Variations are changes to the scope of work required under a construction contract. They can be requested by either the owner or the contractor, or arise due to unforeseen circumstances, such as government regulations, latent conditions, or design errors. Variations can have significant impacts on the cost, time, and quality of the project, and are a common source of disputes and litigation in the construction industry. Therefore, it is important to understand how to manage variations effectively and avoid potential risks and liabilities.
What are the types of variations?
Variations can be categorised into three types:
- Unavoidable variations: These are variations that are necessary to comply with legal or statutory requirements, or to address unforeseen site conditions that could not have been reasonably anticipated at the time of contract formation. For example, a variation may be required to meet new building codes, or to deal with unexpected soil contamination.
- Variations for the convenience of the owner: These are variations that are initiated by the owner to change or improve the design, functionality, or aesthetics of the project. For example, a variation may be requested to add or remove features, upgrade materials, or change the layout of the project.
- Variations for the convenience of the contractor: These are variations that are proposed by the contractor to reduce costs, save time, or improve efficiency. For example, a variation may be suggested to use alternative materials, methods, or subcontractors.
How to authorise variations?
Most construction contracts contain a variation clause that sets out the procedure and conditions for authorising variations. The variation clause may vary depending on the type and complexity of the contract, but generally, it involves the following steps:
- The party requesting or proposing the variation must submit a written notice to the other party, describing the nature, extent, and reason for the variation, and its impact on the contract price, time, and quality.
- The other party must review the notice and either accept, reject, or negotiate the variation. The acceptance or rejection must be in writing and signed by both parties. The negotiation may involve further discussions, clarifications, or adjustments to the variation proposal.
- If the variation is accepted, the parties must execute a variation order, which is a written document that confirms the agreed variation and its effect on the contract. The variation order becomes part of the contract and is subject to the same terms and conditions as the original contract.
How to avoid or minimise variations?
Variations are inevitable in construction projects, but they can also be costly, disruptive, and contentious. Therefore, it is advisable to avoid or minimise variations as much as possible. Some of the best practices to achieve this are:
- Conduct thorough planning, design, and feasibility studies before entering into a contract. This can help to identify and address potential issues, risks, and uncertainties that may lead to variations later on.
- Choose a suitable contract type and delivery method that aligns with the project objectives, scope, and complexity. This can help to allocate risks and responsibilities appropriately, and provide incentives for performance and collaboration.
- Communicate clearly and regularly with the other party and all relevant stakeholders. This can help to establish trust and rapport, and resolve any issues or concerns promptly and amicably.
- Document and monitor the progress and performance of the project. This can help to track and control the scope, cost, time, and quality of the project, and identify and mitigate any deviations or problems.
- Manage changes and variations in a proactive and systematic manner. This can help to ensure that variations are justified, authorised, and implemented properly, and that their impacts are assessed and compensated fairly.
To sum up, variations can be costly, disruptive, and contentious. Therefore, it is important to understand how to manage variations effectively and avoid potential risks and liabilities. In this article, we discussed the types of variations, how to authorise them, and how to avoid or minimise them.