Variations in construction contracts - Revision history

Designing Buildings at 11:47, 20 January 2023

2023-01-20T11:47:29Z

← Older revision		Revision as of 11:47, 20 January 2023
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−	[[File:Plan-b-~~g2b61a5f17 1280~~.jpg]]	+	[[File:Plan-b-g2b61a5f17_1280.jpg\|link=File:Plan-b-g2b61a5f17_1280.jpg]]

	= What are variations in the construction industry? =		= What are variations in the construction industry? =
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	= What are the potential problems with variations? =		= What are the potential problems with variations? =
		+
		+	Change can be a source of conflict, either because the client does not believe that a change has been instructed, the work instructed is unreasonable or undeliverable, the valuation of the changes is disputed and so on.

	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.		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 required in order to complete the works, then the contractor should have included them in 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 ~~faades~~ it is necessary to have steel supports, and a reasonably experienced contractor must make provision for this in the contract price. Unless expressly excluded, such supports are not paid for as a variation.	+	Where there are items that, whilst they are not expressly mentioned, are nonetheless required in order to complete the works, then the contractor should have included them in 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 facades it is necessary to have steel supports, and a reasonably experienced contractor must make provision for this in the 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.		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.	+	Also, the contract administrator cannot change the nature of works under the pretext of variation. For example, if the contract provides for secant pile shoring, they cannot ask for diaphragm wall shoring instead as this will entirely change the nature of the work.

	Further, if the contract administrator omits work from contractors scope, such an omission 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 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.		Further, if the contract administrator omits work from contractors scope, such an omission 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 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 =~~	+	= How can variations be avoided? =
−		+
−	~~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 extension of time and so adjustment of the completion date. See Extension of time for more information.~~	+
−		+
−	~~= Conclusion~~ =	+

	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.		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.

−	~~This~~ can be ~~done~~ by:	+	Variations can be avoided by:

	* Undertaking thorough site investigations and condition surveys.		* Undertaking thorough site investigations and condition surveys.
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	* Ensuring the contractor's rates are clear.		* Ensuring the contractor's rates are clear.
	* Preparing concise drawings, bills of quantities and specifications, providing for all situations which are reasonably foreseeable.		* Preparing concise drawings, bills of quantities and specifications, providing for all situations which are reasonably foreseeable.
		+
		+	= What is the relationship between variations and extensions 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 extension of time and so adjustment of the completion date.
		+
		+	See Extension of time for more information.

	= Related articles on Designing Buildings =		= Related articles on Designing Buildings =

−	* ~~Extension of time EOT~~ in construction ~~contracts~~	+	* Abortive work in building design and construction.
−	* Architect's instruction	+	* Architect's instruction.
−	* Campaign for cash retentions reform.	+	* Change control procedure for building design and construction.
−	* Change order for construction contracts	+	* Change order for construction contracts.
−	* Alterations to existing buildings	+	* Compensation event.
−	* Prime cost sum	+	* Confirmation of verbal instruction.
−	* Liquidated damages in construction contracts	+	* Contract sum.
−	* Construction contract	+	* Extension of time EOT in construction contracts.
−	* Change control procedure for building design and construction	+	* How to prepare a claim for an extension of time.
−	* ~~Compensation event~~	+	* Loss and expense.
−	* Abortive work in building design and construction	+	* Payment for extra work.
−	* ~~Payment for extra work~~	+	* Prime cost sum.
−	* Bill of quantities BOQ	+	* Provisional sum.
−	* Confirmation of verbal instruction	+	* Relevant event.
−	* ~~Scope of work~~	+	* Relevant matter.
−	* ~~Dayworks~~ in construction	+	* Scope of work.
−	* How to prepare a claim for an extension of time	+	* Valuation of interim payments.
−	* Contract sum	+
−	* FIDIC	+
−	* Loss and expense	+
−	* ~~Contract documents~~ for ~~construction~~	+
−	* Relevant event	+
−	* ~~Fluctuations in construction contracts~~	+
−	* ~~Valuation~~	+
−	* Valuation of interim payments	+

	= External references =		= External references =

Designing Buildings at 11:40, 20 January 2023

2023-01-20T11:40:39Z

← Older revision		Revision as of 11:40, 20 January 2023
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−	~~= Introduction =~~	+	[[File:Plan-b-g2b61a5f17 1280.jpg]]

−	In the construction industry, a variation (sometimes referred to as a variation instruction, variation order (VO) or change order), is an alteration to the scope of works (in the form of an addition, substitution or omission) from the original scope of works described in the contract. Almost all projects vary from the original design, scope or specification at some point during the construction works.	+	= What are variations in the construction industry? =

