Construction Variation Claims
The reason most often given by the Contractor for making a claim against the owner for remuneration over and above the original contract price is that “ there was a variation”.
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 contractor includes a “ variation clause” and the variation is one covered by the variation caluse then the contractor’s claim would be under the contract. It may be a claim for debt or a claim for damages.
What is variation?
The term “variation” is used in many different ways. They include:
- A change which the superintendent gives the contractor to make to the work described in the contract.
- A direction which the superintendent gives the contractor with respect to the order of work.
- A change to the contract between the owner and the contractor as distinct to a change to the work under the contract.
- A change to the contract price.
- A quantity which exceeds the estimated quantity in a bill of quantities or a schedule of rates.
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.
Most standard forms of contract empower the owner to direct the contractor to omit a portion of work, or to do additional work.
Differences between variations and claims
The two provisions operate in different ways because they are incorporated in a contract for different reasons. The variations clause gives the employer the right to order alterations to the scope of works as originally defined. The employer may of course activate its right to vary for many reasons, not least because it simply changes its mind as to what it requires. On the other hand, a claims clause is there to compensate the contractor for unexpected events or discoveries that are agreed under the contract as being the employer’s risk.
Ground conditions under FIDIC Red Book
You would normally expect all changes to the permanent works to be sanctioned and paid for via a contract’s variations mechanism. However, it is often the case that ground conditions clauses under civil engineering contracts can provide a wide scope for compensating contractors where the conditions encountered are different from those contemplated. Such clauses will often seek to put the onus on the contractor to proceed with the works once “bad ground” is discovered with an entitlement to be paid for increased costs.
Clause 4.12 of the FIDIC 1999 Red Book provides that where a contractor encounters “Unforeseeable Physical Conditions” it must issue a notice. The contractor is then required to proceed by employing “proper and reasonable measures as are appropriate for the physical conditions”. It is entitled to the additional costs it may expend in doing so.
Suppose a pipe laying contractor was constructing a trench and unexpectedly hit rock. The most appropriate method of proceeding may be to change the line and level of the trench. It would seem as if such a change would amount to a “proper and reasonable measures”, as required under clause 4.12. This would therefore entitle the contractor to be paid for changes to the permanent works under a claims clause, as opposed to the contract’s variations regime. Again, the contractor’s choice of clause may depend on rates under the contract and whether recovery of its costs under clause 4.12 is preferable.
How to claim a variation under a construction contract
Construction contracts usually contain specific procedures for claiming a variation – which, if not followed, can result in your entitlement to claim being lost.
- Characterise the nature of your entitlement
- Check the contract
- Notify the client
- Prepare your detailed costings and other substantiating information
- Wait for a direction to proceed before starting work
- Perform the work and claim payment (and an EOT if needed)