Variation in Construction Projects
What is a variation?
A variation (also known as a variation instruction, variation order (VO), or change order) is an alteration to a construction contract's scope of work that involves addition, substitute, or omission from the initial scope of work.
Almost every construction project deviates from the initial scope, design, and description. Construction projects, whether small or large, will invariably deviate from the design team's original tender design, specifications, and drawings. This could be due to technology advancements, legislative changes or enforcement, changes in conditions, geological anomalies, non-availability of specified materials, or simply the design's continuing evolution after the contract has been given. Variations in major civil engineering projects can be significant, although they may be negligible in modest building contracts. Variation may include the following changes or alterations.
- Alterations to the design
- Alterations to the quantities.
- Alterations in the quality of the product.
- Alterations to the working environment.
- Modifications to the work sequence.
What is a variation on a construction project?
A variation (also known as a change) is an alteration to the scope of work originally defined in the contract, whether by adding, removing, or substituting works or by changing how the works are to be carried out.
Variations in construction contracts might include modifications to the contract's terms as well as the scope or nature of the job. As no project is perfect, alterations to the scope of construction work are required to accommodate unanticipated occurrences or new requirements. Additions, exclusions, and substitutions are all examples of variation. Due to the unique character of the construction process, variances are a crucial consideration. Because the parties can't predict everything that might happen or because a contract is signed before the design or scope of work is entirely finalized, numerous revisions are unavoidable. A contractor is expected to follow the works as originally described unless a variation is requested; otherwise, it would be in breach of the contract.
When the contractor is asked by the employer to change the work, the change is done under the contract rather than to the contract itself.
Variation instructions on a construction project, which considers procedural requirements for instructions, such as written and oral directions, the responsibility to order a variation (where an employer has failed to do so), and scenarios in which a contractor may be able to reclaim payment for amended services.
A building contract's scope of work will typically be specified in attached specifications, blueprints, or a service brief, which together make up the entire contract.
The contract's scope of work is an essential component. It outlines the works for which the contractor is ultimately responsible and serves as the foundation for classifying revisions or additions as variations. The classification of a variation is crucial because it determines a contractor's entitlement to claim additional costs and the principal's obligation to pay them.
When determining what constitutes a variation, keep the following concepts in mind:
- The variation must be requested and not already be included in the scope of work. A contractor will have difficulty claiming additional charges if a principal does not request that the scope of work be changed.
- Similarly, if a contractor provides higher-quality materials than those stated in the scope of work, the contractor will not be able to charge for the upgrade unless it was specifically requested.
- Work that is required to finish the job but is not included in the contract or scope of works is not considered a modification. The installation of hinges when hanging doors is an example of work that is essential to the task – although the specifications may not specifically mention ‘hinges,' it is evident that the provision and installation of doors cannot be accomplished without this component.
- A total change in the scope of work by the principal is not a variation, and a contractor may be entitled to terminate the contract.
- Variations may also be found to have occurred if the contract documents fail to adequately represent the actual works required.
Variations are not permitted (unless the contractor agrees):
- Changing the works' essential character.
- Leave work unfinished so that it can be completed by another contractor.
- Be instructed after practical completion.
- Require the contractor to complete work that was the subject of a prime cost sum.
A variation is a legal term for an agreement supported by consideration to change some contract provisions. As no implied power to request variation exists, contracts must contain express words granting the authority to command variants. In the absence of such express terms, the contractor is free to refuse requests for adjustments without repercussions.
Standard contract forms usually make it clear that the contract administrator (usually the architect or engineer) has the authority to instruct variations. Such clauses allow for the seamless administration of the works to continue without the requirement for a new contract. What is and is not included in the variation instructions must be clearly stated and may provide a method of valuation.
Valuation of Variation
Additions or deductions from the contract total may result as a result of variations. The cost of variants may include not just the work described in the variation instruction but also any additional costs incurred as a result of the variation, such as the influence on other components of the work. Variations may (but are not always) necessitate a change in the completion date.
Variations may be priced based on:
- the contractor's and the client's agreement.
- The cost consultant (person who is in charge of determining the cost of something)
- A contractor's variation quotation has been accepted by the client.
- Alternatively, the contractor and the client may agree on another approach.
Variation valuations are frequently based on the rates and prices offered by the contractor in their tender, assuming that the work is similar and performed under similar conditions. This is true even if it becomes clear that the contractor's prices were higher or lower than other commercially accessible prices.
