Construction Contract Variations: Understanding The Process And Your Options

In the construction industry, it’s rare for a project to go from start to finish without some adjustments. These changes, often referred to as “contract variations,” can impact the scope, cost, and timeline of your work. As a contractor, knowing how to manage and document variations is crucial, as it can help you secure fair payment, avoid disputes, and keep the project running smoothly. In this guide, Blackstone Solicitors provides an overview of construction contract variations and the options available to help you handle these changes effectively.

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1. What Are Contract Variations?

A contract variation is any change made to the original terms of a construction contract. These changes can be minor or significant and may affect the work’s scope, schedule, materials, costs, or even design specifications. Common types of variations include:

• Changes in scope: Expanding or reducing the work outlined in the original contract.
• Alterations in design: Modifying drawings, materials, or methods as the project progresses.
• Time adjustments: Extending or reducing the time needed to complete the work due to various factors.
• Price changes: Adjusting the contract value to account for additional or reduced costs associated with the variations.

Understanding what qualifies as a variation and handling it correctly is essential to ensure you’re adequately compensated and to avoid misunderstandings with clients.

2. Reasons for Contract Variations

Variations in construction contracts are common and can happen for many reasons, including:

• Client requests: Clients may decide mid-project that they want to add, remove, or modify certain elements.
• Unforeseen conditions: Unexpected issues, such as ground conditions, site access problems, or hidden structural problems, can lead to changes.
• Design alterations: Architects and engineers may revise designs due to functional, aesthetic, or safety concerns.
• Regulatory compliance: Changes may be necessary to comply with updated building codes or regulatory requirements.

Each variation, whatever the reason, should be formally documented and agreed upon by all parties to ensure clarity around the impact on scope, timing, and payment.

3. The Importance of a Variation Clause in Contracts

Most construction contracts include a variation clause that specifies how variations should be handled. This clause will typically outline:

• Procedures for requesting a variation: A clear process for how variations are to be submitted, reviewed, and approved.
• Approval requirements: Who has the authority to approve changes, whether it’s the client, project manager, or a representative.
• Payment terms: How cost adjustments related to variations will be calculated and billed.
• Documentation requirements: Instructions for recording the details and implications of any agreed-upon variation.

A well-drafted variation clause protects contractors by ensuring that they are compensated fairly for extra work, and it provides clients with transparency regarding costs and project scope changes.

4. How to Request or Respond to a Variation

Whether the variation is client-driven or necessary due to unforeseen circumstances, it’s essential to follow a systematic approach. Here’s a typical process:

1. Identify and Document the Change: As soon as you become aware of a potential change, document the specifics. This should include the nature of the work, estimated impact on cost and time, and any materials or labour required.
2. Submit a Variation Request: For changes outside the contract scope, submit a formal variation request. Outline the details of the variation, including:

– A description of the work involved.

– A cost estimate, including any additional labour or materials.

– The anticipated impact on the project timeline.

1. Seek Approval Before Proceeding: Ensure that the variation is approved in writing before you begin the additional work. Working on a variation without formal approval can risk non-payment or disputes later in the project.
2. Document Everything: Keep clear and thorough records of the change, including correspondence, revised plans, and cost estimates. This documentation is vital in case of future disputes over the variation’s validity, cost, or timeline impact.

5. Valuing Variations

The method used to value a variation will depend on your contract and the specific circumstances of the change. Here are common methods for valuing variations:

• Pre-agreed rates: Some contracts specify set rates for certain types of work, allowing straightforward application to calculate the cost of a variation.
• Daywork rates: When additional work is needed on a time-and-materials basis, daywork rates (hourly labour plus material costs) are applied.
• Agreed lump sum: Sometimes, parties agree on a lump sum for a variation if the cost can be reasonably estimated.
• Quotations from subcontractors or suppliers: If the variation involves specialised work, obtaining quotations from subcontractors or suppliers can provide a reliable basis for pricing.

When determining the value of a variation, ensure that you follow the valuation rules set out in the contract and obtain any necessary approvals before proceeding.

6. Managing Time Extensions Due to Variations

Contract variations can impact the project’s timeline, potentially delaying completion. Under many construction contracts, you may be entitled to a time extension to accommodate the extra work required. However, you need to formally request a time extension and provide a detailed explanation of how the variation affects the timeline.

Time extensions are essential not only to avoid penalties for late completion but also to set realistic expectations with clients. Be sure to document any approved time extension in writing and, if possible, update the project schedule to reflect the adjusted timeline.

7. Common Pitfalls with Contract Variations

When it comes to variations, certain challenges and pitfalls are common. Being aware of these can help you avoid costly mistakes:

• Failing to Document Changes: Starting work on a variation without formal approval or documentation can lead to disputes and payment issues.
• Misunderstanding Scope of Work: If the scope of the original contract is unclear, there may be disagreements on whether a change qualifies as a variation.
• Overlooking Additional Costs: Contractors sometimes underestimate the true cost of a variation, leading to financial losses. Always consider labour, materials, overheads, and any impact on other project areas.
• Ignoring Impact on Completion Date: Failing to account for delays caused by variations can result in penalties if the project overruns.

By handling each of these aspects carefully, contractors can minimise disputes and help ensure they’re compensated fairly for any extra work or delays.

8. Resolving Disputes Over Variations

Even with careful management, disputes over contract variations can still arise. Common areas of disagreement include the cost of the variation, whether a change qualifies as a variation, or the impact on the completion date. If a dispute occurs, the following steps can help resolve it:

• Negotiation: Often, disputes can be settled informally through direct negotiation with the client.
• Mediation: If negotiation fails, mediation provides a structured environment to reach a mutually agreeable solution.
• Adjudication: For a quicker resolution, adjudication can be used to obtain a binding decision within a short time frame.
• Arbitration or Litigation: As a last resort, unresolved disputes can be taken to arbitration or court. However, these options are time-consuming and costly, so they are generally pursued only when other methods have failed.

Blackstone Solicitors can provide guidance and support throughout the dispute resolution process, helping contractors protect their interests and resolve conflicts as smoothly as possible.

9. Planning Ahead to Manage Variations Effectively

While contract variations are often unavoidable, taking proactive steps can reduce their impact and help prevent disputes. Consider the following tips:

• Clarify the Scope of Work: At the contract stage, ensure that the project scope is well-defined to minimise misunderstandings.
• Include a Variation Procedure in the Contract: A clear process for managing variations makes it easier to handle changes fairly and transparently.
• Communicate Regularly with the Client: Open communication with the client can help you address potential changes early, often before they become formal variations.
• Track Project Progress: Regularly reviewing the project schedule and budget can help you identify variations early and assess their impact on the project as a whole.

Conclusion

Understanding construction contract variations is essential for contractors aiming to manage projects smoothly and ensure fair compensation for additional work. From knowing when to request a variation to accurately valuing the change, careful management of variations can make a significant difference in your project’s success.

If you need assistance with contract variations or any other construction-related issues, Blackstone Solicitors is here to help. We provide expert legal support across England and Wales, ensuring contractors like you can confidently navigate the complexities of construction law.

How we can help

We have a proven track record of helping clients deal with construction law. We will guide you diligently and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting. You can read more about the range of construction law services we offer by clicking here: https://blackstonesolicitorsltd.co.uk/construction-solicitors/

How to Contact Our Construction Solicitors

It is important for you to be well informed about the issues and possible implications of a construction law case. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.

To speak to our Construction solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Blog, News Tagged as

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