Learn what a variation in construction is, why it happens, how it affects cost and time, and the steps to manage contract changes properly.
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No construction project runs exactly as planned. Designs change, site conditions cause surprises, and clients rethink their choices. In Australia, these contract changes are known as variations in construction.
A variation isn’t just a change to the work itself. It also includes the contractual clause that governs variations, the formal approvals, records, and supporting documents that make it official. Whether it’s a design tweak, a scope adjustment, or an unforeseen site issue, every variation must follow a structured process to keep projects on track. Effective variation management is crucial to ensuring these changes do not disrupt project timelines and budgets.
In this guide, we’ll cover:
Let’s get started.
A variation in construction refers to any alteration to the original scope of work specified in a construction contract. This includes additions, omissions, or modifications to the agreed-upon tasks or methodologies. Such changes can significantly impact the project's cost, timeline, and quality.
In Australia, the contract variation meaning doesn’t just refer to the change itself. It also includes all the approvals, paperwork, and formal processes needed to make it official.
Variations typically arise when clients request design changes, unexpected site conditions are discovered, or new regulations require adjustments. Managing them properly ensures projects stay on track and disputes are avoided.
Every construction contract in Australia contains what's called a variation clause. This is where you can find the variation of contract that describes adjustments in the project's scope or how the work will be carried out. A well-defined variation clause ensures that any building variation or contractual amendment is managed fairly and transparently.
This is a vital section because it explains how to handle changes that happen during the project. Knowing what's in this clause helps project owners and managers stay clear on how to manage contract variations smoothly.
Let's break down exactly what's included in a variation clause and where you can easily find it in your contract.
You’ll usually find the variation clause in the conditions section of your contract. Common contracts used in Australia, like the AS 4902 Contract Standard, ABIC MW, or other standard forms from Standards Australia, have clear sections dedicated to variations. Generally, the clause appears under a clear heading like "Variations," "Contract Variations," or similar wording.
For instance, in AS4902 Contract Standard, the variation clause is usually found under the "Variations" heading or similar wording. Take some time at the beginning of your project to familiarise with this clause. It will save headaches later.
A variation clause is an important part of any construction contract in Australia. It sets out the rules clearly, explaining exactly how to handle variations in construction when changes pop up. Having this clause well-defined makes life easier for both project owners and managers, keeping projects running smoothly.
1. Conditions That Trigger Variations: A variation clause clearly states the scenarios considered variations. Common examples include owner-directed changes to designs, unexpected discoveries like contaminated soil or asbestos, design mistakes, or even updated building regulations from local councils.
2. Procedures for Requesting and Approving Variations: A strong variation clause also outlines the steps involved in formally managing variations. It usually starts with the party proposing the variation providing formal, written notice. Details about the proposed changes, expected impact on cost and timeline, and formal approval are all included here.
3. Valuation Methods and Costs: An important part of the variation clause deals with cost. It explains how variations are calculated and paid. Variation cost in construction usually include materials, labour, and equipment needed for extra tasks. The clause also covers adjustments due to savings, provisional sums, prime costs, and how overhead and profit are handled.
4. Timeframes and Deadlines: Variation clauses usually outline clear timelines. They specify deadlines for submitting, reviewing, and approving variation requests.
5. Impact on Project Timelines: Variations often affect construction timelines. Because of this, a variation clause typically explains how extensions of time (EOTs) are managed. It covers scenarios when delays are justified, how claims for extra time should be submitted, and the process for assessing these claims.
Variations generally fall into two main categories: positive variations and negative variations.
Positive variations add to the original project scope, increasing cost and potentially extending timelines. They usually occur when additional tasks or upgrades become necessary or when the client requests changes after construction starts.
Examples include adding an extra bedroom, upgrading kitchen fittings, or changes needed because of unexpected site conditions. Builders price positive variations based on the extra labour, materials, and subcontractor costs involved.
Negative variations involve reducing the project scope, resulting in lower overall project costs. These happen when certain parts of the planned work become unnecessary or simplified due to budget adjustments or design changes.
