Variation

What is a Variation?

A variation (also called a variation order or VO) is a formal modification to the original construction contract. It documents any changes to the scope of work, materials, timeline, or contract price after the agreement has been signed.

In Australian construction, variations are the standard method for managing changes—ensuring both parties agree to modifications before work proceeds and costs are incurred.

Types of Variations

Addition

Extra work not included in the original contract, such as:

• Additional rooms or features
• Upgraded materials or finishes
• Extended scope of work
• New items requested by the client

Omission

Work removed from the original scope:

• Features the client no longer wants
• Items substituted with alternatives
• Scope reductions to manage budget
• Work transferred to another contractor

Substitution

Replacing specified items with alternatives:

• Different materials than originally specified
• Alternative products due to availability
• Upgraded or downgraded fixtures
• Changed specifications

Time Extension

Adjustments to the contract timeline due to:

• Client-requested changes
• Unforeseen site conditions
• Weather delays (if contractually allowed)
• Regulatory changes

When Variations Occur

Client-Initiated

The most common type, arising when clients:

• Change their minds about design elements
• Want to upgrade materials or finishes
• Need to add features they forgot to include
• Respond to changing circumstances

Contractor-Initiated

Variations proposed by contractors due to:

• Site conditions differing from plans
• Errors or omissions in documentation
• More efficient construction methods
• Material availability issues

Regulatory Requirements

Changes mandated by:

• Building inspectors
• Council requirements
• Updated building codes
• Compliance issues discovered during construction

Variation Process in Australia

1. Identification

Either party identifies the need for a change to the original contract scope.

2. Documentation

The contractor prepares a formal variation request including:

• Detailed description of the change
• Reason for the variation
• Cost impact (additions or credits)
• Time impact (extensions or reductions)
• Any specification changes

3. Pricing

The variation is priced using methods specified in the contract:

• Scheduled rates: Pre-agreed rates for common items
• Cost-plus: Actual costs plus agreed markup
• Lump sum: Fixed price for defined scope
• Daywork rates: Hourly/daily rates for labour and equipment

4. Approval

The client reviews and either:

• Approves the variation in writing
• Requests modifications
• Rejects the variation
• Negotiates alternative solutions

5. Execution

Once approved:

• Work proceeds according to variation terms
• Changes are incorporated into project documentation
• Payment terms are applied as agreed

Variation Pricing Methods

What to Include in a Variation

Essential Information

• Variation number: Sequential reference
• Date: When variation is issued
• Project details: Contract reference, site address
• Description: Detailed explanation of changes
• Reason: Why the variation is needed
• Pricing breakdown: Labour, materials, equipment, markup
• Time impact: Effect on completion date
• Signatures: Approval from both parties

Supporting Documentation

• Drawings or sketches showing changes
• Material specifications
• Photos of existing conditions
• Relevant correspondence
• Third-party quotes if applicable

Legal Considerations

Security of Payment

Australian states have Security of Payment legislation that:

• Protects contractors' right to payment for variations
• Sets timeframes for payment claims and responses
• Allows adjudication of payment disputes
• Applies to most construction contracts

Contract Terms

Standard Australian contracts (AS 2124, AS 4000, HIA, MBA) include variation provisions covering:

• How variations must be issued
• Pricing mechanisms
• Time for assessment and response
• Dispute resolution processes

Verbal Instructions

Important: Always document variations in writing. Verbal instructions can lead to disputes about:

• What was actually agreed
• The scope of additional work
• Pricing for the changes
• Whether authorisation was given

Managing Variations Effectively

For Contractors

Document everything: Keep detailed records of all conversations, site conditions, and changes.

Price promptly: Provide variation costs quickly to avoid delays and client frustration.

Don't start without approval: Get written authorisation before commencing variation work.

Track all variations: Maintain a variation register showing status and cumulative impact.

Communicate proactively: Keep clients informed about potential variations before they become urgent.

For Clients

Review carefully: Understand what you're approving before signing.

Question costs: Ask for breakdown of variation pricing.

Consider alternatives: There may be cheaper ways to achieve your goals.

Keep records: Maintain copies of all approved variations.

Common Variation Disputes

Scope Disagreements

Disputes about whether work is a variation or part of the original scope. Prevention:

• Clear, detailed original specifications
• Comprehensive scope documentation
• Explicit exclusions listed

Pricing Disputes

Disagreements about variation costs. Prevention:

• Include pricing mechanisms in original contract
• Provide detailed cost breakdowns
• Get quotes before approval

Authorisation Issues

Disputes about who can approve variations. Prevention:

• Define authorised representatives in contract
• Require written approval
• Document all communications

Variation Tracking

Maintain a variation register including:

Running totals:

• Original contract: $85,000
• Approved variations: $1,340
• Pending variations: $1,200
• Current contract value: $86,340

Technology and Variations

Modern construction software helps manage variations by:

• Creating professional variation documents
• Tracking approval status
• Calculating cumulative cost and time impacts
• Storing documentation and photos
• Generating variation registers and reports

The Bottom Line

Variations are an inevitable part of construction—projects rarely proceed exactly as originally planned. The key to successful variation management is clear documentation, prompt communication, and proper authorisation before work begins.

Well-managed variations protect both contractors and clients: contractors get paid fairly for additional work, and clients understand exactly what they're getting and what it costs. Always get it in writing, and when in doubt, document more rather than less.