Variation Claims

Introduction to Variation Claims in Construction Projects

Variation claims are a common occurrence in construction projects, arising when the scope of work deviates from the original contract. These deviations can be caused by various factors, including design changes, unforeseen site conditions, or changes in regulations. When a variation occurs, the contractor may be entitled to additional compensation to cover the increased costs associated with the modified work.

Introduction to Variation Claims in Construction Projects

The process of submitting and resolving variation claims can be complex and time-consuming. It requires careful documentation, negotiation, and sometimes, arbitration or litigation. Contractors must understand the procedures and requirements for submitting valid variation claims to ensure they are adequately compensated for any additional work performed.

This article will provide an overview of variation claims, including the common causes, the process for submitting claims, and the potential challenges involved. By understanding the intricacies of variation claims, contractors can better protect their interests and ensure fair compensation for their work.

variation Claim

the reason most often given by builders ( Contractor ) for making a claim against the owner for remuneration over and above the original contract price is that ” there was a variation “.

there is a widespread misconception in the construction industry that a contractor is entitled to be paid a fair price for any work performed.

Variation Claim is a term used to describe a variety of deferent categories of claim. The fact that the contractor did work additional to that specified does not entitle the contractor to claim additional recompense from the owner.

if the contractor wants to succeed in a claim against the owner, the contractor must make the claim fit one of the recognized legal categories.

If the contract includes a ” Variation Clause ” and the variation is one covered by the variation clause then the contractor’s claim would be under the contract.

It May be a claim for debt or claim for damages. If the contract does not include a variation clause or the variation is not covered by the variation clause then the contractor’s claim would be outside the contract and would probably be for restitution based on unjust enrichment or a claim that the work was carried out under a separate contract.

what is variation?

Understanding Variation Orders in Construction Projects

A variation order, also known as a variation or change order, is a formal document issued by the project owner or their representative to modify the scope of work, specifications, or deliverables of an existing construction contract. These changes can arise due to various factors, including:

• Design modifications: Changes to the original design or specifications may necessitate alterations to the construction work.
• Unforeseen site conditions: Unexpected conditions encountered during construction, such as underground utilities or contaminated soil, may require modifications to the original plans.
• Changes in regulations: Updates to building codes, zoning regulations, or other relevant laws may necessitate changes to the project.
• Additional requirements: The project owner may request additional features or amenities that were not included in the original contract.

Variation orders can have a significant impact on the project’s timeline, budget, and overall scope. When a variation is issued, the contractor may be entitled to additional compensation to cover the increased costs associated with the modified work. However, it is important to note that not all variations will result in additional payment. The contractor must provide adequate justification and documentation to support their claim for additional compensation.

The process of submitting and resolving variation claims can be complex and time-consuming. It often involves negotiation between the contractor and the project owner or their representative. In some cases, disputes over variation claims may need to be resolved through mediation, arbitration, or litigation.

To avoid disputes and ensure fair compensation for variations, it is essential to have a clear and well-defined process for managing changes in construction projects. This process should include procedures for documenting variations, obtaining approvals, and calculating the associated costs. By following these procedures, contractors can protect their interests and minimize the financial impact of variations on their projects.

The term ” variation ” used in many different ways. They include:

1- A change which the superintendent or owner directs the contractor to make to the work described in the contract.

2- A direction which the superintendent gives the contractor with respect to the order of work.

3- A change to the contract between the owner and the contractor as distinct to a change to the work under the contract.

4- An unauthorized departure by the contractor from the requirements of the specification or drawings.

5- A retrospective acceptance by the owner of work which is not in accordance with the requirements of the contract.

6- A change to the contract price .

7- A quantity which exceeds the estimated quantity in a bill of quantities or a schedule of rates.

 In UAE the term ” Variation Order ” is used to describe the change which the owner or the engineer ( the consultant ) directs ( instruct ) the contractor to make to the work described in the contract. the change may be the omission or addition of work.

Logically, any change to the work described in the contract involves an omission or an addition or both.

A direction to substitute ceramic tiles and to add marble is a clear variation order.

most standard forms of contract empower the owner either personally or through an agent ( Consultant engineer, or project management firm ), to direct the contractor to omit a portion of the work, or to do additional work.

The contract usually provides that the owner will reimburse the contractor for any additional costs caused by compliance with the direction.

The difference between the estimated quantity and the actual quantity may result in a change to the contract price but that is not a variation .

Changes in scope are very likely in many construction projects. A properly managed and organized project should have change control procedures. Often the client according to the terms and conditions of a mutual contract has right to order changes and the contractor is obliged to incorporate them. Those changes can be of different nature and may include additional works, changing material specifications, changing working conditions, design changes before, during and even after work execution and so on and so forth.

To avoid disputes and scope creep it is essential for the entire project team to know exactly what the scope of work and the requirements are. Assuming that the changes are within certain limits the project manager due to the above mentioned contractual situation cannot avoid the change order and change control in that case reduces to administer and execute the change. In order to reserve the contractor’s rights for compensation, to keep control of the ongoing works and to avoid possible disputes over disruption, extension of time, delay and increased cost, the project manager has to properly record all changes.

