Changes happen in construction projects. It’s an unfortunate but normal part of the process. You can’t foresee every possible variable that can occur.
But if these variables end up causing extra work or additional time for you, then a variation order claim may come in handy as a way to receive the extra compensation you are owed.
Understanding Variation Claims in Construction
Variation order claims are filed by contractors when some unforeseen circumstance causes extra work to be performed or something changes the initially agreed-upon timeline. Variation claims allow you to request additional remuneration for these changes.
Depending on the circumstance a contractor may be entitled to a variation claim and in others not so much. There are a few things you can do to ensure that you’re making a proper claim with a high chance of success, at least with a reasonable client.
Variation Claims vs Change Orders
First things first, make sure that a variation claim is the best option and not a change order. Variation claim orders are generally covered in the original contract. The owner and the contractor agree on how work changes will be accommodated and the variation claim is simply asking the owner to make due on these previously worked out arrangements.
Change orders on the other hand are entirely new additions to a contract that require new payment agreements and potentially timeline changes as well.
A variation claim should already be covered in a contract, while a change order expands upon the original scope and creates a new work agreement.
What to Do Before You Submit a Variation Claim
A variation claim’s success is not guaranteed. To make a successful claim will depend on the context and the contract that you’re working under.
It is up to you, as the contractor, to fully explain the situation and justify the additional costs as even a legitimate claim can end up being rejected without the proper documentation.
Review your contract’s variation clause
Construction contracts will often have a variation clause included. Before the project starts, it’s best practice to work this out ahead of time and add one in if it isn’t already written out.
Additionally, always make sure the variation claim you’re making is covered in this clause, and the extra work was added by circumstances that were out of your control.
Give immediate written notice of your intention to file a claim.
Let the client know ASAP. Give a professional written notice that includes all relevant info and data at your disposal to support your claim, make sure to include all costs.
Additionally, variation clauses tend to have a timeframe for when claims can be made, so the sooner you make the request the better if there’s a time limit. More time is always a good thing. It gives everyone a moment to talk things out and review the information.
How to File a Variation Order Claim
Here’s the basic process you’ll need to go through to file a variation order claim.
Provide a Detailed List of Costs to the Client
After notifying the owner of your intention to file a variation order, provide a detailed analysis of the additional costs that were accrued. This is not entirely different from an invoice, though it’s specifically covering variations and may require more specifics.
Take the time to fully write out the exact reasons for each additional cost, and reasonably explain why they were accrued beyond your control. This is your chance to convince the owner, so you don’t want them to have any questions about vagaries in your statement.
Support it with Documentation
Following the previous reasoning, the more documentation the better. Daily logs, weather records, project meeting records, photographs, and even personal diaries are some of the many forms of substantive evidence you can include in a variation claim.
In addition to a detailed list of costs and all supporting documents available, be sure to add the following to every claim order:
- A description of whatever has caused the variation.
- Causal factors.
- The date the variations occurred.
- The effect the variation has had on the project.
- Steps you have taken to mitigate the variation.
- Total monetary and time cost of the variation.
Wait for the Owner Before Proceeding
They may need to review all the previous information before signing off on additional work. Hold off on doing any extra work that hasn’t been signed off on yet. Most contracts will require written notice to proceed after submitting a variation claim order.
So long as they’ve been notified of the variation claim and have been given the previous documentation, then there is enough of a paper trail showing the client was aware of the potential additional costs that may be accrued.
Finish the Work and Claim Your Additional Payment
If you’ve done all the previously mentioned steps – both before and after submitting your variation order claim – then you can move forward with the work, and claim your variation pay when finished.
There should be enough of a paper trail to reasonably prove your claim at this point, and the client should be fully aware of what they are going to be on the hook for.
Tips for Filing a Variation Order Claim
Successfully filing a variation order claim can be tricky. Here are a few helpful tips for making sure it goes smoothly.
Don’t submit a claim if you were the party at fault.
Not only is this unethical, you really don’t have grounds for compensation when any delays or changes are caused by a mistake by you, or by anyone working underneath you.
Eat the costs and learn from the mistakes.
Include all costs.
Don’t beat around the bush. Let the owner know all the potential costs of continuing the work due to the variation. It’s important to be open here to protect your bottom line, as you likely won’t have a chance to submit additional claims.
Make sure that all amounts listed in your variation claim can be proven.
Back all claims with documentation. Helpful documents can include things like weather records, daily project logs, project meeting records, dated photographs, and all correspondences including emails. Claims need to be substantive, so the more information the better.
Determine whether filing a claim is worth it.
Depending on your relationship with the client, and the amount of money on the line, it may or may not be worth it to file a variation claim. It can be seen as a negative mark as if you have somehow misled the client with your initial estimate.
If you’re worried about maintaining a particularly fragile relationship, sometimes it is worth more, in the long run, to take the hit to your bottom line to ensure to be on the list for future projects.
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