FIDIC

Variation Claims in FIDIC Contracts: Pricing, Time and Procedure

Variations are a major source of disputes in construction projects. Understand how variations are priced, when you are entitled to time extensions and prolongation costs, and how to follow FIDIC procedures to protect your claims.

10 min read · Updated 25/04/2026

In this article

1. Understanding Variation Claims in FIDIC Contracts
2. Types of Variations and How They Arise
3. Pricing Variations: Methods and Calculation
4. Time Variations: Extension of Time
5. Prolongation Costs: The Hidden Impact of Variations
6. FIDIC Variation Procedure: From Instruction to Final Account
7. Omission and the Engineer’s Adjustment Powers
8. Protecting Your Rights: Notice, Documentation and Claims Administration

Key takeaway

Variations are changes to the scope of work under a construction contract that entitle the contractor to adjustments in both price and time. FIDIC contracts provide clear procedures for issuing variation instructions, assessing their cost and time impact, and resolving disputes. Contractors must follow these procedures and give proper notice to protect their rights. Prolongation costs — off-site overheads caused by contract extension — must be clearly calculated and distinguished from the direct cost of the variation itself.

1. Understanding Variation Claims in FIDIC Contracts

A variation claim is a request for additional compensation in a construction project, arising when there is a change in the scope of work or design, resulting in the contractor having to do extra work. However, a variation claim is not simply about asking for more money. It can include both an adjustment to the contract price and an extension of time for practical completion to reflect the additional work’s duration.

The purpose of variation claims is to ensure that the contractor is adequately compensated for any additional work required on the project. It is essential to note that variation claims only apply when there is a change in the original scope of work defined in the contract. It is also important that variation claims are made in accordance with the contract’s provisions to avoid disputes or delays in payment.

Under FIDIC contracts, the right to variations is fundamental. The employer (or owner) retains the right to instruct changes to the scope of work during the contract period. The contractor must carry out variations as instructed. In return, the contractor is entitled to fair adjustment of the contract price and, if the variation affects the programme, an extension of time for practical completion.

Variations have long been recognized as a major source of conflict in construction projects. This is often because:

• The quantum (cost) of a variation is not always obvious or pre-agreed
• The time impact is disputed between the parties
• Procedures for issuing and pricing variations are not followed properly
• Indirect costs such as prolongation are claimed but not clearly documented
• Notice requirements are missed, affecting the contractor’s right to claim

Understanding how variations are priced, administered, and claimed under FIDIC is critical to managing costs and protecting entitlements on construction projects in the UAE.

2. Types of Variations and How They Arise

Variations can arise in different ways, and how a variation arises affects how it is valued and the contractor’s entitlement to relief.

Directed Variations

A directed variation occurs when the engineer or employer formally instructs the contractor to carry out additional work that is outside the contract’s original scope. This is the most common type of variation under FIDIC contracts. The engineer has authority under the contract to issue variation instructions. Directed variations can include additional work, omissions, or changes to the specification or method of work.

Example: The engineer directs the contractor to construct an additional 1 kilometre of road, when the original contract was for 12 kilometres. The contractor is obliged to carry out this work and is entitled to payment and time adjustment.

Constructive Variations

A constructive variation occurs when the contractor has to do additional work due to an event or circumstance that was not foreseeable at the time the contract was signed. The additional work was not formally instructed by the engineer, but the contractor was compelled to perform it due to changed conditions.

Example: During excavation, the contractor encounters unforeseen ground conditions (rock when soft soil was expected). The contractor must undertake additional work to remove the rock. This is a constructive variation caused by a changed condition, and the contractor may be entitled to claim for the additional cost.

Unilateral Variations

A unilateral variation occurs when the contractor carries out additional work without the engineer’s approval but believes that it was necessary. However, unilateral variations are risky for the contractor, as the engineer may dispute whether the work was actually necessary or whether it was performed to the required standard. The contractor may not be entitled to payment if the engineer does not agree that the variation was necessary.

In FIDIC contracts, unilateral variations are not recommended. The contractor should always seek engineer instruction or approval before undertaking work outside the original scope.

