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Comprehensive Guide to Managing Variation Orders in Construction Projects
Managing Variation Orders in Construction Projects: An Essential Guide
Almost every construction project, no matter how thoroughly planned, will encounter Variation Orders—reading this article could save your project from unnecessary losses and costly delays.
Introduction
Variation Orders (VOs), also known as Change Orders, play a crucial role in construction projects by allowing adjustments to the original scope of work agreed in contracts. These changes can be due to unforeseen circumstances, client requests, or compliance with new regulations, and are essential for the dynamic nature of construction environments.
What is a Variation Order?
A Variation Order is an official amendment to the construction contract, which alters the original specifications, quantities, or other conditions. It's a formal acknowledgment that the project plan has deviated from its initial path, whether by changing materials, design specifications, or project timelines. Managing VOs effectively ensures that projects meet their modified objectives without compromising on quality or budget.
Initiation of Variation Orders
VOs can be initiated by any primary party involved in a project—be it the contractor, the employer, or the engineer. Common triggers include unexpected site conditions, changes in project requirements, or legal amendments affecting the project scope. Each VO should be logged promptly, detailing the nature of the change and its expected impact on the project timeline and costs.
Types of Variation Orders
Variation orders can arise from several sources including but not limited to:
1. Site Instructions and Meeting Minutes:
Formal changes issued through official communications or recorded in meeting outcomes.
2. Verbal Instructions:
Informal changes that need to be confirmed in writing to ensure they are formally recognized and implemented.
3. Engineering and Regulatory Feedback:
Adjustments due to engineer's comments on drawings or compliance with new regulations that affect project specifications.
4. Contractor Proposals:
Suggestions by contractors to optimize or alter the scope, which can lead to cost savings or time efficiencies if approved.
5. Specification Changes:
Directed by the engineer or employer, these modifications adjust materials or project specifications.
6. Addition or Removal of Scope :
Also known as positive or negative variations, these adjustments directly affect the project scope.
7. Value Engineering:
Proposals initiated by any party aimed at improving project value through better performance, cost reduction, or enhanced efficiency.
Each type highlights the need for clear communication and documentation to avoid disputes and ensure that all changes are understood and agreed upon by all stakeholders.
Logging the Variation Orders
It is crucial to systematically record each VO to track its impact on project quality, finances, and deadlines. This log should include details about the detection date, the nature of the variation, and deadlines for official notices and VO issuance, ensuring compliance with contractual timelines.
- Download Variation Order Log pdf template ( variation order log sample )
- Download Variation Order excel customizable template ( variation order log sample )
Sending Notices to Variation Orders
The process of sending notices is a contractual obligation that informs the employer about potential VOs. These notices should be issued within the time frames specified in the contract and should detail the event causing the variation, its anticipated impact, and preliminary assessments of additional time or costs involved.
Sample Notice:
- Download Variation Order Notice pdf template ( variation order notice sample )
- Download Variation Order Notice word customizable template (variation order notice sample)
Issuing the Variation Order
When issuing VO, the document should include:
- A comprehensive description of the change.
- Updated plans or specifications.
- Adjustments to the contract price and timeline.
- Justifications for the changes, ensuring all parties are on the same page.
Sample Official Variation Order:
- Download Variation Order pdf template (variation order sample)
- Download Variation Order word customizable template (variation order sample)
Pricing the Variation Order
When pricing Variation Orders (VOs) in construction contracts, the changes are typically priced according to the unit rates specified in the contract's Bill of Quantities or previously approved rates. This standard approach ensures consistency and fairness in pricing adjustments necessary due to the VO. However, the contract may stipulate conditions under which these rates can be revisited and potentially altered. For instance, if the total cost of varied works exceeds a certain percentage of the original contract value, the contractor has the right to negotiate new rates.
Estimating the time impact caused by the Variation Order – Schedule Impact Analysis:
To effectively assess the time impact of a Variation Order(VO) in construction projects, it is essential to conduct a Schedule Impact Analysis. This process starts with the project's baseline schedule, which details all planned activities along with their durations. When a VO is introduced, project managers must pinpoint the specific activities that are affected by the change, determining whether these activities are either prolonged or shortened.
The next step involves incorporating these adjustments into the project scheduling software. The modified schedule is then analyzed to determine its effect on the project’s critical path—the sequence of dependent tasks that dictate the minimum time required to complete the project. If the analysis shows that the end date is pushed out, it indicates that the VO has a delaying impact on the critical path. Conversely, if the end date moves earlier or remains unchanged, it suggests that the VO may either shorten the project duration or have no impact on the critical timeline, respectively.
This method of Schedule Impact Analysis not only quantifies the delay or time savings introduced by VOs but also aids in transparent and strategic project management, allowing stakeholders to make informed decisions regarding schedule adjustments and resource allocation.
Contractors’ Rights
Contractors must be aware of their rights under the contract, especially if responses to VOs are delayed by the employer or engineer, which could lead to disputes. According to FIDIC guidelines, contractors have the right to claim extensions or cost adjustments if the employer or engineer fails to respond timely or adequately to submitted VOs.
In addition, the change in scope may give the contractor the right to object to variation orders.
Construction Submittal Form
When submitting a Variation Order (VO) for the engineer's review, it's often mandatory to include it within an official construction submittal form. This standardized document ensures that all necessary information is presented consistently, facilitating a thorough and efficient evaluation process. To assist in this procedure, free, customizable submittal form templates are available in Word, Excel, and PDF formats. These templates allow for easy customization to align with specific project requirements, streamlining documentation and approval workflows. For a comprehensive guide on effectively completing a construction submittal form and to access these free templates, refer to the "Construction Submittal Form Guide: Free Downloadable Templates in Excel, Word, and PDF."
