cost(s).
OH&P is to be applied to variations as detailed within the contract (please check your contract to determine if rates are deeded to include OH&P or if you are entitled to add this on), likewise with any design / risk contingency and preliminary entitlements.
We can’t stress how important these are when it comes to variations. Get it in writing, take photos, record dayworks and get them signed. More often than not, we see a personnel change during the life of a project. In unfortunate cases (but not uncommon), multiple personnel changes. These bring with them a loss of knowledge and trust / rapport that may have taken months to build. It is then imperative for all parties to be able to refer to clear, accurate and factual records, which provide justified entitlement to a variation.
The more detailed and accurate the records (whether it be signing-in sheets to show additional people onsite, invoices of materials, photos and site diaries) and the more you have, the easier it will be to prove entitlement and agree costs for your claimed variation.
- If it’s not clear, get it clarified in the contract
- Ensure instruction is by a (contractually) authorised party
- Get the instruction in writing
- Record it, take photos and get it signed
If you require any clarity on anything covered in this post, or require some assistance with management of variations, please do not hesitate to give us a call on 01227 361186 or drop me an email – firstname.lastname@example.org