Claiming Compensation for Variation

Practical considerations when submitting a variation claim

All too often the issue of making variation claims do not receive sufficient management attention when planning a project or even after a delay event occurs, due to time pressures. However, a properly substantiated claim submission will be considered seriously by employers and their agents, and can be an effective tool in expediting agreement and avoiding conflict. Conversely, poorly drafted variation claims can lead to frustration and conflict between the parties. Notwithstanding the political and administrative challenges which a contractor potentially faces on a construction contract, investing time and resources to deliver complete and robust submissions for variation claims will invariably lead to a better business outcome for the contractor.

Adherence to provisions within the contract conditions is of vital importance. Failure to do so can severely prejudice a contractor’s chances of securing a favourable outcome. Occasionally, the contract conditions do not provide a route for the contractor to recover compensation directly through a variation clause, in which case it may be possible to pursue a claim on the basis of a breach of contract, subject to the provisions of the local laws.

A well-prepared variation claim will typically include five elements: Introduction and Background; Cause and Effect; Entitlement; and Valuation and Substantiation. Record keeping is at the core of successful variation claims. Measures should be put in place early in in a construction contract to ensure that all documentary evidence which will be required for substantiating potential variation claims is consistent and being properly collected and filed. It is worth noting that whilst the collation of records should generally be a matter of course for all contractors, photographic evidence and officially circulated daily site records can be particularly persuasive sources of contemporaneous data, to be drawn upon in a retrospective scenario.

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