GYK Newsletter – Issues to be Assessed before Executing the Variation

Welcome to the new issue of Grow Your Knowledge Newsletter where you get free, ready to use, actionable, clear information regarding FIDIC Contracts and Construction Claims.

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Today at a Glance;

➤   Term of the Week

➤   One Tweet

➤   Issues to be Assessed before Executing the Variation

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TERM of the WEEK 

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ONE TWEET 

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Hello from eayglobal.com.

Variation is a process that puts a significant financial burden on the Contractor if not well-managed.

What triggers variation will be different for each case based on the own facts of the project.

The nature of the works, the complexity of the project, the ever-changing needs of the Employer, the lack of detail at the pre-contract stage and unexpected developments are some of the triggers for variation.

It’a a fact that almost every construction project experiences variation. It’s part of the construction process.

The 3 most common variation types;

1. Variation by Instruction: The Engineer issues an instruction and the Contractor is to proceed with executing the Variation.

2. Variation by Request for Proposal: Before instructing a Variation, the Engineer requests a proposal from the Contractor. The Contractor responds in two ways; submits the proposal or gives the reasons why he cannot comply with the request.

3. Variation in the Context of Value Engineering: The Contractor submits a proposal that speeds up completion, reduces the cost of the project, improves efficiency, and provides benefits for the Employer.

Variations mostly affect the project performance negatively in terms of cost, time and productivity.

Because of that; it is highly critical for the success of the Contractor to learn how to react to a variation order.

Here are some key issues that the Contractor should clearly assess before executing the variation.

ISSUE to be ASSESSED #1: The validity of the Variation Instruction

Does the variation instruction follow the procedure stated in the contract to be valid?

If not, the instruction of the Engineer is a variation or not will be one of the common sources of disputes.

ISSUE to be ASSESSED #2: The scope of the Variation Instruction

➤ Is there a specification change?

➤ Is the work instructed deliverable or reasonable?

➤ Is there an addition or omission to the current scope of work?

ISSUE to be ASSESSED #3: The reason(s) of the Variation

➤ Are there changes in conditions?

➤ Is there a technological advancement?

➤ Is there a non-availability of specified materials?

➤ Are there changes in the Employer’s requirements?

ISSUE to be ASSESSED #4: The valuation of the variation

➤ Is the appropriate rate or price for each item specified in the Contract or specified for similar Work?

➤ Is a new rate or price needed for an item of work?

ISSUE to be ASSESSED #5: The need for a variation claim

➤ What does the contract say about the claiming procedure?

➤ How to comply with the Notice requirements?

➤ How to collect the relevant supporting documentation?

Make your assessments effective from the start.

Prevent future surprises.

See you next week.

 

This information is provided for your convenience and does not constitute any “Legal Advice”. This document is prepared for the general information of the interested persons. This should not be acted upon in any specific situation without appropriate legal advice.

This information may not be reproduced or translated without the prior written permission of eayglobal.com

For further information please contact eay@eayglobal.com