According to the judgment in the case of Henry Boot Construction Ltd v Alstom 1999, the contractor's rates do not become fair or unreasonable as a result of the execution of changes. If the drawings, specifications, or bills of quantities do not show equivalent types of work to those requested by a variation, a fair value of the contractor's direct costs, overheads, and profit is required. NEC contracts, on the other hand, do not value deviations based on tender rates. Advice on determining the statuses of compensation occurrences. Compensation events are evaluated in terms of how they affect prices based on their impact on Defined Cost plus the Fee.
This is in contrast to the standard forms of contract, where variations are based on the contract's rates and prices. The reason for this policy is that no compensation event that requires a quotation is due to the Contractor's fault or involves a matter that is at his responsibility under the contract. As a result, the Contractor should be reimbursed for his anticipated increased expenses (or actual expenses if the job has already been completed) as a result of the compensation event.' In other words, the contractor can claim cost plus on modifications regardless of their tender prices.
However, there could be arguments over things like production overheads and management, which are difficult to assess. Furthermore, given the complexity and length of the supply chain in significant construction projects, obtaining projected pricing from all parties involved takes time, which often extends beyond the deadline for the contract administrator to decide whether or not to instruct the variation.
They may then have to determine whether or not to proceed with a variation based on cost consultant estimates that are eventually replaced by the actual cost. It has been suggested that this pragmatism negates some of the NEC contracts' justification in terms of cost control and decision making.
Functions of Variations Clauses
Construction contracts frequently include variation clauses. It's worth noting right away that the proprietor has no authority to direct variations (Ashwell Nesbitt v Allan & Co (1912). As a result, a variation clause is required. Second, they ensure that contractors can recover fees for appropriately directed alterations (Knight Gilbert Partners v Knight (1968) All ER 248).
Source of conflict
When work is not addressed in the bills of quantities, drawings, or specifications, conflict can emerge. This silence does not imply that the contractor has an automatic right to extra payment under common law. The customer is not obligated to pay for work that a reasonable contractor should have known was required but was not included in the bill of quantities.
Where components are not expressly listed but are essential to complete the task, the contractor should have included them in their quote. Every nail to be pounded in' does not have to be included in the bills of quantities and specifications. For example, steel supports are required for installing GRC façades, and a fairly experienced contractor must account for this in the contract price. Such supports are not paid for as a variant unless they are expressly omitted.
When a subcontractor qualifies that, for example, "Supply and Fixing of Door is Included," but "Supply and Fixing of Ironmongery are Excluded," conflict can ensue. A sensible subcontractor should anticipate that a door cannot be installed without the use of hinges, which are part of the ironmongery. So, even if ironmongery isn't included, the subcontractor can't expect a change in any of the goods needed to install the doors.
Additionally, the contract administrator cannot change the essence of the task under the guise of variation. For example, if the contract specifies secant pile shoring, they cannot request diaphragm wall shoring because it would completely alter the scope of the work.
Furthermore, if the contract administrator omits work from the scope of the contractor, the omission must be genuine: the work deleted must be completely excluded from the contract; it cannot be used to take work away from the contractor and give it to another. Similarly, if the contract works are proving too difficult or time-consuming, the contract administrator is not authorized to order changes to assist the contractor.
Extension of time
Many construction contracts allow for the extension of the work time if there are delays that are not the fault of the contractor. This is referred to as a time extension. Variations may (but may not always) be considered relevant events that warrant a time extension and, as a result, a change in the completion date.
Even if the delay is not their fault, the contractor is responsible for preventing or mitigating the damage. Assessing applications for a time extension can be difficult and contentious. Multiple or concurrent delays may occur, some of which are the contractor's responsibility and some of which are not.
Contractors frequently contribute to delays by their performance during design stages while creating drawings, mock-ups, and samples or while interacting with subcontractors.
The quality of the information presented and the records accessible are critical in determining whether or not a request for a time extension should be granted. Claims should be evaluated based on the actual progress of the project, not the schedule, and must show a link between the breach (cause) and the delay. After practical completion, the contract administrator may examine time extensions and change the completion date.
Mechanisms that allow for time extensions aren't just for the contractor's advantage. If there was no such system in place and a delay occurred due to circumstances beyond the contractor's control, the contractor would no longer be expected to complete the work by the completion date and would instead be expected to finish the job in a "reasonable" amount of time. Any recourse to liquidated damages would be forfeited by the client. Claims for extension of time can run concurrently with claims for loss and expense (related matters), but one does not have to follow the other.
Variations are frequently the basis of disagreement, whether over the value of the variation or whether certain parts of the works are variations at all, and they can waste a lot of time and money during a contract. While certain differences are unavoidable, it is prudent to reduce prospective variations and future claims by ensuring that all uncertainties are resolved before awarding the contracts. This can be performed by
- Performing comprehensive site investigations and condition surveys.
