Variations to the scope of works, or variations to the services or materials to be provided, under a building contract are common.
A variation may be requested by either party or arise out of necessity, for example, due to changes required by legislation, latent conditions, or the unavailability of materials.
When seeking a variation, it is important to follow the process required under the building contract and to ensure that the variation is clearly documented.
What is a variation?
The scope (or description) of works to be performed under a building contract will usually be set out in plans and specifications.
The scope of works is an integral part of the contract. It identifies the works the contractor is obliged to perform and is the basis from which alterations or additions are assessed as being variations or not. It is important to determine whether there is a variation under a building contract, because the building contractor may be entitled to additional remuneration where there is a variation.
The variation must be something that is not already required by the scope of works. If there is no request by the principal to vary the scope of works, a building contractor will usually be unable to claim additional costs, subject to the terms of the building contract.
Where a principal requests materials different from those specified in the scope of works, this might also lead to a variation.
On the other hand, works that are integral to completing the project, although not spelt out in the contract or scope of works, may not be a variation.
A complete change to the nature of the scope of works is not a variation.
Dealing with variations
Variations to the scope of works often lead to disputes. It is therefore, important that all parties understand the significance of a variation and the processes required for requesting them and claiming any additional costs for them.
Principals should ensure that their building contracts contain provisions that enable them to request variations to the original scope of works. The contract should identify the circumstances under which a variation might be requested and set out a clear process for varying the scope of works.
Principals should also be aware of the difference between a variation and a complete change to the nature of the scope of works, which may entitle the contractor to terminate the contract.
Building contractors should ensure that they will be fairly compensated for works additional to the original scope and follow the processes outlined in the building contract for seeking variations and claiming additional costs for them.
Building contracts will generally provide a timeframe within which a building contractor may notify the principal of a proposed variation. The contractor will typically be required to set out reasons why the variation is required and the costs to carry out any additional or altered works.
Building contractors should always obtain approval before undertaking any variations.
A clearly defined scope of works and detailed process for dealing with variations should be included in all building contracts.
The scope of works should be sufficiently detailed and the building contract should be flexible enough to cover contingencies that may arise during the course of construction.
If you have any concerns or queries about variations in building contracts, please contact our experienced building and construction team on (07) 4052 0700.