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Variationsinconstructioncontracts
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Contents
Relatedarticles
1Introduction
2Valuationofvariations Abortivework.
3Sourceofconflict
4Limitsonvariations Architect'sinstruction.
5Extensionoftime
6Conclusion Billofquantities.
7Findoutmore Changecontrolprocedures.
7.1RelatedarticlesonDesigningBuildingsWiki
Changeorder.
7.2Externalreferences
Confirmationofverbalinstruction.

Introduction Compensationevents.

Constructioncontract.

Avariation(sometimesreferredtoasavariationinstruction,variationorderorchangeorder)is
analterationtothescopeofworksinaconstructioncontractintheformofanaddition,
substitutionoromissionfromtheoriginalscopeofworks.
Featuredarticles

Almostallconstructionprojectsvaryfromtheoriginaldesign,scopeanddefinition.Whether
smallorlarge,constructionprojectswillhaveinevitablydepartfromtheoriginaltenderdesign, IdeascompetitionMakeBuildingsBetter

specificationsanddrawingspreparedbythedesignteam.Thiscanbebecauseoftechnological
advancement,statutorychangesorenforcement,changeinconditions,geologicalanomalies,
nonavailabilityofspecifiedmaterials,orsimplybecauseofthecontinueddevelopmentofthe
designafterthecontracthasbeenawarded.Inlargecivilengineeringprojectsvariationscanbe
verysignificant,whereasonsmallbuildingcontractstheymayberelativelyminor.

Variationsmayinclude:

Alterationstothedesign.
Alterationstoquantities.
Alterationstoquality. BSRIAandDesigningBuildingsWikiare
Alterationstoworkingconditions. askingwhatyourideasareforimprovingthe
Alterationstothesequenceofwork.
performanceofbuildingsinuse.Win500of
BSRIAgoodies.
Variationsmayalsobedeemedtooccurifthecontractdocumentsdonotproperlydescribethe
worksactuallyrequired.

HexHouseproject
Variationsmaynot(withoutthecontractorsconsent):

Changethefundamentalnatureoftheworks.
Omitworksothatitcanbecarriedoutbyanothercontractor.
Beinstructedafterpracticalcompletion.
Requirethecontractortocarryoutworkthatwasthesubjectofaprimecostsum.

Inlegalterms,avariationisanagreementsupportedbyconsiderationtoaltersometermsofthe
contract.Nopowertoordervariationisimplied.Hencethereshouldbeexpresstermsin
contractswhichgivethepowerinstructvariations.Intheabsenceofexpresstermsinthe
contractthecontractormayrejectinstructionsforvariationswithoutgivingrisetoanylegal ArchitectsforSocietyrevealprototypedesign
consequences. foremergencyreliefandrefugeecamps.

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Standardformsofcontractgenerallymakeexpressprovisionsforthecontractadministrator Unusualbuildingoftheweek
(generallythearchitectorengineer)toinstructvariations(forexample,FIDICClause51.1).Such
provisionsenablethecontinued,smoothadministrationoftheworkswithouttheneedforanother
contract.Variationinstructionsmustbeclearastowhatisandisnotincluded,andmaypropose
themethodofvaluation.

Valuationofvariations

Variationsmaygiverisetoadditionsordeductionsfromthecontractsum.Thevaluationof
variationsmayincludenotjusttheworkwhichthevariationinstructiondescribes,butother
expensesthatmayresultfromthevariation,suchastheimpactonotheraspectsoftheworks.
Oneoftheworld'slargesthotels,the
Variationsmayalso(butnotnecessarily)requireadjustmentofthecompletiondate.
EgyptianthemedblackpyramidtheLuxor
LasVegas.
Variationsmaybevaluedby:

Agreementbetweenthecontractorandtheclient.
Thecostconsultant.
Britain'sgreatestmaverickbuilding
Avariationquotationpreparedbythecontractorandacceptedbytheclient.
Bysomeothermethodagreedbythecontractorandtheclient.

