How to Manage the Variation Procedure Effectively under the 1999 FIDIC Red Book

“Variations are common and inevitable in most of the Construction Projects. Well defined “Variation Procedure” adds value to the performance of the project.”

Whether the construction project is small or large, variations frequently occur.

The existence of the variation increases the probability of the future disputes.

To minimize that, you have to define the “Variation Procedure” clearly.

Clause 13 [Variations and Adjustments] in the 1999 Edition of the Red Book states Procedures for Variations.

At any time, prior to issuing the Taking-Over Certificate for the Works, the Engineer may instruct the Variation or request a proposal from the Contractor and initiate Variation.

And also the Contractor, by submitting his own proposal under Sub-Clause 13.2 [Value Engineering], may launch the Variation process.

In this document, you will find the key issues and the procedures for Variation in accordance with the 1999 FIDIC Red Book.

1   Procedure for “Variation by Request for Proposal”

1.1 Request for a Proposal by the Engineer

Before instructing a Variation, the Engineer may request a proposal from the Contractor. While the Contractor is to comply with the “Engineer’s Instructions”, the Contractor is not obliged to comply with the “Engineer’s Requests”.

1.2 The Contractor’s Response to the Request for Proposal

The Contractor responses in two ways;

1.2.1  The Contractor gives the Reasons why he cannot Comply with the Request

1.2.2  The Contractor Submits a Proposal

The proposal is to include [1];

(a) A description of the proposed work to be performed and a programme for its execution.

(b) The Contractor’s proposal for any necessary modifications to the programme according to the Sub-Clause 8.3 [Programme] and to the Time for Completion.

(c) The Contractor’s proposal for evaluation of the Variation.

1.3 The Engineer’s Response to the Contractor’s Proposal

Upon receiving the Contractor’s Proposal, the Engineer is to respond with approval, disapproval or comments.  The Contractor is not to delay any work while waiting for the Engineer’s response.

1.4 Evaluation of the Variaiton

Unless the Engineer instructs otherwise in accordance with Clause 13 [Variation and Adjustment], Clause 12 [Measurement and Evaluation] will be applied for evaluation of the Variation.

2   Procedure for “Variation in the Context of Value Engineering”

2.1 A Proposal to the Engineer by the Contractor

The proposal is to include the elements listed in Sub-Clause 13.3 [Variation Procedure] and;

Speed up completion.

Reduce the cost of the project through its lifetime.

Improve efficiency.

Provide benefits for the Employer.

2.2 Engineer’s Response to the Contractor’s Proposal

The Engineer is to respond with approval, disapproval or comments to the Contractor’s proposal in the context of “Value Engineering”.

2.3 Evaluation of the Variaiton

If a proposal, which is approved by the Engineer, includes a change in the design of part of the Permanent Works, then unless otherwise agreed by both Parties [2]:

(a) The Contractor shall design this part.

(b) Sub-paragraphs (a) to (d) of Sub-Clause 4.1 shall apply.

(c) If this change results in a reduction in the contract value of this part, the Engineer shall proceed in accordance with Sub-Clause 3.5 to agree or determine a fee, which shall be included in the Contract Price. This fee shall be half (50%) of the difference between the following amounts: (i) Such reduction in contract value, resulting from change, excluding adjustments under Sub-Clause 13.7 and Sub-Clause 13.8. (ii) The reduction (if any) in the value to the Employer of the varied works, taking account of any reductions in quality, anticipated life or operational efficiencies. However, if amount (i) is less than amount (ii), there shall not be a fee.

3  Procedure for “Variation by Instruction”

3.1 The Engineer’s Instruction

In accordance with Sub-Clause 3.3 [Instructions of the Engineer], the Engineer may issue Instructions to the Contractor which constitutes Variation.

3.2 Execution of the Variaiton

The Contractor is to proceed with executing the Variation.

FOOTNOTES

1. The same Sub-Paragraph letters are used as in Sub-Clause 13.3 [Variation Procedure] of the 1999 FIDIC Red Book.

2. The same Sub-Paragraph letters are used as in Sub-Clause 13.2 [Value Engineering] of the 1999 FIDIC Red Book.

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