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Pricing variation

Pricing variation

Variation In Writing

Because of the many different categories of legal claim made under the heading of variation claims, there are many ways in which the so-called variations are priced.

Variation of A/C Units

The most straight forward variation claim is that based on debt. For example a contract may provide that if the owner directs the contractor to provide new A/C units in lieu of second hand A/C units the price will be AED 100,000 in lieu of AED 50,000. If the owner does direct the contractor to provide new A/C units and the contractor does so then the contractor can sue in debt for AED 100,000.

More often, the contract does not have a specific rate or price for variation. Then the price may be based on rates in the contract or a reasonable rate.

The term “ Variation Claim “ is often used to describe a claim for additional recompense based not on a price for the additional work but on the extension of time for practical completion granted by the superintendent to reflect the time taken by the contractor to do the extra work.

For example

Take a contract to build a road 12 kilometers long. The super-intended may direct the contractor to construct an extra 1 kilometer. If the price per kilometer in the contract is AED 1 Million, all things being equal, the price for additional 1 kilometer would be AED 1 Million. If the original time for practical completion was 12 months, the contractor would be entitled to an extension of time for practical completion of one month.

Some contractors, in addition to clamming the price of variation and an extension of time, make a claim for alleged additional off-site overheads and loss of profit caused by the variation. They call these “prolongation costs” . They argue that the contract period has been extended by one month and therefore the contractor should be paid additional overheads and loss of profit in proportion to the extension of time for the variation.

The contractor originally tendered to perform not only the originally specified work but also any additional work that the owner may direct. The contract contemplated that on account of variations, the work may take longer than the original contract period. Hence the contract period is not a fixed period but an adjustable period. 

Understanding the Generality of Variation Clauses that Exists under FIDIC Based Contract Modalities in UAE.

Although it is advised by FIDIC not to alter the General Conditions, but use the particular conditions, clients articulate their own requirements using the General Conditions. It is therefore important to understand the salient features of such changes made in the contracts.  This paper is an attempt to understand the term of the variation clauses and their application.

It is fundamental that the parties are only bound to perform what is stipulated in the contract document they sign. Unless there is an express provision allowing alterations to be made during the course of the contract, the Contractor cannot be compelled.

It could be claimable if the Employer himself or another Contractor carries out any omitted work whilst a contract exists without consent of the Contractor or unless it can be proved that the Contractor is technically or financially incapable of carrying out such omitted work. However in contracts, we find the Employer has the right to omit a part of the scope and get it done by another Contractor under a separate contract. However the Employer is entitled to entertain the benefit a valid omission, despite of the appointment of another Contractor. If the nature and scope of omission renders the existing rates no longer appropriate, the Engineer has the power to adjust it to an appropriate extent in such a way that the Contractor obtains a reasonable compensation. The Employer generally has the absolute immunity against any claim for loss and profit due to omitted work. 

Variations has long been recognized as a major source of conflict in construction projects. 

Read more about the Variation Claim. 

What is Variation Claim? 

variation in construction contract. 

 

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