Valuationsofvariationsareoftenbasedontheratesandpricesprovidedbythecontractorin
theirtender,providedtheworkisofasimilarnatureandcarriedoutinsimilarconditions.Thisis
true,evenifitbecomesapparentthattheratesprovidedbythecontractorwerehigherorlower
thanotherwiseavailablecommercialrates.Theydonotbecomereasonableorunreasonableby
theexecutionofvariations(seeHenryBootConstructionvAlstom(2000)).

Insomecontracts,whenratesareappliedtothevaluationofvariations,thecontractorisnot
abletoclaimforadditionalpaymentsinrelationtoprofitsandoverheads. DesigningBuildingsWikiattendedtheRoyal
Academy'sdebatetodecideBritain'sgreatest

Ifsimilartypesofworkstothoseinstructedbyavariationcannotbefoundinthedrawings, maverickbuilding.

specificationorbillsofquantities,thenfairvaluationofthecontractor'sdirectcosts,overheads
andprofitisnecessary.
WestEndGreen

NBNECcontractsdonotvaluevariationsbasedonratesinthetender.Guidanceonassessing
compensationeventsstates:

"AssessmentofcompensationeventsastheyaffectPricesisbasedontheireffectonDefined
CostplustheFee.Thisisdifferentfromsomestandardformsofcontractwherevariationsare
valuedusingtheratesandpricesinthecontractasabasis.Thereasonforthispolicyisthatno
compensationeventforwhichaquotationisrequiredisduetothefaultoftheContractoror
relatestoamatterwhichisathisriskunderthecontract.Itisthereforeappropriatetoreimburse
theContractorhisforecastadditionalcosts(oractualcostsiftheworkhasalreadybeendone)
arisingfromthecompensationevent." Publicconsultationreducesheightof
proposedmixedusedevelopmentinLondon.

Inotherwordsthecontractorcanignoretheirtenderpricingandclaimcostplusonvariations.
Theargumentscomeonitemssuchasfactoryoverheadsandmanagementwhichareveryhard
toevaluate.Inaddition,giventhecomplexityandlengthofthesupplychaininmajorbuilding BRESMARTWaste'JohnMuir'release

works,gettingforecastpricingoutofallthepartiesaffectedtakestime,oftenbeyondthedateby
whichthecontractadministratorhastomakethedecisionastowhetherornottoinstructthe
variation.Theymaythenhavetodecidewhetherornottoproceedwithavariationbasedon
estimatesfromthecostconsultantwhichinduecoursegetreplacedbytheactualcost.Ithas
beenarguedthatthispracticalitydefeatstherationaleoftheNECcontractsinrelationtocost
controlanddecisionmaking.

Sourceofconflict

BREreleaseadditionalfunctionalitytotheir
SMARTWastemanagementtool.

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Conflictcanarisewhenworkisnotmentionedinthebillsofquantities,drawingsor
NBSNationalBIMReport2016
specifications.Incommonlawthissilencedoesnotmeanthecontractorhasanautomaticright
toclaimforextrapayment.Theclientisnotboundtopayforthingsthatareasonablecontractor
musthaveunderstoodweretobedonebutwhichhappentobeomittedfromthebillsof NBSfinduptakeofBIMhasimproved,but

quantities.Wherethereareitemsthat,whilsttheyarenotexpresslymentioned,arenonetheless thereisstillpoorunderstandingofwhatlevel2
requiredinordertocompletetheworks,thenthecontractorshouldhaveincludedthemintheir involves.

price.Thebillsofquantitiesandspecificationdonotnecessarilyhavetoincludeeverynailtobe
punchedin.ForexampleinfixingGRCfaadesitisnecessarytohavesteelsupports,anda
reasonableexperiencedcontractormustmakeprovisionforthisinthecontractprice.Unless InprofileArchitecturalPhotographer
expresslyexcluded,suchsupportsarenotpaidforasavariation.

Conflictcanalsoarisewhenasubcontractorqualifiesthat,forexample,Supply&Fixingof
DoorisincludedbutSupply&FixingofIronmongeryisexcluded.Areasonablesubcontractor
shouldforeseethatadoorcannotbefixedwithouthingeswhichisapartoftheironmongery.
Soevenifironmongeryisexcluded,thesubcontractorcannotexpectavariationforanyofthe
itemsrequiredtofixthedoors.

