The trap you must avoid
Here’s the guide on how to get your variations valued properly.
IF YOU’RE working on a project and things change, then you’re entitled to be paid for that change, aren’t you?
You’d like to think it was that simple. After all, if you order a new car, then start adding on a whole lot of extras, you expect to pay for them don’t you? Unfortunately, especially where main contractors are involved, things aren’t always that straightforward.
You must get instructions
The first and probably most often used barrier for the contractor or client to put in your way to prevent you from getting paid is: ‘We didn’t instruct you to do that!’ or ‘Where’s your instruction?’ Don’t fall into this trap!
If somebody wants you to change something you must get an instruction before you do the work.
Otherwise, later on you’ll find yourself arguing about whether you were instructed to do the work. This will be after you’ve spent your money for their benefit and are then trying to get paid for it. There’s no need for this to become confrontational. Stay cool, calm and collected. If someone has the authority to instruct you to do something, then they should have no problem in giving you instructions.
Once you’ve received proper instructions, you need to ensure you record those instructions irrespective of whether they actually constitute variations.
In the case of those instructions which are actually variations, then you need to ensure the variation is properly recorded, measured and valued and can be easily tracked through the process of submission, agreement, and incorporation into your applications and ultimately paid for.
Measuring and pricing variations
There’s no point in attempting to prove something which is in fact not true. Surprisingly even the dumbest contractors can count and measure. There are better ways to maximise your entitlements eg by legitimately claiming for all the relevant additional man hours, price increases, lost time, administration, supervision, design and engineering time etc, relevant to each particular variation.
Most standard forms of contract refer to the valuation of variations in accordance with a Schedule of Rates.
However, most standard forms also contain provisions for revising those rates in the event that the varied work is carried out under different conditions, or is of a different character to that set out and/or described in the original contract documents.
The Schedule of Rates should therefore only be regarded as a starting point and the rates shouldn’t be applied automatically without any regard as to whether or not the rates should be adjusted to make ‘a fair allowance’ for the change in character or conditions.
Getting your variations valued is a process
Just like laying any kind of flooring, getting variations valued properly is a process. Here are my thoughts on that process:
1 Assemble all the information relevant to the instruction/variation including drawings, schedules and/or other documents.
2 Carry out a take-off of the physical changes from the relevant drawings or schedules and/or
3 Identify reasons the work isn’t of similar character or being carried out under similar conditions to that set out in the original contract and/or
4 Establish relevant details of the change to be priced if it does not relate to physical works and
5 Identify the relevant additional administration, supervision, design and engineering time so the rates can be adjusted to make ‘a fair allowance’ for the change in character or conditions.
6 Apply the adjusted rates to the quantities established under 2 above or
7 Apply the rates to the quantities established under 2 above and produce a separate priced summary of the relevant additional administration, supervision, design and engineering time and/or
8 Price the change to be priced if it does not relate to physical works and
9 Produce a total price for the variation
If this seems like a time-consuming process, that’s because it is. But trust me, you can use this to substantially increase your recovery from variations. You’ll also make it easier to press home your entitlement to a proper valuation. And most importantly – get paid what you are actually entitled to.
Once the variation has been properly valued it should be immediately submitted to the contractor or client. Your objective is to ensure the priced variation is submitted as soon as possible. The sooner you make the contractor or client aware of the amount of money you’re expecting to be paid the better.
Don’t underestimate the common-sense logic behind this drive to submit accurate financial details at the earliest possible opportunity. Contrary to popular belief contractors and clients don’t have an endless supply of money to spend.
Getting paid for the variation
Submitting properly conceived and accurately priced financial details, properly supported by instructions and any other information required, is the first step in getting paid.
Not only should you submit accurate financial details as soon as possible, but you should also include claims for work undertaken in respect of variations into your Interim Applications or Invoices at the earliest possible opportunity.
Your monthly applications should be set up in such a way as to produce an ongoing cumulative account. In other words, it should be readily apparent from the monthly application what the total ongoing contract value is going to be.
If necessary, where you’ve not yet produced accurate variation costings, you may choose to include budget prices for individual variations into the monthly applications.
A key objective should be to reach agreement with the contractor or client on the valuation of variations as soon as possible. Don’t be shy about getting this process underway as soon as possible.
This process needs to be approached professionally and with a certain degree of assertiveness. You may need to be the one doing the pressing to get meetings arranged with the relevant people etc.
You may need to involve more senior members of your team and/or their team to move things along. If things still aren’t getting resolved, then you may need to bring even more pressure to bear.
If you’re having problems getting paid for variations check out the professional advice you can get via Streetwisesubbie.com to unlock payment.