The Nature of a Variation
A variation is any change to the scope of work defined in the original contract documents. It can be:
- An Addition: Client adds a deck.
- An Omission: Client removes the joinery package.
- A Substitution: Changing tile selection (which may change labour costs).
- A Change in Condition: Latent conditions (e.g., hitting unexpected rock) that necessitate a change in method.
The Process (Typical AS4000 Flow)
- Direction/Request: The Superintendent or Client requests a change.
- Pricing: The Builder submits a price (and effect on time).
- Assessment: The Superintendent assesses if the price is fair (reasonable rates + margin).
- Approval: A Variation Order (VO) is issued.
Expert Tip: Never proceed with variation work without a signed Variation Order or a formal "Direction to Proceed". Doing the work first and arguing the price later is a classic way to lose money.
Time Bars
Many commercial contracts have strict notification windows (e.g., "The Builder must notify the intention to claim within 7 days of becoming aware of the event"). If you miss this window, you may be "time-barred"—meaning you lose the legal right to be paid for that variation, even if you did the work.
Pricing Methods & Fair Valuation
- Rates-Based: Use tendered schedule of rates for additions/omissions where applicable.
- Dayworks: Labour, plant, and materials at agreed rates with signed dockets.
- Prime Cost / Provisional Sum Adjustments: Adjust to actuals plus agreed margin.
- Margin: Apply overhead & profit per contract (often 10–20%); be consistent and evidence-based.
- Credits: Omitted work must reflect realistic savings (including negative impact on preliminaries if any).