Change Orders and Change Control: A Guide for Project Managers

Introduction

Change orders are a common occurrence in construction projects, arising when the scope of work deviates from the original contract. While changes may be inevitable, effective change management is crucial to avoid disputes, maintain project control, and ensure fair compensation for contractors.

Understanding Change Orders and Change Control

A change order is a formal document that authorizes a modification to the original contract, such as a change in scope, design, or schedule. Change control is the process of managing these changes to minimize their impact on the project’s overall objectives.

The Importance of Clear Scope Definition

To prevent disputes and scope creep, it is essential for the entire project team to have a clear and comprehensive understanding of the project’s scope of work and requirements. This includes defining the deliverables, timelines, and performance criteria. A well-defined scope serves as a baseline for measuring progress and identifying any deviations.

The Role of the Project Manager in Change Management

While the project manager cannot always avoid change orders, they play a crucial role in managing and controlling them. By effectively administering change orders, project managers can:

• Protect the contractor’s rights: Ensure that the contractor is fairly compensated for any additional work or costs incurred due to changes.
• Maintain project control: Keep the project on track by managing the impact of changes on the schedule, budget, and quality.
• Avoid disputes: Minimize the risk of disputes by documenting changes accurately and transparently.

Key Strategies for Effective Change Management

1. Proactive Communication: Maintain open and transparent communication with all stakeholders, including the client, contractor, subcontractors, and design team. Regularly review progress and address any potential issues proactively.
2. Documentation: Thoroughly document all changes, including the reason for the change, the impact on the project, and the agreed-upon terms for additional compensation or time extensions.
3. Change Control Board: Establish a change control board (CCB) to review and approve all proposed changes. The CCB should consist of key stakeholders who can evaluate the impact of changes on the project’s objectives.
4. Impact Assessment: Before approving a change, assess its potential impact on the project’s schedule, budget, and quality. Consider factors such as additional costs, delays, and the need for revised plans or permits.
5. Negotiation: If a change is necessary, negotiate fair and reasonable terms with the contractor. This may involve discussing additional compensation, revised timelines, or other adjustments to the contract.
6. Contract Amendments: Formalize any agreed-upon changes through written contract amendments. These amendments should clearly outline the new terms and conditions.
7. Monitoring and Reporting: Continuously monitor the progress of changes and report on their impact to the project team and stakeholders. This helps to ensure that the project remains on track and within budget.
8. Lessons Learned: After a change is implemented, conduct a review to identify lessons learned and improve future change management processes.

Conclusion

Effective change management is essential for successful project delivery. By following these strategies, project managers can minimize the negative impact of changes, protect the contractor’s rights, and maintain project control. By proactively addressing changes and ensuring transparent communication, project managers can avoid disputes and deliver projects that meet or exceed expectations.

20 FAQs About Change Orders and Change Control

General Questions

1. What is a change order?

   • A formal document authorizing a modification to the original contract.

2. Why do change orders occur in construction projects?

   • Changes in design, unforeseen site conditions, regulatory changes, or additional requirements.

3. What is change control?

   • The process of managing changes to minimize their impact on the project.

4. Why is change management important?

   • To avoid disputes, maintain project control, and ensure fair compensation.

5. Who is responsible for managing change orders?

   • The project manager.

Scope Definition and Change Prevention

6. Why is a clear scope of work essential for change management?

   • To prevent scope creep and disputes.

7. How can project teams ensure a clear scope definition?

   • Through detailed planning, communication, and documentation.

8. Can change orders be completely avoided?

   • While changes may be inevitable, effective change management can minimize their occurrence.

Change Order Process

9. What is the typical process for submitting and approving a change order?

   • Request for change, evaluation, negotiation, approval, and implementation.

10. Who typically initiates a change order?

• The contractor, but the project owner may also request changes.

Impact Assessment and Negotiation

11. How should project managers assess the impact of a proposed change?

• Consider the impact on schedule, budget, quality, and other project objectives.

12. What factors should be considered when negotiating change order terms?

• Additional costs, time extensions, and any necessary modifications to the contract.

13. Can the contractor unilaterally implement changes without a change order?

• No, changes must be authorized through a formal change order process.

Documentation and Communication

14. Why is it important to document all changes?

• To provide evidence, track progress, and avoid disputes.

15. What information should be included in a change order?

• Description of the change, justification, impact assessment, and proposed terms.

16. How can project managers ensure effective communication during the change management process?

• By maintaining open lines of communication with all stakeholders.

Dispute Resolution

17. What should project managers do if a dispute arises over a change order?

• Attempt to resolve the dispute through negotiation or mediation.

18. Can a change order be appealed?

• In some cases, a change order may be subject to appeal or arbitration.

Lessons Learned

19. How can project managers learn from past change management experiences?

• By conducting post-project reviews and documenting lessons learned.

20. What strategies can project managers implement to improve future change management processes?

• Enhance communication, refine change evaluation procedures, and improve documentation.

 Read More about the construction claims.

Claims under FIDIC.

variation, claim, clause, order, direction.