Common examples include removing a planned extension, choosing cheaper flooring, or simplifying architectural features. When these occur, the cost savings (labour, materials, etc.) are deducted from the contract price. Clear agreement and documentation between builder and client help avoid misunderstandings and disputes.
No matter how well a project is planned, changes happen. Some are unavoidable, like discovering unexpected site conditions. Others result from design updates or client requests. Regardless of the cause, every variation in construction affects cost, time, or both.
Here are the most common reasons variations occur in Australian construction projects:
Some contracts include prime cost items (estimates for specific materials) and provisional sums (allowances for work that isn’t fully defined). If the actual cost exceeds these allowances, a variation is required.
💡Example: The contract allows $15,000 for tiling, but the tiles the client selects cost $20,000. That extra $5,000 becomes a variation.
Construction sites don’t always reveal their secrets upfront. Unexpected conditions can force changes in the project scope.
💡Example: During excavation, asbestos-contaminated soil is discovered. Removing it safely wasn’t in the original contract, so the additional cost for testing, removal, and disposal becomes a variation.
Clients change their minds. Sometimes, they want to upgrade materials, add features, or adjust layouts after work has begun. These changes nearly always result in variations.
💡Example: A homeowner initially chooses standard bathroom tiles but later upgrades to custom Italian tiles that require extra installation time. The price and labour costs increase, requiring a variation order.
Mistakes or missing details in drawings can lead to variations. If the contract is unclear or the plans don’t match reality, adjustments are needed.
💡Example: A structural engineer specifies a steel beam, but the architectural drawings don’t account for it. This discrepancy means the design must be revised, leading to a variation.
Sometimes, building codes, safety rules, or council regulations change mid-project. If these changes require additional work, they lead to a variation.
💡Example: A new fire safety regulation is introduced while a building is under construction. The updated code requires extra smoke detectors that weren’t part of the original contract. Installing them is a variation.
Some variations are beyond anyone’s control. Events like floods, fires, pandemics, and supply chain disruptions can force contract changes.
💡Example: A flood damages materials stored on-site. New materials need to be ordered, delaying the schedule and creating a variation in both cost and time.
Variations can be triggered by different people at different stages of a project. Sometimes, a contractor needs to adjust the work due to unforeseen conditions.
Other times, the owner decides to change materials or add new features. Regardless of who starts the variation, it must be handled through a formal process to avoid confusion and disputes.
Here’s how variations typically begin in Australian construction projects:
A contractor may request a variation when site conditions, material shortages, or unforeseen issues make it impossible to complete the work as originally planned. This usually happens when the scope of work needs to change due to factors outside the contractor’s control.
Example: During excavation, the contractor discovers that the soil isn’t stable enough to support the foundation. Additional reinforcement is needed, requiring a variation notice to cover the extra work.
Project owners sometimes request changes to design, materials, or finishes after work has already started. While these changes may improve the final outcome, they can also impact the cost and schedule.
Example: The owner initially selects standard windows but later decides to upgrade to energy-efficient double glazing. This change requires additional costs and labor, so the contractor processes it as a variation request.
A variation order is a formal instruction from the owner directing a change to the contract. Unlike a variation request, which is optional and negotiable, a variation order is mandatory—the contractor must follow it. This often happens when regulatory changes, safety updates, or client-driven adjustments require modifications to the work.
Example: A new fire safety regulation comes into effect mid-project, requiring additional smoke detectors. The owner issues a variation order to ensure compliance with the new rule.
Sometimes, variations happen simply because new information comes to light after the contract is signed. This could be updated drawings, engineering specifications, or council requirements that were not available at the start of the project.
Example: The owner provides revised architectural plans that relocate several interior walls. This change wasn’t included in the original contract, so it must be handled as a variation.
Variations in construction follow a structured process. This ensures that all changes are properly reviewed, approved, and documented before any work begins.
The first step is recognizing that a variation is needed. This could happen because of an unexpected site condition, a client request, a regulatory change, or a mistake in the plans. At this stage, it’s important to clearly define what is changing, why it’s necessary, and how it will impact the project.
Example: During construction, the contractor discovers that the specified flooring material is no longer available. A substitution must be made, leading to a variation.
