Variation orders in construction — a complete guide

A variation order is a change to the contracted scope of works — either an addition, an omission, or a substitution. Variations can be instructed by the client (or their architect or contract administrator) or claimed by the contractor as a result of unforeseen circumstances. Under most standard building contracts, including JCT, the contract administrator has the power to instruct variations, and the contractor is obliged to carry them out. The contract sets out how the value of variations is to be assessed and how they are to be authorised. A variation order should be issued in writing before the work is carried out. A verbal instruction to change something, without a written confirmation, creates ambiguity about what was agreed — and disagreements about what was instructed are one of the most common sources of construction disputes.

A contractor can legitimately claim additional payment for work that falls outside the contracted scope. The most common grounds are: Client instructions — if the client or their representative instructs additional work or changes to the specification, this is a straightforward variation entitlement. The contractor should issue a variation order for agreement before proceeding. Unforeseen conditions — if conditions are encountered during the works that could not reasonably have been anticipated and that materially affect the cost or programme, the contractor may be entitled to additional payment. The key tests are whether the conditions were genuinely unforeseeable and whether the contractor notified the client promptly when they were discovered. Errors in contract documents — if the contract drawings or specification contain errors or omissions that require additional work to correct, this may give rise to a variation entitlement depending on the contract terms. Statutory requirements — if changes in legislation or statutory requirements after the contract date require additional work, this is typically a variation entitlement. A contractor is not entitled to a variation simply because the work is more expensive than they estimated, because material prices have increased, or because the job is taking longer than planned. These are commercial risks that the contractor accepts when they sign a fixed price contract.

Under JCT contracts, variations are valued using the following hierarchy. First, if the varied work is similar in character to work in the original contract, it should be valued using the rates in the contract bills or schedule of rates. Second, if there are no applicable rates, new rates should be derived from the contract rates as a basis. Third, if neither approach is appropriate, the work may be valued on a daywork basis — time and materials at agreed rates. A lump sum variation claim without a breakdown is difficult to assess and easy to dispute. A well-presented variation claim should include a description of the additional work, the reason it falls outside the contract scope, a breakdown of the additional labour, materials, and plant costs, and a reference to the relevant contract clause entitling the claim. When assessing a variation claim, compare the rates claimed against market rates for the type of work. Labour rates, material costs, and plant hire all have realistic ranges. Significant deviations from market rates should be challenged with evidence.

Under most standard contracts, the contractor must give notice of a variation entitlement within a specified period of becoming aware of it — typically 28 days under JCT. Failure to give notice in time can result in the claim being barred, even if the entitlement would otherwise be valid. For clients, this means that a variation claim that surfaces weeks or months after the event should be scrutinised carefully. The lack of timely notice is a legitimate ground for reducing or rejecting a claim under many contracts. For contractors, this means keeping a contemporaneous record of events on site, notifying the client in writing as soon as a potential variation entitlement arises, and following the contract's notice provisions precisely. Many legitimate claims are lost because the contractor failed to give proper notice.

When a variation claim is disputed, the starting point is always the contract. What does the contract say about the entitlement, valuation, and dispute resolution? Most disputes can be resolved through negotiation if both parties approach the process professionally and with evidence. The client should set out clearly why they dispute the claim or the amount; the contractor should provide evidence to support their position. A meeting to discuss the evidence often resolves disputes that written correspondence cannot. If negotiation fails, most standard building contracts provide for adjudication — a rapid, relatively inexpensive dispute resolution process where an independent adjudicator reaches a binding decision within 28 days. Adjudication decisions can be enforced through the courts and are final unless overturned by subsequent arbitration or litigation. Litigation should be a last resort. Even for relatively modest disputed amounts, litigation is expensive, slow, and unpredictable.

The contractors who get their variation claims paid promptly and in full are those who present them professionally, with evidence, promptly, and in accordance with the contract. A one-line email saying "we need an extra £6,500 for groundworks" is easy to dispute and easy to delay. A well-presented variation claim includes: written notification given promptly when the event occurred, a clear description of what happened and why it gives rise to an entitlement, a reference to the contract clause relied upon, an itemised cost breakdown with supporting invoices and timesheets, and a request for written acceptance within a specified period. Contractors who keep good site records — daily diaries, site photographs with dates, signed delivery notes — are in a much stronger position when disputes arise than those who rely on memory.