Designing Buildings Wiki: Variations in Construction Contracts
Designing Buildings Wiki: Variations in Construction Contracts
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1 Introduction dynamicafrica.co.za
2 Valuation of variations
3 Source of conflict
4 Extension of time OPEN
5 Conclusion
6 Related articles on Designing Buildings Wiki
7 External references
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Introduction
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A variation (sometimes referred to as a variation instruction, variation order (VO) or change Economic and powerful. You can use it in
order), is an alteration to the scope of works in a construction contract in the form of an your waste water projects. (100-2400)mm
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addition, substitution or omission from the original scope of works.
Almost all construction projects vary from the original design, scope and definition. Whether
OPEN
small or large, construction projects will inevitably depart from the original tender design,
specifications and drawings prepared by the design team.
Variations may also be deemed to occur if the contract documents do not properly describe
the works actually required.
Standard forms of contract generally make express provisions for the 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 and is not included, and may propose the
method of valuation.
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in construction.
Valuation of variations
Variations may give rise to additions or deductions from the contract sum. The valuation of Infrastructure
variations may include not just the work which the variation instruction describes, but other
expenses that may result from the variation, such as the impact on other aspects of the
works. Variations may also (but not necessarily) require adjustment of the completion date.
Valuations of variations are often based on the rates and prices provided by the contractor in
their tender, provided the work is of a similar nature and carried out in similar conditions.
This is true, even if it becomes apparent that the rates provided by the contractor were
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higher or lower than otherwise available commercial rates.
infrastructure for all?
The contractor's rates do not become reasonable or unreasonable by the execution of
variations, as stipulated by the ruling in the case of Henry Boot Construction Ltd v Alstom
Appointments
[1999].
If similar types of works to those instructed by a variation cannot be found in the drawings,
specification or bills of quantities, then fair valuation of the contractor's direct costs,
overheads and profit is necessary.
However, NEC contracts do not value variations based on rates in the tender. Guidance on
assessing compensation events states:
In other words, the contractor can ignore their tender pricing and claim cost plus on Standards
variations. However, there may be disagreements about items such as factory overheads
and management which are very hard to evaluate. In addition, given the complexity and
length of the supply chain in major building works, getting forecast pricing from all the parties
affected takes time, often beyond the date by which the contract administrator has to make
the decision as to whether or not to instruct the variation.
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. It has been
argued that this practicality defeats the some of the rationale of the NEC contracts in relation
2toof 4 control and decision making.
cost 4/19/19, 4:59 PM
A brief history plus some new developments.
Variations in construction contracts - Designing... https://www.designingbuildings.co.uk/wiki/Varia...
Design
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 to 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 to be omitted from the
bills of quantities.
Where there are items that, whilst they are not expressly mentioned, are nonetheless
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required in order to complete the works, then the contractor should have included them in
building design.
their price. The bills of quantities and specification do not necessarily have to include 'every
nail to be punched in'. For example, in fixing GRC façades it is necessary to have steel
supports, and a reasonably experienced contractor must make provision for this in the Infrastructure
contract price. Unless expressly excluded, such supports are not paid for as a variation.
Conflict can also arise when a sub-contractor qualifies that, for example, 'Supply & Fixing of
Door 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 ironmongery is excluded, the sub-contractor cannot expect a
variation for any of the items required to fix the doors.
Also, under the pretext of variation, the contract administrator cannot change the nature of
works. For example, if the contract provides for secant pile shoring, they cannot ask for
diaphragm wall shoring as it will entirely change the nature of the work.
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Further, if the contract administrator omits work from contractor’s scope, such an omission Scheme (HATS).
must be genuine: that is, 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
Appointments
FIDIC Clause 51.1). Similarly, 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.
Extension of time
Many construction contracts allow the construction period to be extended where there are
delays that are not the contractor's fault. This is described as an extension of time (EOT).
Variations may (but do not necessarily) constitute relevant events that can merit an
'Expressions of interest' for construction
extension of time and so adjustment of the completion date. See Extension of time for more
information. contracts.
Variations are often sources of dispute, either in valuing the variation, 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. Whilst some variations are unavoidable, it is wise to minimise potential
variations and subsequent claims by ensuring that uncertainties are eliminated before
awarding the contract.
External references
The JCT 05 Standard Building Contract: Law and Administration By Issaka Ndekugri,
Michael Rycroft.
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