Barrister Professor Rudi Klein highlights the possible pitfalls when variations are made to your works.
What is a Variation?
Typically, a variation is a change to the scope of your works involving an addition, substitution or an omission from the contracted scope. The change may also relate to the manner in which the works are to be carried out.
The standard contracts published by the Joint Contracts Tribunal defines a variation as: “An alteration or modification of the design, quality or quantity of the Works.”
They then go on to state that the definition also includes: “the imposition by the Employer of any obligation or restriction.”
Scaffolding contractors should always read carefully the definition in the contract of what is meant by a variation.
Why variation clauses?
Construction contracts should define the works that you will be required to deliver. In the absence of a variation clause neither party can unilaterally change the scope of the agreed works.
A clause enabling a party to vary the works will then allow him to change his mind on what was originally agreed.
Potential disputes in connection with variations
Variations are often linked to two types of dispute. The first relates to whether an instruction to carry out certain work is a variation at all. It might be argued that the work is already within the scope of works that you agreed to carry out.
Scaffolding contractors should carefully study their scope of works. If the scope is open-ended it will be far easier to argue that any other work that is required already comes within the agreed scope.
The second type of dispute relates to the valuation of variations. Your contract should contain the rules for valuing variations; there may be an argument over the rule to be applied. If the contract doesn’t contain such rules, then the variations are left to be valued on what would constitute a reasonable price for the work. Standard contract forms in the industry enable you to provide a quote for a proposed variation to include both the price and the required extension of time.
When submitting a quote or offer for variations scaffolding contractors should indicate a date by which the quote will expire.
Finally, a word of caution. Always make sure that the person instructing a variation has the authority to do so. The contract should specify the person(s) authorised to issue instructions.
Essentially there are two approaches to valuing variations. The first approach is that the variation is valued according to the pricing breakdown or rates included within the agreed lump sum (or the valuation is based upon such pricing breakdown or rates). The second approach is to have in the contract a separate schedule of rates and prices for the specific purpose of valuing variations.
It’s very difficult to discern in all cases whether one or other approach is the better. The best advice is that when valuing variations one should be mindful of the fact that your contract rates and prices would have anticipated an orderly or planned delivery process. Variations are potentially very disruptive to your sequence of working. The bottom line is that you should seek to maximise your claim.
Check your contract for provisions that could debar your variation claim. Your claim could be debarred if you have not given sufficient warning that a variation instruction will be required or if you have not submitted your claim in time.
There are a number of possible pitfalls to consider when valuing variations. Here are some examples:
- Have you considered the cost of making any changes to the drawings?
- Are there any additional attendances to be provided and who pays for them?
- Have any changes been made to the space that has been allocated near to your working area (if so, there may be additional costs of transporting materials and equipment.)
- Have you costed any changes to your sequence of working (you may have agreed on a specific sequence of working in your contract or in pre-start meetings)?
Scaffolding contractors should as far as possible agree all variations upfront; such agreement should reflect the price for the variation and any required extended time for completion.
Omitted work is another area fraught with difficulties. In most contracts omitted work counts as a variation and the contract rates and prices (or those in a separate schedule) are applied to the omitted work. Unfortunately, most contracts do not enable you to claim loss of profit in respect of the omitted work. But there may be so much work that is omitted, one could argue that one has ended up with a very different contract from that entered into. In such case a claim for loss of profit should be made. Furthermore, the same claim could be made if work is omitted and then handed over to another contractor; this would amount to a breach of contract.
Above all else you should ensure that your scope of works is defined as precisely as possible. There are countless arguments about whether a variation is, in actual fact, a variation or whether it is already within the originally agreed scope of the works.
Rudi Klein is chief executive of the Specialist Engineering Contractors Group (SEC Group).