By way of a guide, the Variation Order MUST be drawn up with care, and it must be clear, concise and explicit.

To be effective, a Variation Order has to cover the following essential features:

i) Variation Orders are issued in numerical sequence;

ii) A concise description identifying the subject of the variation, including the item numbers from the Bill of Quantities and appropriate Specification reference, where applicable;

iii) The precise location in the works and in which Contract, cross-referenced to any drawing on which the particular item may be shown;

iv) The Variation Order must show the limits of the work and define the work to be performed;

v) The Variation Order must show whether or not by reason of the change the Contract Sum is increased or decreased. The Team Leader will determine the estimated additional cost based on recommendations from the Resident Engineer’s Office, (through the Deputy Team Leader) and if required will forward a recommendation to the Project Manager;

vi) The time adjustment factor must be filled in on all Variation Orders. If a time extension is allowed, it must be commensurate with the delay to the work as a whole. No time extension can be allowed unless the completion date of the contract is impacted. Once the Contractor accepts a Contract Variation Order, either with or without time extension, no further time adjustments should be made unless further order changes are made by a supplemental Variation Order;

vii) The following sequence of signing the Variation Order should be observed:

a) Generally, the Variation Order is initiated and drawn up by the Project Manager’s team, usually the Resident Engineer.

b) Normally the Contractor will sign first.

b) The Project Manager will sign second

c) The Employer will sign last, thereby legalizing the Variation Order.

A Variation Order, after approval and signature by the Employer and the Contractor, is a legal document that is equally as binding on all parties as the original contract.

Each Variation Order number will be recorded on the Variation Order Log.

The Conditions of Contract recognize that there are times on a construction project when varying the work needs to be done urgently, without the opportunity to go through the formal Variation Order process. In such circumstances, no quotation need to be formally given but the Variation is to be considered as a Compensation Event (see Section 12 below). In these circumstances if verbal instructions have been given by any of the Resident Engineer’s team, these instructions need to be confirmed in writing immediately. Clause 6.1 of the Conditions of Contract require all communications to be in writing, and so any verbal instruction would not be effective until the Resident Engineer’s staff confirm the instruction in writing.

The Project Manager has the authority to issue instructions to the Contractor on a number of matters. He can order him to search for a Defect (Cl 32.1) and to uncover and test any work that may be considered to have a defect. If the test indicates that the work is defective the cost for testing and reinstatement is to the Contractor’s account. If the test indicates that the work is satisfactory, the cost of the test is considered to be a Compensation event and the costs to be borne by the Employer, and would be paid to the Contractor as a Variation.

Finally, it should be noted that the Employer has no power under the Contract to order any variation on his own initiative. All variations must be issued by the Project Manager or his representative.

A Variation Order may result in a change of quantities, but the converse does not necessarily apply. Changes arising from minor alterations in the estimated quantities set out in the Bill of Quantities do not require ordered variations. Clause 36 “Changes in the Contract Price” deserves special consideration with respect to changes in Contract unit rates. Normally, the unit rate to be applied to the Payment Certificate is the rate included in the Contract (refer to Cl 36.1), irrespective of whether the rate was submitted in the tender, or established by a variation. Normally, the rates included in the Contract cannot be changed, (except by agreement between the Parties). However, Cl 37 (see below) sets out a particular scenario when Contract stipulated rates are to be revised.

Variation Orders – Quality Assurance System

The Variation Order process and sign off should be:

(a) Variation Orders can be initiated by the Project Manager, but only with the Employer’s approval

(b) The Resident Engineer should immediately notify the respective Project Manager that some discussions/submissions are being undertaken with the Contractor regarding a potential Variation Order

(c) After completion and agreement of all submitted rates and prices, the Resident Engineer’s Office should prepare the Variation Order, and also prepare a file containing all back up correspondence and supporting documents

(d) The Variation Order (4 copies) should then be sent to the Contractor for signature

(e) After Contractor signature, the Resident Engineer should then sign, and forward to the Team Leader’s Office

(f) After Resident Engineer’s signature, the Team Leader will then sign and forward to the Project-in-Charge’s office, for final approval and signature

(g) After final approval and signature by the Project-in-Charge, the distribution will be, one (1) original copy will be sent to the Contractor, one (1) original copy will be retained in the Resident Engineer’s Office, one (1) original copy will be retained in the Team Leader’s Office – the final copy will be kept by the Project-in-Charge.

The sign-off procedure will be that the Variation Order will be:

(a) Agreed by the Contractor

(b) Certified by the Resident Engineer

(c) Recommended by the Team Leader

(d) Checked by the DoR Engineer

(e) Approved by the Project-in-Charge

Rate Variation – Clause 37.1

Cl 37.1 should be read carefully but in essence states that if the final quantity of work done differs from the BoQ quantity by more than 25%, and provided that the change exceeds 2% of the Initial Contract Price, the Project Manager shall adjust the item rate to allow for the change – please note that in accordance with Cl 63.1, the revised rate requires the Project-in-Charge’s approval.

However it should be noted that in accordance with Cl 37.2, the Project Manager shall not adjust rates from changes in quantity if thereby the Initial Contract Price is exceeded by more than 15%, unless the Project-in-Charge agrees to a rate change.

At the start of the Contract, the Resident Engineer should identify those BOQ Items that will likely fall into the category of being adjusted, ie identify all BOQ Items where:

• (25% of the BOQ quantity) * (Unit Rate) exceeds (2.00% of the Initial Contract Price1).
• (1the Initial Contract Price is defined in Cl 1.1 (Bid) of the Conditions of Contract as “the Contract Price listed in the Employer’s Letter of Acceptance” – in our view, this should be calculated without VAT).

These Items should be carefully monitored during the Contract so as to give advance warning of any impending rate change.

It would not be appropriate to revise unit rates until the work included within referenced Item is completed, and the final quantity associated with that Item is known.