Related Readings:
The Crucial Role of Timely Notices in Construction Projects: An Engineer's Guide
Conclusion
Effective management of Variation Orders is pivotal for the successful completion of construction projects. By understanding and implementing structured processes for initiating, logging, and issuing VOs, project teams can ensure adaptability to changing conditions without losing sight of the project's goals and budgets.
Call to Action
Construction professionals should strive to adopt best practices in VO management, utilizing tools and resources to ensure every change is documented and managed efficiently. For more detailed guidance, consider downloading our comprehensive VO management templates available on this page.
Frequently Asked Questions about Managing Variation Orders Construction Projects
Q: What is a variation order in construction?
A: A variation order, also known as a change order, is a formal document that modifies the original scope of work in a construction contract. This alteration can involve additions, deletions, or substitutions to the agreed-upon tasks, potentially impacting the project's cost and timeline.
Q: Why do variation orders occur in construction projects?
A: Variation orders often arise due to unforeseen site conditions, client-initiated changes, design discrepancies, regulatory updates, or material availability issues. These factors necessitate adjustments to the original project plan to ensure successful completion.
Q: What is the time limit to send a notice of variation or change?
A: FIDIC Contracts: The contractor must notify the Engineer of the event or circumstance giving rise to the claim as soon as practicable, and no later than 28 days after becoming aware of the event. Failure to provide this notice within the 28-day period results in the contractor forfeiting the right to an extension or additional payment. Federal Acquisition Regulations (FAR) in U.S. Government Contracts: Contractors must provide written notice stating the date, circumstances, and source of the order, and indicate that they regard the order as a change order. This notice should be given within 30 days after receiving a written change order or after furnishing the required notice. VERTEX Australian Standard Contracts (e.g., AS4000-1997): The superintendent must give the contractor written notice of a proposed variation. After receiving this notice, the contractor must notify the superintendent whether the proposed variation can be carried out and provide an estimate of the effect on the construction program and the cost of the variation. ConsensusDocs in the United States: Contractors are required to give written notice of a claim for an increase in the contract price or time within 14 days after the occurrence giving rise to the claim or after recognizing the condition giving rise to the claim, whichever is later.
Q: When is the deadline to issue the final variation cost and time claim?
A: FIDIC Contracts: The contractor is required to submit a fully detailed claim to the Engineer within 42 days after becoming aware of the event or circumstance. If the event has a continuing effect, the contractor should submit interim claims at monthly intervals and a final claim within 28 days after the end of the effects resulting from the event or circumstance. FAR in U.S. Government Contracts: Contractors must assert their right to an adjustment within 30 days after receiving a written change order or after furnishing the required notice. However, this period can be extended by the Government. VERTEX Australian Standard Contracts (e.g., AS4000-1997): The contract typically outlines specific timelines for the contractor to provide detailed particulars of the variation's impact on cost and time. It's essential to refer to the specific contract terms for exact deadlines. ConsensusDocs in the United States: Following the initial notice, contractors must submit written documentation of the claim, including supporting details, within 21 days unless a longer period is mutually agreed upon.
Q: How should ongoing effects of a variation be managed in terms of notification and claims?
A: FIDIC Contracts: If the event or circumstance has a continuing effect, the contractor should: fidic.org, Acquisition.gov, Findlaw Submit interim claims at monthly intervals, detailing the accumulated delay and/or amount claimed, along with any further particulars the Engineer may reasonably require. Provide a final claim within 28 days after the end of the effects resulting from the event or circumstance. FAR in U.S. Government Contracts: The contractor is required to assert its right to an adjustment within 30 days after receiving a written change order or after furnishing the required notice. The contracting officer may vary this period according to agency procedures. Acquisition.gov +1 VERTEX +1 Australian Standard Contracts (e.g., AS4000-1997): The contractor must notify the superintendent of the potential impact on the construction program and cost as soon as practicable after receiving the variation notice. Ongoing effects should be communicated promptly to ensure proper assessment and agreement on adjustments. Construction Law Made Easy ConsensusDocs in the United States: Contractors should provide timely written notice of any ongoing impacts resulting from the variation and submit supporting documentation as required by the contract terms. Regular communication with the owner is essential to address continuing effects appropriately. Peckar & Abramson, P.C.
Q: How do variation orders impact project budgets and schedules?
A: Variation orders can lead to increased costs and extended timelines if additional work is required. Conversely, they might result in cost savings and shorter schedules when work is omitted. Accurately assessing these impacts is crucial for effective project management. Procore
Q: What are the common types of variation orders?
A: Variation orders can be categorized as additive (introducing additional work), deductive (removing certain tasks), or substitutive (altering existing work). Each type affects the project's scope, cost, and schedule differently.
Q: How can contractors minimize the occurrence of variation orders?
A: Contractors can reduce variation orders by conducting thorough project planning, maintaining clear communication with stakeholders, and ensuring detailed contract documentation. Proactive risk management also plays a vital role in minimizing unforeseen changes. davisbucco.com
Q: What should be included in a variation order document?
A: A comprehensive variation order should detail the description of the change, cost estimates, schedule adjustments, and any necessary approvals. Including supporting documentation ensures clarity and facilitates smooth implementation.
Q: How does poor management of variation orders affect a project?
A: Ineffective handling of variation orders can lead to budget overruns, project delays, strained stakeholder relationships, and potential legal disputes. Implementing a structured process for managing these changes is essential for project success.
Q: Are variation orders common in construction projects?
A: Yes, variation orders are common in construction due to the complex and dynamic nature of projects. Despite meticulous planning, unforeseen factors often necessitate changes to the original contract.
Q: Where can I find templates for managing variation orders?
A: For practical tools to streamline your variation order processes, consider downloading our free templates available in this article. These resources are accessible without the need for registration, ensuring you have immediate support in managing change orders effectively.