Alsounderthepretextofvariation,thecontractadministratorcannotchangethenatureofworks.
Forexample,ifthecontractprovidesforsecantpileshoring,theycannotaskfordiaphragmwall
shoringasitwillentirelychangethenatureofthework.Further,ifthecontractadministrator
omitsworkfromcontractorsscope,suchanomissionmustbegenuine:thatis,theworkomitted
mustbeomittedfromthecontractentirely,itcannotbeusedtotakeworkawayfromthe DesigningBuildingsWikitalktoPaulGrundy
contractortogiveittoanother(forexample,seeFIDICClause51.1).Similarly,thecontract aboutwhatittakestobeanarchitectural
administratorisnotempoweredtoordervariationstohelpthecontractorifthecontractworksare photographer.
provingtoodifficultorexpensiveforthem.

Limitsonvariations BuildingoftheweekFlatironBuilding

FIDICformsofcontractputlimitationsonvariationsthatcanbeinstructed.Ifthevalueofthe
contractincreasesordecreasesbymorethan15%ofthenetcontractsum(excluding
provisionalsumsanddayworks)thenthecontractadministratorcanaddordeductfromthe
contractsumadeterminedvalueuponconsultationwiththecontractor,havingdueregardtotheir
siteexpensesandothergeneraloverheads.Notethatthis15%increaseordecreaseisnotfora
singleitemofwork,butthetotalcontractsumatcompletion.

InNEC3(OptionB)iftherateinthebillmultipliedbythefinaltotalquantityofworkdoneismore
than0.5%ofthepricedtotalofthebillatthecontractdate,thenitwillconstituteavariation(see
Clause60.4)

Extensionoftime

Manyconstructioncontractsallowtheconstructionperiodtobeextendedwheretherearedelays
Withitsdistinctivewedgeshape,theFlatiron
thatarenotthecontractor'sfault.Thisisdescribedasanextensionoftime(EOT).
remainsoneofNewYork'smosticonic
buildings.
Variationsmay(butdonotnecesarily)constituterelevanteventsthatcanmeritanextentionof
timeandsoadjustmentofthecompletiondate.Seeextensionoftimeformoreinformation.

GreenDealslammed
Conclusion

Variationsareoftensourcesofdispute(eitherinvaluingthevariation,oragreeingwhetherpartof
theworksconstituteavariationatall)andcancostalotoftimeandmoneyduringthecourseof
acontract.Whilstsomevariationsareunavoidable,itiswisetominimisepotentialvariationsand
subsequentclaimsbyensuringthatuncertaintiesareeliminatedbeforeawardingthecontract.
Thiscanbedoneby:

Undertakingthoroughsiteinvestigationsandconditionsurveys.
Ensuringthattheprojectbriefiscomprehensiveandissupportedbystakeholders.

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Ensuringthatlegislativerequirementsareproperlyintegratedintotheproject.
Ensuringthatrisksareproperlyidentified. NAOreportfindstheGreenDealnotonly
Ensuringthatdesignsareproperlycoordinatedbeforetender. failedtodeliveranymeaningfulbenefit,it
Ensuringthecontractisunambiguousandexplicit.
Ensuringthecontractor'sratesareclear. increasedsupplierscostsandtherefore
Preparingconcisedrawings,billsofquantitiesandspecifications,providingforallsituations energybills.
whicharereasonablyforeseeable.

Findoutmore
LondonMayoralelections2016

RelatedarticlesonDesigningBuildingsWiki
Abortivework.
Architect'sinstruction.
Billofquantities.
Changecontrolprocedures.
Changeorder.
Confirmationofverbalinstruction.
Compensationevents.
Constructioncontract.
Contractdocuments.
Definedcost.
Delaydamages.
Extensionoftime.
Liquidateddamages.
Lossandexpense.
Astheelectiondatenearsweexaminewhat
Outturncost.
Relevantevent. thecandidatesaresayingaboutLondon'sbuilt
Requestforinformation. environment.

Externalreferences
TheJCT05StandardBuildingContract:LawandAdministrationByIssakaNdekugri,
MichaelRycroft. Formorenews,gotothehomepage.

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