Once a variation is identified, the responsible party must issue a formal notice. This could be a variation notice from the contractor or a variation request from the owner. The notice should outline:
Most contracts require variations to be submitted in writing within a set timeframe. Delays in notification can lead to disputes or rejection of the variation.
Next, the variation is reviewed to determine its financial and scheduling impact. The contractor typically prepares a cost estimate, breaking down material, labor, and time adjustments.
The project owner or contract administrator will then assess:
At this stage, negotiations may take place to agree on fair pricing and timeline adjustments.
Once the variation has been reviewed, the project owner or contract administrator must approve or reject it.
A clear decision at this stage helps avoid delays and uncertainty.
Proper documentation is critical to avoid disputes later. Every approved variation should be recorded in writing and stored with the contract records.
Key documents include:
Once approved and documented, the variation can be implemented. This means adjusting work schedules, material orders, and subcontractor tasks as needed.
It’s important to keep all stakeholders informed so the changes are smoothly integrated into the ongoing work.
If the variation affects the contract price, payment adjustments need to be made. This could mean:
The contract should specify how and when payment for variations is handled. Delays in processing variations can cause disputes, so it’s best to settle costs promptly.
Every variation in construction needs careful assessment before approval. Whether it’s a minor adjustment or a major change, understanding its impact helps keep the project within scope, budget, and timeline.
Here’s how to systematically assess the impact of a variation in a construction project.
Not all variations require the same level of scrutiny. Some are straightforward, while others significantly impact the project's cost, schedule, or compliance requirements.
A variation’s complexity depends on its risk. A small change in supplier contact details is simple, but replacing specified structural materials due to supply shortages can introduce engineering, safety, and regulatory concerns.
Every variation must have a valid reason before it can be approved. Establishing why the variation is necessary helps ensure it aligns with the project’s objectives and budget.
For instance, if unexpected ground conditions require additional excavation, the variation should be assessed based on whether it was foreseeable and if the extra cost is reasonable.
If a client requests a design upgrade, discussions should clarify whether the change is feasible within the contract terms and how it impacts the schedule.
Variations often lead to additional costs and changes in scheduling. A detailed assessment is necessary to understand how the variation affects labour, materials, and overall project expenses.
If a variation increases costs, a revised budget should account for the additional work. If it leads to cost savings, the contract should reflect the adjustment.
Delays are another important factor. If a variation affects the construction sequence, subcontractors may need to adjust their work schedules.
If a change is significant enough to push back the completion date, an extension of time (EOT) may be required. The project timeline should be updated accordingly, and any potential disruptions should be addressed before approving the variation.
A cost estimator or quantity surveyor can provide a financial breakdown of the impact, while project managers and engineers can assess whether the timeline adjustments are practical.
Before finalising a variation, ensure compliance with the variation clause in the contract. The contract should outline:
Legal review may be necessary for complex variations that introduce liability risks or alter contract obligations.
Delays are common in construction projects, and when they happen due to variations, they often lead to an Extension of Time (EOT) claim. An EOT allows a contractor more time to complete the project without facing penalties for late delivery.
An Extension of Time (EOT) is an official adjustment to the construction schedule, granting additional days or weeks beyond the original completion date. EOTs are typically allowed when delays occur due to circumstances beyond the contractor’s control.
If approved, an EOT prevents liquidated damages or penalties for late completion, ensuring the contractor is not unfairly penalised for delays caused by variations or other unforeseen issues.
Not every variation results in a time extension, but some changes have a direct impact on project timelines. EOTs are usually required when:
For example, if an owner requests a change in flooring material that takes six weeks to arrive instead of the originally planned three weeks, this could justify an EOT. Without an extension, the contractor would be unfairly held responsible for a delay caused by a variation beyond their control.
Variations are inevitable, but they don’t have to disrupt a project. A structured approach keeps costs under control, minimizes delays, and prevents disputes.
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Variations can significantly impact project costs and timelines. Mastt links all variations directly to contract budgets, providing a clear view of financial changes and ensuring cost control throughout the project lifecycle.
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