Our expert QS kicks off a new series by looking at variations and how to make them boost your bottom line
With prices a rock bottom, it is necessary for contractors and subcontractors to squeeze every drop of income out of all their projects. There has never yet been a construction project devoid of variations, therefore this is a good place in which to make a start.
Most contracts arrive accompanied by a schedule of rates, for use in pricing variations, which often come thick and fast. The natural reaction is to price the variations at the rates in the schedule, where appropriate. It is the “where appropriate” which is important.
The wording in the contract is the start point in deciding if the schedule of rates is appropriate for pricing purposes. The JCT contracts clearly state that the contract rates should only be applied, when:
- the work described in the variation when compared with the work described in the contract, is of a similar character
- the conditions under which the work is carried out are the same
- here is no significant change in quantities.
There are a few ifs and buts here that need to be considered. Concrete in columns and beams cannot be classed as similar in character to concrete in foundations. Undertaking work in soft and watery ground conditions cannot be regarded as the same conditions as working in firm ground conditions.
With regard to a significant change in quantities, a small increases or decrease can affect the manner and timing relating to the ordering of the goods and hence the unit price.
That is not all. The JCT contract provides for payment of an extra, if other work is affected by the variation, such as a knock-on effect which causes disruption. For example, an alteration to the blockwork may disrupt the plastering.
Finally if the variation causes delay, then the delay costs are recoverable.
So come on, every additional pound secured in respect of variations, is a pound added to the bottom line.