−	Reasons for variations include~~; technological~~ advancement~~, changes~~ in the client's requirements~~, 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.	+	In the construction industry, a variation (sometimes referred to as a variation instruction, variation order or change order), is an alteration to the scope of works, in the form of an addition, substitution or omission, from the works described in the contract.
		+
		+	= What are the reasons for variations? =
		+
		+	Almost all projects vary from the original design, scope or specification at some point during the construction works.
		+
		+	Reasons for variations include:
		+
		+	* Technological advancement.
		+	* Changes in the client's requirements.
		+	* Statutory changes or enforcement.
		+	* Change in conditions.
		+	* Geological anomalies.
		+	* Non-availability of specified materials.
		+	* 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.
		+
		+	= What types of variations might be required? =

	Variations might include:		Variations might include:
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	* Be instructed after practical completion.		* Be instructed after practical completion.
	* Require the contractor to carry out work that was the subject of a prime cost sum.		* Require the contractor to carry out work that was the subject of a prime cost sum.
		+
		+	= How are variations provided for in construction contracts? =

	In legal terms, a variation is an agreement supported by consideration (payment) to alter some terms of the contract. No power to order variation is implied, and so there must be express terms in contracts which gives the power instruct variations. In the absence of such express terms the contractor may reject instructions for variations without any legal consequences.		In legal terms, a variation is an agreement supported by consideration (payment) to alter some terms of the contract. No power to order variation is implied, and so there must be express terms in contracts which gives the power instruct variations. In the absence of such express terms the contractor may reject instructions for variations without any legal consequences.
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	Variation instructions must be clear as to what is and is not included, and may propose the method of valuation.		Variation instructions must be clear as to what is and is not included, and may propose the method of valuation.

−	= ~~Valuation of~~ variations =	+	= How are variations valued? =

−	Variations may give rise to additions or deductions from the contract sum. The valuation of 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.	+	Variations may give rise to additions or deductions from the contract sum (the price agreed with the contractor and entered into the contract). The valuation of 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.

	Variations may be valued by:		Variations may be valued by:
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	* By some other method agreed by the contractor and the client.		* By some other method agreed by the contractor and the client.

−	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 higher or lower than otherwise available commercial rates.	+	Valuations of variations are often based on 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 higher or lower than otherwise available commercial rates. 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_Combined_Cycles\|Henry Boot Construction Ltd v Alstom [1999]]].
−		+
−	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_Combined_Cycles\|Henry Boot Construction Ltd v Alstom [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.		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:	+	However, NEC contracts do not value variations based on rates in the tender. Guidance on assessing compensation events states: 'Assessment of compensation events as they affect Prices is based on their effect on Defined Cost plus the Fee. This is different from some standard forms of contract where variations are valued using the rates and prices in the contract as a basis. The reason for this policy is that no compensation 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. 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.'
−		+
−	'Assessment of compensation events as they affect Prices is based on their effect on Defined Cost plus the Fee. This is different from some standard forms of contract where variations are valued using the rates and prices in the contract as a basis. The reason for this policy is that no compensation 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. 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.'	+

	In other words, the contractor can ignore their tender pricing and claim cost plus on 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.		In other words, the contractor can ignore their tender pricing and claim cost plus on 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.
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	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 to cost control and decision making.		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 to cost control and decision making.

−	= ~~Source of conflict~~ =	+	= What are the potential problems with variations? =

	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.		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.

Designing Buildings at 08:52, 4 October 2022

2022-10-04T08:52:00Z

← Older revision		Revision as of 08:52, 4 October 2022
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	= Introduction =		= Introduction =

−	A variation (sometimes referred to as a variation instruction, variation order (VO) or ~~[[Change_order\|~~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.	+	In the construction industry, a variation (sometimes referred to as a variation instruction, variation order (VO) or change order), is an alteration to the scope of works (in the form of an addition, substitution or omission) from the original scope of works described in the contract. Almost all projects vary from the original design, scope or specification at some point during the construction works.

−	~~Almost all construction projects vary from~~ the ~~original design~~, ~~scope and definition. Whether small~~ or ~~large~~, ~~construction projects will inevitably depart from the original tender design~~, ~~specifications and drawings prepared by~~ the design ~~team~~.	+	Reasons for variations include; technological advancement, changes in the client's requirements, 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.

−	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 might include:
−		+
−	Variations ~~may~~ include:	+

	* Alterations to the design.		* Alterations to the design.
−	* Alterations to quantities.	+	* Alterations to the quantities required.
−	* Alterations to quality.	+	* Alterations to the quality requried.
	* Alterations to working conditions.		* Alterations to working conditions.
	* Alterations to the sequence of work.		* Alterations to the sequence of work.
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	* Require the contractor to carry out work that was the subject of a prime cost sum.		* 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, and so there must be express terms in contracts which ~~give~~ the power instruct variations. In the absence of such express terms the contractor may reject instructions for variations without any legal consequences.	+	In legal terms, a variation is an agreement supported by consideration (payment) to alter some terms of the contract. No power to order variation is implied, and so there must be express terms in contracts which gives the power instruct variations. In the absence of such express terms the contractor may reject instructions for variations without any legal consequences.

