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Variations in Construction Contracts

Variations in Construction Contracts

The construction industry is dynamic because of the ever-changing demands of the clientele. The industry is divided into a large number of diversified branches involving cross-integration with a number of other disciplines. Any given construction project, be it big or small, involves complex information, comprehensive arrangements, and collaborations within a number of parties. 

This adversarial nature of the construction industry combined with the advancements in technologies along the way gives rise to several variations in construction projects throughout the project lifespan.

A variation or a variation order involves a change in the scope of works of a construction project. This is implemented using a “Change Order”. A Change Order is used to add or delete work from the original scope of the construction contract. This change in scope results in a change in the original contract amount. All construction projects inevitably vary from the original design provided in the Tendering stage. Therefore, a multitude of change orders must be used to bring about variations in Construction Contracts.

The complex nature of construction projects and the various engineering works inculcated into the projects means that variations are required to account for the changes in design, quality, and quantity of the work.

Variations in construction projects may be of the following types:

  1. Variation in Design.
  2. Addition or Reduction in Quantities.
  3. Variation in Quality
  4. Change in Working Conditions.

Alterations in the Working Sequence. Variations may also occur in cases where the Contract documents have ambiguities in the scope of work. A variation is usually notified through the Principal architect or the Project Manager. Variations can present the contractor with either opportunities and/or risks depending on the type of contract. The valuation of variations is dependent on the original rates provided by the contractor during the bidding stage of the tender, provided the extra work to be executed is of similar nature to the original work. If the work to be done is not of similar nature as the originally stipulated work, a fair valuation has to be done based on the direct expenses of the project, overheads, and profits. 

Variations in a construction contract may merit an Extension of Time (EOT) depending on the relevant events that may have caused any delays in completion. 

Sources of Conflict

Conflicts can often arise between parties entering a construction contract when work is not clearly specified in Bills of Quantities and drawings provided to the contractor. In a lot of cases, there are certain works or materials which are not mentioned in the BOQ but are a commonly acknowledged requirement for the completion of a particular work, then it is the contractor’s responsibility to include them in the prices for those works. The Contract administrator cannot change the nature of the works to be executed without the Contractor’s knowledge. 

Variations are almost always a source of dispute among all the parties involved in a contract. Hence, it is prudent to keep any potential variations in the project to a minimum so that work can be executed smoothly and without any delays. This can be done by identifying all the risks beforehand, conducting site surveys, and ensuring that the designs are properly coordinated during the tendering stage.