#WiseUpWednesday: Identifying And Valuing Variations In Construction
This week’s Wise Up Wednesday is about the all important subject of variations.
The identification and proper valuation of variations is arguably the greatest source of problems for Specialist Sub-Contractors and it is therefore important to have a clear understanding of the contractual framework governing the instruction, execution and valuation of variations.
A common feature of most construction projects is that at some stage the person who has commissioned the work is going to change his mind about some element of it and will require changes to be implemented during the construction phase.
All the standard forms of contract for Main Contractors and Specialist Sub-Contractors recognise this fact and specifically provide for variations.
WHAT IS A VARIATION?
Standard forms of contract and sub-contract tend to define the term ‘variation’ in a similar way. However, you need to be aware that there are a considerable number of standard forms and many different ways of dealing with variations. So, please take care to ensure that you are familiar with and understand the provisions in each particular contract.
IS IT ACTUALLY A VARIATION?
Disputes frequently occur as to whether a particular instruction amounts to a variation. Unfortunately a common misunderstanding made by many Specialist Sub-Contractors is to assume that all Architects, Engineers and Main Contractors instructions are variations.
Let’s be clear on that; not all instructions give rise to a variation.
Instructions may merely confirm or clarify that which was originally required under the contract, whilst the Contractor or Specialist Sub-Contractor may argue that it is a change which entitles him to additional monies.
Such differences of opinion can be minimised by ensuring that the description of the work in the Contract Documents is as clear as possible. This is very much a case of easier said than done. However, attention to detail at contract formation stage, will be well worth the effort when it is becomes necessary for you to demonstrate that the work you are being instructed to do constitutes a variation to that originally contracted for.
At their most fundamental level, the are two essentials which you should observe when dealing with variation instructions.
1. Check whether or not the person purporting to have authority to issue variation instructions actually has authority to do so, and
2. Comply with the particular requirements of the contract in respect to instructions.
It is not uncommon for various parties to assume that they have authority to issue instructions when in fact they have no such authority. Check the terms of the contract and if it is not clear clarify the matter from the outset.
MAXIMISING RECOVERY FROM VARIATIONS
Variations are an opportunity for the Specialist Sub-Contractor to maximise his financial return from the project.
Please remember the old adage “if you don’t ask you don’t get” and in practice variations should be valued by the Specialist Sub-Contractor.
You need to submit details as soon as possible after the variation arises. This will avoid situations where the person commissioning the work has not been properly advised as to the increased value that has arisen because of the changes he has instigated and may have insufficient funds to pay for them.
I hope you enjoyed my Wise Up Wednesday blo and that it gave you some food for thought, and I sincerely hope to speak with you soon.
In the meantime if you need any help with any of your business problems, including getting paid for variations, please don’t hesitate to pick up the phone and give us a call on 01773 712116.