VARIATIONS
Wide
definition
The standard forms of contract usually give a wide definition to the term "variation". It may be stated as including alterations or
modifications of design or quality or quantity of the works, additions, omissions
or substitutions, alterations of kinds
or standards of materials, alterations in the obligations or restrictions
relating to access, working space, hours of work or the order of work. However, once a sub-contract has been
awarded, it is not lawful to remove work from that sub-contractor and to give
it another firm. To do so, probably opens the door to a claim for damages (ie
loss of profit etc).
Authority
The
sub-contractor should ascertain at the outset exactly who is authorised and the
procedure for instructing and valuing variations on the particular
contract. Beware of acting on the direct request of consulting engineers and
even more peripheral parties (eg client's co-ordinator, depot manager,
etc). Any such instructions should be
confirmed in writing via the main
contractor , since the actual contract relationship is with that party. To
ignore this precaution is to risk “working for free”.
All variations must be authorised in
writing. The JCT standard forms lay
down certain rules as to oral instructions. Usually, there is no obligation to
immediately comply. The sub-contractor must confirm any such oral instruction
in writing within seven days, if dissent is not forthcoming in a further seven
days then the instruction takes effect. If the main contractor himself confirms
in writing within seven days of the oral instruction, it takes effect
immediately.
Valuation of
variations
The
valuation rules set down in most
standard forms are based on similar principles, which are reasonably to be
implied into "bespoke" forms if the latter are silent on the subject.
Firstly, the
bill or schedule rates are not a shopping list. The rates will only apply if the character, conditions and
quantities do not significantly change.
If the conditions under which the work is executed, and/or the
quantities of work undergo a significant change, then the bill rates will be
used as a basis, with a fair adjustment in respect of the changes. If the
character of the work changes, then fair rates and prices must be used. This is not the same as "cost
plus". Indeed, if the general level of the bill rates is low, then a
"fair" valuation may well reflect this.
An astute sub-contractor may well be
able, quite legitimately, to secure agreement to starred rates for the majority
of his variations. The list of valid
reasons for change in character and/or conditions can be substantial (eg winter
working, small quantities, return visits, piecemeal buying, restricted access,
high level working etc). It is essential
that the sub-contractor take the initiative if he is to secure his just
entitlements.
The JCT forms also provide for
adjustments to the rates of non-varied contract work where these works have
been affected by variations. Again, this
offers considerable scope for wide ranging re-valuation.
If
the variation is such that it cannot be measured and valued, then a
dayworks basis may be used. Arrangements vary from one form of contract to
another (eg "all in rates per hour", "RICS/ECA Definitions with
tendered percentages, etc). Most
sub-contracts require prior agreement as to work being done on dayworks, and
the prompt submission of vouchers for signature
The JCT forms generally provide for
adjustment of preliminaries where such elements have been affected by a
variation. Again, it is up to the
sub-contractor to take the initiative.
Strictly speaking, this applies where there is a separate bill of
preliminaries. However, an astute sub-contractor should be able to find
legitimate reasons for adjustments, even where there is no such bill.
Who values the variations?
Contrary to general belief, the client’s
qs and/or the consulting engineer are not contractually responsible for
valuation of variations under domestic
sub-contracts.
Usually, the valuation stands to be agreed between the two key parties – the
main contractor and sub-contractor.
Loss and expense
Many of the circumstances which are treated as "claim
situations" in fact fall under "variations" and stand to be
valued as such. The sub-contractor
should take the initiative in such matters, since the prospects of fair
reimbursement and good cash flow are usually greater when dealing with variations
than in a "claims scenario".
The result is a significant improvement in cash flow and reduction in
end of job disputes.
The whole business of pricing variations is far more than just “picking
from a shopping list of rates”. With appropriate awareness and ingenuity,
the sub-contractor can do a great deal to ensure being properly paid for variations and also the
original contract works affected by variations.
ARTICLE NO 6
DATED 4/12/01
FOR END OF December 2001 “TIMES”
FILE biet06
John
Russell
Contracts
and Training Consultant
Cheshire CW4 7DP
Tel:
07770 986444
Email: swsubbie@globalnet.co.uk
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