Variation Orders in Construction Projects

A variety of factors can cause the amount of work required by a contract to increase or decrease. These increases and decreases are either directed or constructive. This article provides a brief overview of each of these major types of a variation order in construction. It also discusses the potential consequences of variations and variation orders in terms of time and cost management.

What is a Variation Order in Construction?

A variation order is a written agreement to change, add to, or otherwise alter the work originally specified in the contract. Variation orders, in general, involve changes in scope, time and material for additional work and additional costs for additional working hours. Changes in construction projects are unavoidable due to the dynamic and complex structure of the construction industry, and variation orders are used in all types of projects.

Any deviation from the work scope agreed upon in the contract is referred to as a project variation.

What are the different types of variation?

Because variations affect the scope of work in a contract and can also have time and cost implications, it is critical to identify the various types of variations and recognize the potential impact of each type of variation on contracts. The following are some of the most common variations:

  • Modifications to the means and methods of installation, as well as the materials to be used
  • Distinctive or unforeseen site conditions that were not anticipated in the original contract price
  • Modifications that alter the originally planned work sequence
  • Modifications to the scope of work as a result of constructability issues or conflicts between work elements
  • Changes in plans and specifications
  • Corrections made due to errors or omissions
  • Modifications as a result of the actions or inactions of third-parties

1.Directed Variations

When the owner specifically instructs the contractor to make a change, a directed variation is issued. This kind of variation may or may not have an impact on the contract price. A directed variation that only affects the schedule is an example of a directed variation that has no impact on the contract price.

A directed variation that affects a project’s configuration, work sequence, or space requirements, for example, may have a negative impact on labor and equipment productivity on-site. A cost-impacting directed variation may reduce or increase the contract price. Directed variations are typically not complicated because the owner specifically directs the contractor to make a change, making them easier to deal with.

2.Constructive Variations

On the other hand, constructive variations occur due to non-owner-directed events that implicitly necessitate a variation. In contrast to directed variations, the owner does not specifically direct the contractor to make a change in the case of a constructive variation. Instead, due to non-owner-directed events or actions or inactions on the owner’s part, the contractor is forced to modify the scope specified in the contract or incur additional costs.

Constructive variations are typically difficult to identify because non-owner-directed events or circumstances cause them. Furthermore, in the case of a constructive variation, the owner typically does not explicitly acknowledge a variation to the original scope of work specified in the contract. The following are some of the most common types of constructive variations:

  • Verbal communications that imply that changes must be made
  • Deficient drawings or specifications
  • Ambiguity in architect-provided responses to information requests
  • Differing site conditions
  • Over-inspection

3.Implications

Although deductive variations exist, they typically increase contract prices. This increase is due to increases in direct material, labor, and equipment prices. Nonetheless, the effects of variations are frequently not limited to direct costs. Variations frequently result in a loss of efficiency; as a result, the negative effects of variations must be closely examined to ensure their consequences are fully evaluated.

The process of identifying and valuation of variations

A few steps are mentioned below in the process of dealing with variations in construction:

  • identifying variations to the contract
  • issuing variation order instructions
  • carrying out variation work as in variation order
  • preparation and submission of variation claim
  • Valuation of variations

Although variations and variation orders are common in construction projects, followed by VO claims, contractors frequently struggle to get a fair valuation for their variation claims because their expenses for the extra work exceed what they are paid. (additional work)

As a result, variations have a significant impact on the cost management of any construction project. At the same time, consultants prefer to complete their projects within the budget they have set. As a result, they look for any way to save money while avoiding cost overruns.

Causes of variations

A variety of factors can cause variations in construction projects. Some of the reasons for variations are listed below. However, you should consult the contract document for specific projects to find the specific terms and clauses that apply to your project.

Variations can be due to,

  • Adding to or removing from the scope of works
  • Changes in the quantity of work, either an increase or a decrease
  • Changes in the dimensions, level, or position of the works impact the construction cost.
  • Changes to the construction quality, including material quality changes.
  • The removal or demolition of a portion of the work scope by the Employer, which impacts the overall scope of works.
  • Because of changes in the completion schedule, if it becomes necessary to complete the work or a portion of the work before the agreed-upon Time for Completion, it will impact the work completed. As a result, contract modifications may occur.

Who can issue a Variation Order?

The authority person can be an architect, superintending officer, or contract administrator with authority to issue instructions. You can find a clause in your contract agreement that mentions the authority person.

Suppose the contractor receives verbal instructions to perform additional work in the form of an addition or omission. In that case, he must write it to the Architect or superintending officer for approval to create a valid variation order.

At the same time, if the contractor discovers any additional work not specified in the contract document or scope, he must notify the Architect or the appropriate authority within the time frame specified in the contract.

This is where contractors should have a thorough understanding of the contract agreement’s variation clause.

Submission of Variation Claim

When there is a variation to the works, and it is specified in writing, the contractor must carry out the work as specified.

When the work is finished, he must submit his variation claim while he submits the progress claim. Along with his claim, he must submit the necessary documents and details to support his claim.

In some cases, the contractor may be given instructions to complete the work during the day. In such cases, the contractor should notify the Contract Administrator, Superintendent Officer, or the respective client’s representative of the time the work is being completed.

To submit his claim, the contractor must keep signed day work records.

In general, this is how the valuation of variations is done. It is also the contractor’s responsibility to submit his variation claim with all necessary details to certify the payment within a reasonable time frame.

Depending on your contract, these conditions and methods of claim evaluation may differ.

Conclusion

It is critical to identify variations in construction promptly, especially when the effects are not explicit and easily recognizable. The causes of each variation must be identified and documented in proper tracking logs. Furthermore, the effects and implications of each variation must be properly documented to ensure that adequate documentation and historical records are readily available to substantiate contractual entitlements.