What is a Variation in Construction
Also called as variation orders or change orders in construction. Any modification or change to works agreed in the contract is treated as a variation. These modifications can be divided into three main categories.
- Addition to the work agreed in the contract.
- Omission to work agreed in the contract.
- Substitution or alteration to work agreed in the contract.
FIDIC 1999 Clause 13- Variation and adjustments
The modern construction industry is developing rapidly day by day. New technologies, materials are introduced every day. Also, the clients are not always satisfied with the first design, and they intend to revise it all the time. Another main reason for change orders is funding problems. Whenever the client realise that they are under budget, they want to revise the design and reduce the cost. So it is inevitable to finish a project with the design agreed at the initial stage. Therefore variations might be (as per FIDIC 99),
- Revisions to the design
- Adjustment of the sequence of work
- Adjustments to quality
- Changes to levels, positions and dimensions of any part of the works
- Changes to working conditions
- Alterations to the quantities of any item of work ( may not always be treated as a variation)
But importantly, the contractor should agree to change the fundamental nature of the works. Also, the client or consultant cannot omit and reward it to another contractor without the contractor agreeing to it.
Another critical factor is that the change order cannot issue after the practical completion of the project. According to FIDIC 1999, the engineer(client’s representative) can issue a variation order before issuing Taking-over certificate. And also, the contractor is bound to carry out a variation instructed by the engineer unless the contractor cannot obtain material required to carry out the works. As FIDIC 99 stated, The Contractor should submit a prompt notice with supporting documents so the engineer can cancel or change the variation instructions based on the presented evidence. The contractor cannot change of modified any agreed works as per the contract without engineers approvals and instructions.
Value engineering under variations in construction(by contractor)
As per the FIDIC 99 sub-clause 13.2, the contractor can submit a written value engineering proposal at any time to,
- Accelerate completion of the project
- Reduce the cost project( Building cost, maintenance cost or operating cost of the project)
- Improve the performance or value of the project
- Any other benefit to the client.
Approving and evaluating the value engineering proposal as a variation
If the engineer approves this proposal, the contractor should design this part. And also, any reduction to the contract value will be assessed by the engineer under sub-clause 3.5 (determinations-FIDIC 99) before determining the contractor’s fee. The fee will be half (50%) of the difference of,
- reduction of the contract value due to given VE option (under FIDIC 1999, sub-clause 13.7 and sub-clause 13.8)
- modification of the quality, anticipated lifespan, maintenance or operational cost that should bear by the client after completion.
But if amount 1 is lesser than the amount 2, the contractor will not be entitled to any fee.
Sub-clause 3.5 – Determinations
The engineer can resolve or determine any matter under sub-clause 3.5 whenever conditions apply accordingly. The engineer will discuss with each party to reach an agreement to the matter. Whenever agreement is not achievable, The Engineer can make a fair determination in accordance with the contract. The engineer should provide all particulars to back up the decision made (to all parties). If any of the party not agreeing to the determination made by the engineer can try to revise the decision under clause 20 (FIDIC 99) – claims, disputes & arbitrations). Until that the engineer’s decision will be valid.
What is Variation procedure in the construction industry
Upon the engineer’s instruction to proceed for a variation the contractor can reply in writing stating the reasons not to continue the variation or the contractor can submit,
- Proper description and programme to execute the variation
- Also, the contractor can propose alterations to the programme as per the sub-clause 8.3 [programme]
- The contractor should submit a proper evaluation of the change order
If the contractor provides a proposal according to sub-clause 13.2 [value engineering] the engineer can reply with approving, disapproving or commenting. But the contractor cannot delay any work until the engineers respond. The engineer’s responsibility is to evaluate each variation following clause 12 [measurement and evaluation-FIDIC 99]