3. Pricing Variations: Methods and Calculation

The most straightforward approach to variation pricing is when the contract provides a specific rate or price for the variation. This is sometimes called a variation “in debt,” where the parties have agreed in advance to a fixed sum for a particular change.

Example — Debt Basis: A contract may provide that if the owner directs the contractor to provide new air conditioning units in lieu of second-hand units, the price will be AED 100,000 instead of the original AED 50,000. If the owner directs the contractor to provide new units and the contractor does so, the contractor can claim AED 100,000 as agreed.

Variations Based on Contract Rates

More often, the contract does not have a specific rate or price for a particular variation. In such cases, the variation is priced using rates in the contract’s Bill of Quantities (BQ) if the variation work is similar to items in the BQ. The contractor recovers the cost at the contract rate per unit.

Example — Contract Rate Basis: If the contract specifies concrete at AED 500 per cubic metre, and the variation requires additional concrete, the variation is priced at AED 500 per cubic metre for the additional volume.

Under FIDIC contracts (Clause 13.3 in the Red Book), when the nature of the work is such that its price cannot be determined from the contract, the engineer assesses a reasonable rate. This requires analysis of the contractor’s costs (labour, materials, equipment) plus a reasonable profit margin.

Variations Based on Reasonable Rates

If the variation work is entirely different from any work in the contract, or if contract rates are no longer appropriate due to the changed scope, the engineer determines a reasonable rate for the variation. A reasonable rate typically includes:

• Direct labour costs (wages plus on-costs for supervision, welfare, etc.)
• Materials costs (including wastage and delivery)
• Equipment and plant costs (hire or depreciation)
• A reasonable profit margin (typically 10–15% of cost)
• General overheads (site office, management, etc.)

The contractor must provide detailed cost documentation to support a reasonable rate claim. Engineering judgment and market rates for similar work are considered.

Variations Without Pre-Agreed Prices

When the contract does not contain a rate, and reasonable estimation is difficult, some contracts allow the contractor to claim on a day-works basis — recovering actual costs (labour at agreed daily rates, materials at cost, and equipment) plus overheads and profit. However, this approach is less common under FIDIC contracts, which prefer the engineer’s assessment of a reasonable rate.

4. Time Variations: Extension of Time

When a variation affects the critical path of the programme and extends the date for practical completion, the contractor is entitled to an extension of time (EOT). This is separate from the price adjustment. An extension of time protects the contractor from being assessed liquidated damages (also called delay damages) for the delay caused by the variation.

Example — Time Impact: A road construction contract specifies 12 months for completion. The contract value is AED 12 Million (AED 1 Million per kilometre). The engineer directs the contractor to construct an additional 1 kilometre. The contractor assesses that this requires one additional month. The contractor is entitled to:

• Price adjustment: AED 1 Million for the additional kilometre
• Time extension: 1 month extension to the date for practical completion (from 12 months to 13 months)

The extension of time is essential. Without it, the contractor would be liable for delay damages (liquidated damages, or if not specified, general damages for delay) even though the delay was caused by the employer’s variation instruction.

Under FIDIC contracts, the contractor must give notice of delay and request the extension in accordance with the contract procedures. Failure to give proper notice may result in loss of entitlement to an EOT. In the UAE, the FIDIC Red Book (1999 or 2017) specifies in Clause 20.1 that the contractor must give notice within 28 days of the event causing delay to be entitled to relief.

5. Prolongation Costs: The Hidden Impact of Variations

Variations do not only cost money for the direct work itself. They also cause indirect costs through the prolongation of the contract. Prolongation costs are additional costs claimed by contractors for off-site overheads and loss of profit caused by variations that extend the contract period.

These costs arise because the contract period is not fixed but adjustable. When a variation extends the time for practical completion, the contractor incurs additional costs for management, site supervision, security, insurance, and other overhead items that continue for the extended period.

Understanding Prolongation Costs

Prolongation costs are distinct from the direct cost of the variation itself. The direct cost is the cost of the additional work (materials, labour, equipment). The prolongation cost is the cost of keeping the site and support functions operational for an extended period.

