Project managment

Ordered variations

Many types of contract allow the engineer to order variations but, as mentioned in Section 8.4 his powers to do so are usually restricted to changes that are
necessary or desirable for completion of the works, including any changes requested by the employer. By this means the employer, through the engineer, can obtain the result he wishes if his ideas and desires have altered since he awarded the contract. But if the employer wishes to introduce an entirely new piece of works or otherwise alter the basis of the contract, he can do this only by agreement with the contractor. The intention is that the works as contracted will still be built, that is, the same concept or result will be achieved but the detail may alter. This is essential, since the contract gives the contractor the duty and the right to carry out the contract works, and the contract will maintain those rights even if the works are varied.
The resident engineer may sometimes receive a request from an employee of the employer to make some addition. He should refer the request to the engineer who will need to consider whether the employer would agree to his employee’s request, and whether it is within the engineer’s power to instruct the contractor  to make such addition. Obviously in matters of choice or no great cost the resident engineer will assent to reasonable requests, such as colour schemes for finishes.
But sometimes during the finishing stages of a construction, the request may be for something expensive or which could delay completion, and it is then necessary to be sure the employer agrees with the request of his employee.
When ordering variations the ICE conditions set out the procedure to be followed. All such variations have to be ordered in writing, or if given orally, must be confirmed in writing. The ICE conditions require the contractor to undertake such ordered variations and, in general, they are to be paid for at bill rates or rates based on them. In some instances this may seem harsh on the contractor, since he may be doing work somewhat different from what he expected, and the rates so applied may seem to him too low. But the reverse can also happen,
and some of the varied work may leave the contractor with a welcome extra profit, if the relevant rates happen to be set high at tender.

Extensive variations can make the contractor’s task of constructing the works to his original programme impossible and can seriously affect his costs. They should be avoided if at all possible, but if they occur, the added costs can be taken into account by allowing for them in the rates set under the variation order.
But ordered variations must not be so large as to alter the nature of a contract.
This problem more usually arises when the employer decides to delete some substantial part of the contract works, such as a complete structure or a length of pipeline. A large deletion may so change the content of the contract that it may have to be re-negotiated, or maybe some agreement has to be reached to reimburse the contractor part or all of his intended profit on the deleted work. Clearly this is a matter for agreement between the employer and the contractor, and could not be ordered as a variation.
Under the ECC conditions (see Section 4.2(f)) the project manager may instruct a change to the works information and this has the same effect as a variation. The effect of such an instruction in the terms of ECC is to create a compensation event; one of the many such events listed in core Clause 60.1. On giving the instruction, the project manager asks for a quotation from the contractor, which is to include both proposed changes to the price and the time for completion. If the project manager does not accept the quotation he may ask for it to be revised or can make his own assessment of the effect of the instruction. The means of assessment depend on which of the options for payment has been selected but can include use of items in any bill of quantities.
Under lump sum contracts the ability to order variations may be much restricted, and may sometimes only be possible by pre-agreement. Normally there will be some contingency money in the contract, which the engineer is authorized to expend on necessary variations. Since there are seldom any unit rates in a lump sum contract, the engineer may have to request a quotation from the contractor for a proposed extra before he orders it. It depends on the contract provisions how he deals with a quotation which he thinks is too high.
Sometimes he will have no power other than to negotiate a lower price from the contractor. If that fails he either orders the extra at the contractor’s price or does not order it. If it is a matter of some importance he may decide to consult the employer on the matter. On lump sum or turnkey projects, care has to be taken to ensure that any extra required is a true addition, not included in or implied by the overall requirements of the contract. As may be imagined this is a fruitful cause of dispute.
On some lump sum contracts, while all above-ground work is paid for by means of lump sums, a small bill of quantities may be included for belowground, that is foundation work, so that it can be paid for according to the prices entered by the contractor and the measure of below-ground work required. This covers the case where the extent of the foundation work may not be exactly foreseeable. Other lump sum contracts may include a schedule of rates to be used for pricing ordered variations, typically adopted in the case of electrical or plumbing contracts where additions of a standard nature are often found necessary.

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