1 in 5 Adjudications Directly Relate to Variation Disputes
This means money that you may be entitled to but haven’t yet been paid. Even worse, a shocking 73% of payment disputes potentially hide variation disputes that should have been resolved months earlier. For every day that these disputes continue, your hard-earned profit slips away….. directly from your bottom line.
Not Getting Paid for Variations?
Variation to the contract scope of works is a common occurrence in Construction and Engineering projects. However, what should be a straightforward adjustment to the contract sum often turns into a battleground over entitlement and valuation.
Research by the Kings College London and the Adjudication Society1 reveals that more than 20% of most common categories of claims in construction adjudications come from disputes about variations.
While this percentage is masked by a significant rise in true value payment disputes (final account 38% and interim payment 35%), many of these actually contain hidden variation differences that parties couldn’t resolve.
Why this Pain Intensifies Without Proper Management
When variation disputes remain unresolved, the consequences ripple throughout your entire project:
- Trust between the project team diminishes, making future working relationships difficult
- Your company’s cash flow suffers as payments are delayed
- The programme is often impacted, as work slows or stops during variation discussions
- Unwarranted stress affects everyone involved, from management to the on-site team
The construction industry’s tight margins mean these disputes can transform profitable projects into financial losses. Every day a dispute continues represents money flowing out, rather than in.
Establishing Contractual Entitlement First
Before you can even begin discussing the value of a variation, you must first establish your contractual entitlement to payment. This crucial first step is often overlooked, leading to disputes that could have been avoided.
“READ THE CONTRACT!”
Confirm the Work Falls Within the Contract’s Definition of a Variation
Not all changes constitute contractual variations. Most contracts define what qualifies as a variation, typically including:
- Additions, omissions, or substitutions to the works
- Changes to design, quality, or quantity
- Changes to working conditions or sequence
- Access restrictions to the works locations
Work falling outside the definitions stated may not be recoverable as a variation, no matter how much it costs you to perform.
Confirm the Instruction Was Properly Issued
In many contracts, for a variation to be valid, it must be properly instructed in writing, according to the contract’s requirements.
Most standard form contracts specify:
- Who has authority to issue variations (typically the contract administrator, project manager, or employer’s agent)
- What form the instruction must take (written, electronic, or verbal followed by written confirmation)
- When the instruction must be issued (before work commences or within a specified time)
- Important: If a verbal instruction has not been followed up with a written instruction or there is any ambiguity, issue your own confirmation of verbal instruction (CVI).
If these requirements aren’t met, you may face the argument that the work was not a valid variation at all, regardless of its value.
Clear Communication Is Key – Don’t Kick the Can Down the Road
Clearly communicate to the other party what the issues are and address them early. Don’t accept a “we’ll deal with that at the final account” mentality
Document the Impact on Your Original Scope (Records, Records, Records)
Recorded documentation showing how the varied work differs from your original scope is an essential life saver.
This includes but is not limited to:
- Original contract drawings and specifications
- Revised drawings and instructions (show and compare the original and revised)
- Correspondence confirming the changes
- Site records showing the impact of the change
Without this evidence trail, proving entitlement becomes significantly more difficult, especially if disputes arise months after the work is completed, often where the Works have been closed-up or hidden within the substructure or superstructure.
Submit Notices Within Contractual Timeframes
Some contracts include strict time limits for notifying the other party of potential variations. Failing to provide these notices on time can severely limit or even eliminate your entitlement to payment, in what is called being ‘time barred.’
Common notice requirements include:
- Initial notification that you consider work to be a variation
- Estimates of cost implications before proceeding
- Regular updates on time and cost impacts
- Final accounts of actual costs incurred
Each notice strengthens your position and prevents arguments that the other party was unaware of the variation and/or the financial implications.
Ensure the notice clearly communicates your position so that there can be no ambiguity about the claims being made.
!TAKE ACTION NOW: Don’t Let Another Variation Go Unpaid
Are the non-payment of variations eating into your profits? Our team of construction contract specialists can help you establish entitlement, prepare robust valuations and recover the money you’re owed.
Contact us today for a free 30-minute consultation to discuss your specific challenges and discover how our proven approach can transform your variation management process.
Call 01727 861510 or email us on [email protected] to improve your project’s profitability today.
