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Variation, or Change as referred to under some contracts, is when a contractor or subcontractor claims for extra costs for additional works carried out which were not envisaged at the outset of a building contract.
On almost every construction project there will be additional works and depending on the contract setup, there may or may not be entitlement to additional cost (and time, but we’ll save that Pandora’s box for another time!)
It is for this reason that often parties can fall out over variations and additional costs that can be claimed.
At our company, we work on behalf of subcontractors, main contractors and employers and we are responsible for the submission of variation claims and the assessment of claims that are submitted to us.
We have found that in order for a variation claim to be successful there are two elements that need to be established;
The first requirement that needs to be established is a party’s contractual entitlement to additional costs. Depending on whether the contract is a design and build, standard building contract or a bespoke building contract, the conditions of the contract will determine whether a party is entitled to additional costs for the extra works being carried out.
In order to establish their entitlement, a party needs to fully understand the terms of the contract, their existing obligations and demonstrate the new work that is outside of the original scope of works.
A common pitfall we see on this point is the evidence of the request for additional works. Many parties fall foul and fail to document the requests and this leads to the inevitable ‘he said, she said’ situation which gives the QS a very difficult task.
The second part of justifying variation costs is the actual nitty gritty of the quantum. This is the actual measurement of additional work and the associated costings. So, in practical terms this could be additional fill, tiling, reinforcement which is usually quantified by a unit of measurement such as m² or m³. From there you apply rates to these measurements which then provide the cost for the variation. Alternatively, these can also come in the form of actual costs incurred or properly completed dayworks i.e. properly recorded and signed by the required parties.
Now you have your contractual reasoning and the detail of the costs being claimed in the form of measurements and rates. Often people will think they have everything they need and be bemused when a sneaky quantity surveyor starts asking questions…
“What more information do you need? I’ve already explained why and how the costs are calculated!”
The answer is very simple, proof!
Whenever an employer’s agent or quantity surveyor is informing their client that the cost of their project has gone up, they will always get asked a simple question, WHY!
This means they have to have a conversation to explain why their client is incurring more money than expected. So, when they get asked questions about variations, they need to give good answers to justify the extra cost.
This evidence can come in variety of different forms and could include:
The ease of getting this evidence can vary depending on the variation in question. If a client is asking for double the amount of tiling then it’s a very simple exercise but if you are required to do additional substructure works it can be difficult.
Therefore, parties need to make a judgement as to the lengths they go to in order to demonstrate variations but as the value increases, the need to demonstrate it becomes more and more important. Furthermore, once above a certain value, the cost of proving a variation will be minor in comparison to the costs being claimed.
Our advice on this point though is simple, evidence works as you progress regardless of its status. It is much easier to evidence works, instructions, costs as they are occurring rather than later down the line.
Once you have the contractual entitlement, the quantum build up and the evidence to verify the claims made, you will have a fully prepared variation claim.
However, before you get the claim out the door, ask yourself Would a stranger be able to pick up the claim and understand the original obligations, the reasoning for the additional works and costs being claimed?
If you ask that and say yes then you’re good to go!
If not, it is likely that you need to provide more information to one or more of the requirements for a variation.
If you need any assistance with drafting claims or assessing variation submissions, Magnitude can provide expert advice. Please do get in touch and see if we can be of assistance.