Example: A contractor’s project manager costs AED 20,000 per month. The contract is for 12 months. Due to a variation, the contract is extended by 1 month. The prolongation cost includes the additional AED 20,000 project management fee for month 13, plus additional costs for site supervision, security, insurance, and general site facilities.

Calculating Prolongation Costs

Calculating prolongation costs is complex and requires careful analysis. The contractor must prove that:

• The variation caused the contract period to be extended
• The extension was on the critical path (i.e., the variation caused the delay, not other non-critical activities)
• The extended costs are reasonable and directly related to the extension
• The costs would not have been incurred if the contract had been completed on time

Typical prolongation cost items include:

• Management and supervision: Project manager, site engineer, health and safety officer salary and on-costs for the extended period
• Site facilities: Temporary offices, tool sheds, welfare facilities, security lighting for the extended period
• Insurance: Public liability, employer’s liability, and contract works insurance for the extended period
• Plant hire: Any plant and equipment kept on site for the extended period
• Bonds and finance costs: Performance bonds, parent company guarantees, and financing costs for extended period
• Loss of profit: Some contracts allow the contractor to recover loss of profit on the extended contract value, though this is less common and requires proof of lost opportunity

The contractor must provide detailed evidence of these costs, including payroll records, invoices for equipment hire, insurance policies, and cost accounting records. Arbitrators and engineers will scrutinize prolongation claims carefully.

Under FIDIC contracts, the engineer’s assessment of variation costs must be “fair” and include all costs reasonably incurred by the contractor. This includes prolongation costs if they are proven to result from the variation.

6. FIDIC Variation Procedure: From Instruction to Final Account

Under FIDIC contracts, the procedure for variations is carefully defined. Strict compliance with these procedures is essential to protect the contractor’s right to claim. The typical FIDIC variation procedure (Red Book Clause 13) involves the following steps:

Step 1: Variation Instruction

The engineer issues a written variation instruction to the contractor. The instruction must be clear and unambiguous, setting out what additional work or change to the scope is required. The contractor must obey the variation instruction. If the contractor refuses to carry out a valid variation instruction, the contractor may be in breach of contract.

Step 2: Contractor’s Notice and Assessment

Within a specified period (typically 28 days under the FIDIC Red Book), the contractor must give notice to the engineer stating that it intends to claim for cost and/or time relief as a result of the variation. The contractor must also provide a preliminary assessment of the likely cost and time impact. Failure to give notice within the specified period may result in loss of entitlement.

Step 3: Detailed Cost Submission

The contractor then submits a detailed cost and time impact assessment to the engineer. This assessment must be supported by:

• Detailed breakdown of labour, materials, equipment, and overhead costs
• Method statement showing how the variation will be executed
• Revised programme showing the time impact
• Evidence of quotes from suppliers for additional materials
• Supporting documentation such as timesheets and invoices

Step 4: Engineer’s Assessment

The engineer assesses the contractor’s submission and determines a fair and reasonable value for the variation. The engineer may accept the contractor’s assessment, partially accept it, or reject it and propose an alternative value. The engineer must act fairly and consider all evidence provided by the contractor.

Step 5: Provisional Inclusion in Interim Certificates

Under FIDIC contracts, the engineer typically includes the variation in interim certificates on a provisional basis while discussions continue. The contractor receives payment for the variation pending final agreement.

Step 6: Final Account Agreement

At the end of the contract, all variations are finalized in the Final Account. This is when all disputed variations are finally resolved. If the contractor and engineer cannot agree on the variation value, the matter may proceed to dispute resolution (expert determination or arbitration).

It is critical that the contractor follow these procedures and maintain meticulous documentation at each stage. Many variation claims fail not because they lack merit, but because the contractor has not complied with the contract’s procedural requirements.

7. Omission and the Engineer’s Adjustment Powers

Not all variations are additions to the scope. The engineer may also direct omissions — parts of the original scope that the contractor is instructed not to carry out. The contractor is entitled to be relieved of the obligation to perform omitted work and to be paid for the relief.

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 to perform work outside the scope. Similarly, the contractor cannot be compelled to omit work without compensation.

When Is Omitted Work Claimable?