−	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.	+	Standard forms of contract generally make express provisions for the contract administrator (generally the architect or engineer) to instruct variations. 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.		Variation instructions must be clear as to what is and is not included, and may propose the method of valuation.

113.199.254.218 at 09:32, 22 April 2022

2022-04-22T09:32:57Z

← Older revision		Revision as of 09:32, 22 April 2022
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	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.		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 required in order to complete the works, then the contractor should have included them in 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 contract price. Unless expressly excluded, such supports are not paid for as a variation.	+	Where there are items that, whilst they are not expressly mentioned, are nonetheless required in order to complete the works, then the contractor should have included them in 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 faades it is necessary to have steel supports, and a reasonably experienced contractor must make provision for this in the 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.	+	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.		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.

−	Further, if the contract administrator omits work from ~~contractor’s~~ scope, such an omission 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 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.	+	Further, if the contract administrator omits work from contractors scope, such an omission 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 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 =		= Extension of time =

Designing Buildings at 11:34, 15 March 2022

2022-03-15T11:34:22Z

← Older revision		Revision as of 11:34, 15 March 2022
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	* Preparing concise drawings, bills of quantities and specifications, providing for all situations which are reasonably foreseeable.		* Preparing concise drawings, bills of quantities and specifications, providing for all situations which are reasonably foreseeable.

−	= Related articles on Designing Buildings ~~Wiki~~ =	+	= Related articles on Designing Buildings =

	* Extension of time EOT in construction contracts		* Extension of time EOT in construction contracts

Designing Buildings at 10:30, 20 September 2021

2021-09-20T10:30:20Z

← Older revision		Revision as of 10:30, 20 September 2021
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	* Ensuring the contractor's rates are clear.		* Ensuring the contractor's rates are clear.
	* Preparing concise drawings, bills of quantities and specifications, providing for all situations which are reasonably foreseeable.		* Preparing concise drawings, bills of quantities and specifications, providing for all situations which are reasonably foreseeable.
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−	~~{{:Deltek_CTA_setup}}~~

	= Related articles on Designing Buildings Wiki =		= Related articles on Designing Buildings Wiki =

Designing Buildings at 10:05, 20 July 2021

2021-07-20T10:05:42Z

← Older revision		Revision as of 10:05, 20 July 2021
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	* Ensuring the contractor's rates are clear.		* Ensuring the contractor's rates are clear.
	* Preparing concise drawings, bills of quantities and specifications, providing for all situations which are reasonably foreseeable.		* Preparing concise drawings, bills of quantities and specifications, providing for all situations which are reasonably foreseeable.
		+
		+	{{:Deltek_CTA_setup}}

	= Related articles on Designing Buildings Wiki =		= Related articles on Designing Buildings Wiki =

Designing Buildings at 07:59, 1 October 2020

2020-10-01T07:59:54Z

← Older revision		Revision as of 07:59, 1 October 2020
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	* Ensuring the contractor's rates are clear.		* Ensuring the contractor's rates are clear.
	* Preparing concise drawings, bills of quantities and specifications, providing for all situations which are reasonably foreseeable.		* Preparing concise drawings, bills of quantities and specifications, providing for all situations which are reasonably foreseeable.
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−	~~[[File:Clink_loss_of_profit_button.png\|link=http://zpr.io/gxVV7]]~~

	= Related articles on Designing Buildings Wiki =		= Related articles on Designing Buildings Wiki =

Designing Buildings at 05:48, 27 August 2020

2020-08-27T05:48:12Z

← Older revision		Revision as of 05:48, 27 August 2020
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	* The JCT 05 Standard Building Contract: Law and Administration By Issaka Ndekugri, Michael Rycroft.		* The JCT 05 Standard Building Contract: Law and Administration By Issaka Ndekugri, Michael Rycroft.

−	[[Category:~~Articles_needing_more_work~~]] [[Category:Contracts_/_payment]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Contracts_/_payment]]

Editor: Reverted edits by 195.154.106.50 (talk) to last revision by Designing Buildings

2020-04-14T11:25:21Z

Reverted edits by 195.154.106.50 (talk) to last revision by Designing Buildings

← Older revision		Revision as of 11:25, 14 April 2020
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	* The JCT 05 Standard Building Contract: Law and Administration By Issaka Ndekugri, Michael Rycroft.		* The JCT 05 Standard Building Contract: Law and Administration By Issaka Ndekugri, Michael Rycroft.
−	* C[https://www.projectcubicle.com/construction-contract-agreements-different-ways-of-contracting/ onstruction Contract Agreement] &Ways of Contracting

	[[Category:Articles_needing_more_work]] [[Category:Contracts_/_payment]]		[[Category:Articles_needing_more_work]] [[Category:Contracts_/_payment]]