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5 Tips for Success When Claiming for Variations

A question that I am often asked during CPD talks and claims training courses is “is it necessary to submit claims for a variation?”. Unfortunately, I am going to have to give a lawyer’s answer to this and say that “it depends”.

If the party responsible for administering the contract follows the procedure set out in most forms of contracts for instructing variations, then the answer is “no”, because the variation has been acknowledged and it will either be measured and evaluated as part of the remeasurement on a remeasureable contract or as a separate evaluation leading to a change of the contract price of a lump sum contract.

WHEN CONSULTANTS DON’T DO WHAT THEY’RE OBLIGED TO DO

We all know however, that in many cases, consultants do not formally issue instructions for variations to the contract and often give instructions which are not acknowledged as being variations. Examples can often take the following forms:

  1. Issue of revised drawings;
  2. Comments on shop drawings which require changes to the contract drawings;
  3. Comments on materials submittals which change the specification;
  4. Instructions given during site meetings;
  5. Verbal instructions given on site as the work is being carried out.

Very often the above are a result of design errors or omissions and if, as is often the case, the consultant responsible for contract administration is also the designer, they understandably do not wish to draw the employer’s attention to their failings and especially do not want to have to advise the employer that because of these failings, the project is going to cost more and / or be delayed.

Bearing in mind that most forms of contract oblige the contractor to comply with instructions, the contractor has no choice but to proceed with the varied works, but what should the contractor do if he considers that the instruction comprises a variation, although no formal acknowledgement has been made?

5 TIPS FOR SUCCESS

Firstly, he should consider whether the variation is going to result in significant additional cost and/or delay. If not, it is probably something that may not be worth pursuing for the sake of good relations.

Is the contract remeasureable or a lump sum? If remeasureable, payment will be picked up in the remeasure and unless the variation will delay the time for completion, then there is no need for a claim. If, however the contract is a lump sum, there has to be a mechanism for increasing the contract price, so a variation needs to be established.

If he decided to pursue the variation, then it is vital to send a notice to the contract administrator that the instruction constitutes a variation under the contract and that the contractor intends to claim additional payment, an extension of time or both. The contractual time-frames for the submission of notices should be respected here to avoid any time bars. The reason that this notice is vital is to allow the contract administrator or employer to revoke any instruction which he may have previously considered had no time or cost implication, or at least to make provisions against it. Hopefully, at this point the contractor will receive an acknowledgement of a variation, although in my experience, contractors should not hold their breath whilst waiting for this.

If no acknowledgement is forthcoming, then the contractor should submit a claim for the variation. The claim should follow good practice for claims and should set out the following as a minimum:

  • Establish that an instruction has been given.
  • Establish why the instruction comprises a variation. This can usually be achieved by comparing the works included in the contract to the work that has been varied by the instruction.
  • Establish the contractual provisions for variations and demonstrate that the instruction comprises a variation leading to additional payment or time.
  • Quantify and evaluate the variation – either the additional payment or extension of time or both – and explain how all calculations have been carried out.
  • Substantiate everything.

Claims Class followers will know that the above comprises the essential elements to a successful claim i.e.:

  • Cause
  • Effect
  • Entitlement and;
  • Substantiation.

Interested in learning more about claims? Join us on London on 12 & 13 June for our new workshop, The Perfect Claim