Omitted work can be claimable by the contractor in the following circumstances:

• The employer or another contractor carries out any omitted work whilst the contract exists, without the contractor’s consent, unless it can be proved that the contractor is technically or financially incapable of carrying out the work
• The nature and scope of omission renders the existing rates no longer appropriate
• The contractor has incurred costs in preparation for work that is subsequently omitted (e.g., mobilization costs, site set-up)

The Employer’s Right to Omit and Employ Another Contractor

However, the employer generally has the right to omit a part of the scope and get it done by another contractor under a separate contract. This is known as “work omitted and re-let.” In such cases, the contractor’s entitlement is more limited.

When work is omitted and re-let:

• The contractor is relieved of the obligation to perform the omitted work
• The contractor receives a credit for the estimated value of the omitted work (based on contract rates)
• The employer generally has absolute immunity against any claim for loss of profit due to the omitted work
• The contractor may be entitled to a time extension if the omission affects the critical path (e.g., if another contractor’s work delays the contractor’s progress)

The Engineer’s Power to Adjust Rates

When the nature and scope of omission renders the existing rates no longer appropriate, the engineer has the power to adjust rates to an appropriate extent so that the contractor obtains reasonable compensation. For example, if the omission of a large portion of the works means that the contractor’s fixed overheads per unit of work increase significantly, the engineer may adjust the rates for the remaining work to reflect this.

Under FIDIC Clause 13.3, if omitted work is such that the contract rates are no longer appropriate to the remaining work, the engineer assesses reasonable rates for the remaining work. This ensures the contractor is not unfairly penalized by omissions beyond the contractor’s control.

8. Protecting Your Rights: Notice, Documentation and Claims Administration

Many variation claims fail because contractors do not follow FIDIC procedures or fail to give proper notice. To protect your variation entitlements, the following practices are essential:

Give Timely Notice

Under FIDIC (Clause 20.1, Red Book 1999; Clause 20 Red Book 2017), the contractor must give notice of an event entitling the contractor to an extension of time within 28 days of the event occurring. This includes variations that affect the programme. Failure to give notice within this period may result in loss of the entitlement.

Notices must be in writing and clearly identify:

• The event or circumstance (e.g., variation instruction dated X)
• The likely impact on time for practical completion
• Any preliminary cost estimate
• The clause of the contract on which relief is claimed

Maintain Contemporaneous Records

Document all variations in real time as they occur:

• Site diary entries recording the variation instruction and work carried out
• Daily timesheets showing labour deployed on variation work
• Invoices and delivery notes for materials purchased for the variation
• Equipment hire records and plant movement logs
• Photographs and video of the variation work
• Revised programme updates reflecting the time impact

At the end of the contract, these records form the evidential foundation for supporting your final account submission.

Separate Direct and Indirect Costs

In your cost submission, clearly separate:

• Direct variation cost: Labour, materials, equipment, and profit directly attributable to the variation work
• Prolongation costs: Site overheads (management, supervision, security, facilities) incurred due to contract extension
• Adjusted rates: Any adjustments to contract rates due to changed conditions or omissions

Each category must be calculated separately with supporting evidence.

Engage Expert Support

If the variation is complex or high-value, engage a quantity surveyor or claims specialist early to assess the variation, advise on entitlements under FIDIC, and support your submission to the engineer. Expert evidence is critical if the variation dispute proceeds to arbitration.

Manage the Variations Register

Maintain a master variations register throughout the contract tracking:

• Date of variation instruction
• Description of the variation
• Contractor’s notice date and reference
• Date submitted to engineer
• Engineer’s preliminary assessment
• Engineer’s final assessment (if agreed)
• Status of agreement
• Payment status

This register ensures nothing is overlooked and provides a clear audit trail for the final account.

Variations are a major source of disputes. Proper administration and expert support protect your entitlements.

Whether you are a contractor seeking fair pricing for variations, an employer assessing variation claims, or a consultant administering a FIDIC contract, expert analysis of variation entitlements under FIDIC, UAE law, and quantum assessment is essential. We advise on procedures, assess claims, and represent parties in variation disputes through negotiation, expert determination, and arbitration.

Book a 30-Minute Case Assessment →

Offices in Dubai · Available for instructions across the UAE and GCC