How to Get Paid for Additional Work
As construction projects progress and develop, changes occur. These changes can be costly and are often a source of disputes.
This article includes practical tips to help parties get properly paid for additional work and reduce the likelihood of disputes. It also covers the basics such as why construction contracts have variations clauses, what variations are, and how they should be instructed and valued.
Why do construction contracts have variations clauses?
Parties to construction contracts frequently change their minds about what they want and how to achieve it.
As a result, most construction contracts include a variation clause to allow for the works to be varied. Without such a clause, a new contract, or a formal amendment, would be required each time a change to the works was required.
What are variations?
The simple answer is ‘whatever the contract says is a variation’. The contract is therefore the first place to look when determining what constitutes a variation.
JCT definition of variations
Many JCT contracts define a variation as an alteration or modification of the design, quality, or quantity of the works, including the addition, omission or substitution of the work and the alteration of the kind or standard of any of the materials or goods to be used in it.
The JCT definition of variation also includes the imposition of obligations or restrictions in relation to access, working space, working hours or the execution or completion of work in a specific order. This is not what you might first think of when you think about what constitutes a variation.
In some instances, JCT contracts provide that errors and inadequacies in the Contract Documents are treated as a variation (although these clauses are frequently amended).
Definition of variations in other contracts
Other contracts use different definitions, so it is important to check.
We have dealt with disputes worth hundreds of thousands of pounds which turned on what exactly the words used in the variation clause meant.
Some contracts might not refer to variations at all. The JCT Design & Build Contract refers to variations as Changes. The NEC contracts do not have variations – they deal with all change as compensation events.
Who can instruct a variation? Has the instruction been validly issued?
Again, the starting point is the contract. Contracts often contain provisions that require instructions to be given by certain persons or in a certain form or by a certain method. These provisions are likely to be effective.
If there is no valid instruction, then the contract may not have been varied. This can mean that a Contractor or Sub-Contractor can be in breach of contract for complying with an invalid instruction. As a consequence, not only will they not be paid for the ‘variation’, but they might even have to incur the costs associated with putting the works back into the position required by the contract and undoing the ‘variation’ work!
Can a Contractor refuse to comply with an instruction?
This is a very fact-specific question. The simple answer is that in some circumstances instructions can be refused or objected to, but those circumstances tend to be extremely limited.
How are variations valued?
Many contracts include detailed valuation rules. Under an unamended JCT contract, it is likely to be the case that:
- Additional work that is similar to, executed under similar conditions as, and which does not significantly change the quantity of work in the original scope: the rates and prices for the original scope work are used.
- Additional work that is similar to work in the original scope but is not executed under similar conditions or the quantity significantly changes: the rates and prices for the original work are used, but they are adjusted to include a fair allowance for the difference in conditions and quantity.
- Additional work that is not of a similar character to work in the original scope: is valued at fair rates and prices (usually cost plus overhead and profit).
What do I need to include in a claim for variations so that they get paid?
While it is important to check the specific requirements of your contract, a variation claim will have the best prospects of success where it includes:
- The instruction.
- Evidence of the change to the original scope. In other words, documents that clearly show that the original scope has changed. For example, you might include the original contract drawing and the revised drawing showing the additional work, with the additional work highlighted.
- Evidence of the valuation of the variation and an explanation of how it has been produced to demonstrate that it has been valued in accordance with the contract.
Ideally these documents would be assembled as a project progresses, as it is far quicker and cheaper to put these records together at the time rather than at the end of a project.
Presenting the variations in this way and submitting them regularly is also recommended as it enables differences in the parties’ respective valuations to be addressed as the project progresses, rather than being stored up for a dispute at the end of the project. This approach often reduces the likelihood of a dispute. Even if it does not, the scope of the dispute is likely to be reduced.
CCC has assisted many parties in putting together their variation claims in this way, to maximise their recovery, and reduce the likelihood and scope of disputes.
Will a variation also give an entitlement to extension of time?
Usually, yes. It is however likely that the extension of time mechanism in the contract will need to be operated separately. Check the extension of time provisions, and review what notices need to be issued and when.
How CCC can help you
Whatever stage your project is at, CCC can provide advice and assistance. This will ensure that practical steps are taken so that you achieve the best outcome when dealing with variations, just as we have helped many others. This includes:
- Providing advice to help you make sure that you are taking the right steps at the right time.
- Assisting with interim applications and final accounts, and presenting backup to variation accounts. It is important to do this in a way that is likely to result in a good outcome when presented to a third party such as an adjudicator.
- Formal dispute resolution, such as adjudication and arbitration.