- Assuring that the project brief is comprehensive and that all stakeholders are on board.
- Assuring that all legal obligations are adequately incorporated into the project.
- Assuring that hazard are detected correctly.
- Ensure that designs are well-coordinated before submitting a tender.
- Ensure that the contract is clear and unambiguous.
- Ensure that the contractor's rates are transparent.
- Creating clear drawings, bills of quantities, and specifications that account for all reasonably foreseeable scenarios.
Issues Concerning Variation
Problems with variations can be divided into three categories:
- scope (was it a variation, or was the contractor obligated to perform it anyway?)
- failure to comply with procedural rules; and
- appreciating the differences
Whether the variant work is within the contract's scope depends, first and foremost, on the contract's provisions, which sometimes begs the question, "What is the contract?" In many circumstances, the contract documents are pre-defined.
Implied or Necessary Works
As previously stated, whether a specific task is a variant is determined by whether it falls within the contract's general scope. Even though some works are not precisely defined, they are regarded as implied or are a required component of the contract. Williams v Fitzmaurice is an early case on this topic (1858). The facts of the case are as follows the contractor agreed to supply all of the material indicated or otherwise in the above particulars essential for the completion of the work as well as to perform all works of every sort specified and contained in the above specifications for the sum of 100.00 pounds. The issue was whether or not flooring was included, as it was not indicated. The court held that the flooring was included.
Formal Requirements – Written Directions
A directive from the principal's architect or superintendent is frequently used to accomplish a change. In most cases, such directions must be written down. Whether this is a condition precedent to the contractor's claim to payment will depend on whether the demand is one. This is a question of contract interpretation.
It is typical to have more or less rigorous rules, such as these, that no further work shall be paid for unless it is ordered in writing by the engineer, and if such conditions are correctly formed, and there is nothing fraudulent or iniquitous in the manner they are carried out, these requirements would be adequate and effectual.
What constitutes ‘writing’ is sometimes also an issue.
In Wormald Engineering Ltd v Resources Conservation Co (1992) 8 BCL 158, it was held that sketches in the architect's office describing the variations to be done insufficient to satisfy the clause requiring alterations to be directed in writing in the architect's hand, while in Bedford v Borough of Cudgegong (1900) 16 WN (NSW) 142, a letter signed by the architect authorizing the work was held to be sufficient.
Dealing with variations
In the construction industry, disagreements over the scope of work are common. As a result, both parties must comprehend the significance of a variation as well as the procedures for asking and claiming one. The contractor may be required to do more or less work than is specified in the scope of work by the principal. When a contractor isn't competent for the additional task or doesn't have enough resources to complete it, problems can occur. Similarly, if work that falls within the scope of a contract with one contractor is assigned to another, it will be troublesome for both parties and may result in the principal breaching the contract.
To avoid a potential breach that could result in the contract being terminated, principals should make sure that their contracts include clauses that allow them to request changes to the initial scope of work. The contract should spell out the situations in which a variation can be requested, as well as the procedures for changing the scope of labour or services.
The distinction between a variation and a total overhaul of the scope of work, which may enable the contractor to terminate the contract, should be understood by the principals. Contractors should guarantee that any work performed outside the scope of the original contract is fairly compensated, and they should follow the procedures indicated in the contract for applying the modification.
A contractor who has to complete more work to complete the scope of work may request a modification. This can happen when latent conditions emerge. Despite a contractor's inspections and investigations of the site, latent conditions are physical characteristics on the development site that are fundamentally different from those that would reasonably have been anticipated. A contractor must normally notify the principal of a pending change within a certain deadline specified in the contract. Typically, the contractor will be expected to explain why the variation is required as well as the price of performing the additional work—obtaining permission from the contractor prior to undertaking any variations.
Variation is nearly inevitable in any construction contracts. Given the competitive nature of the construction industry, many contractors are likely to rely on proprietorial variants to make a decent profit on their contracts. Furthermore, variant works frequently affect the completion date and, as a result, have an impact on the proprietor's delay claims. This helps to explain why resolving disputes about variations is never simple, especially when the dispute arises after the structure has been built and records are scant, making actual measurements of the completed work impossible.
Variations in the scope of work or the services to be given during a construction project are typical in the construction business. A variation can be requested by either party, or it can develop out of necessity, such as due to legislative changes or a latent situation. When negotiating a variation, it's critical to stick to the contract's procedures and make sure the change is properly documented.
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