Change
Variation claim exposure
By the time a variations package lands on your desk, it has been prepared by people whose job is to maximise recovery. Yours has not been prepared at all.
The situation
Fourteen months of instructions, arriving at once
A client received a consolidated variations submission covering fourteen months of instructions. It was well presented, professionally argued and considerably larger than anything their monthly cost reports had suggested.
Nothing improper had occurred. The contractor had simply done what contractors do: recorded every instruction, valued each in the way most favourable to themselves, and submitted the package at the moment of greatest programme pressure. Meanwhile the client had recorded instructions in emails, minutes and site conversations, and had valued none of them.
One party had spent fourteen months building a commercial position. The other had spent fourteen months building a building.
What we found
Three categories, presented as one
The submission mixed items that require entirely different responses, and it presented them as a single package.
Genuine variations, properly instructed and correctly valued. These represented a substantial part of the package and were agreed quickly.
Design development within the contractor's existing obligation, presented as change. Contract interpretation decided these, not negotiation.
Items where entitlement existed but quantum had been inflated through rate build ups that did not reflect the contract mechanism, most visibly in the treatment of preliminaries and overheads.
Several claims for time related cost attached to events that had not delayed completion. Consequently entitlement failed before quantum was ever reached.
What changed
Assess the claim, do not haggle over it
What remained in dispute was small enough to settle commercially. Nothing proceeded to adjudication.
Take entitlement first, every item
Each item was tested on the clause, the instruction and the causation before any figure was assessed, which removed a category of the package before valuation began.
Rebuild valuation from the contract rates
Where entitlement was clear, quantum was constructed from the contract mechanism rather than negotiated against the submitted figure. That is the difference between assessing a claim and haggling over one.
Show the reasoning on every line
The response went back as a structured commercial position with the basis of each assessment visible, so the contractor could check it rather than dispute it in principle.
Agree the correct items quickly
Because the reasoning was visible, the properly valued variations were agreed within weeks instead of being held hostage to the contested ones.
Why this happens
Exposure is created by silence
Every instruction that goes unvalued is a commercial position surrendered, and the surrender is invisible until the package arrives.
Live valuation under cost control and variations removes the accumulation entirely, because there is nothing left to consolidate. Where the accumulation already exists, final accounts and disputes addresses it retrospectively, although retrospective assessment is always harder than real time assessment and usually more expensive.
Questions
Asked about variations and claims
What separates a variation from a claim?
A variation is a change instructed under the contract and valued by its rules. A claim is a request for money on some other basis, usually loss and expense arising from disruption, prolongation or a breach. The two are assessed differently and evidenced differently, and a claim dressed as a variation rarely survives scrutiny. Establishing which category each item belongs to is the first step in assessing a package of contractor entitlement.
How should a client respond to a large claim submission?
By assessing it rather than rejecting it, and by doing so line by line. A rejection without analysis puts a client in a weak position at any subsequent adjudication and invites the claim to be resubmitted with more volume. Assessment separates the entitlement that exists from the entitlement that has been asserted, and it produces a defensible counter-position. That position is what makes settlement possible at a sensible number.
Does a global claim ever succeed?
It can, though the threshold is high and it has narrowed over the years. A global claim asks a tribunal to accept a total loss without linking each cause to each effect, and it is generally available only where that linkage is genuinely impossible rather than merely inconvenient. Where records exist and have not been used, the claim tends to fail on that ground alone. Contemporaneous records are therefore as much a defence as a proof.
What is the value of assessing claims early?
Leverage and cost. An early assessment establishes the client's position while the events are recent, the people involved are still on the project and the records are still accessible. It also stops interim payments being made on account against entitlement that does not exist, which is difficult to unwind at final account. Claims assessed on receipt settle for materially less than the same claims assessed eighteen months later.
When does a claim need legal input rather than commercial?
When the argument is about the meaning of the contract rather than the value of the work. Quantum, records and valuation are commercial questions and are best answered by someone who can build the numbers from first principles. Entitlement in a contested case, particularly where the drafting is amended or the events engage more than one clause, needs a lawyer. Most matters need both, and they need them in that order.
Related scenarios
Where this connects
A variations package larger than your cost reports suggested?
Send the submission and the instruction record. We will tell you what the contract actually supports before you respond.
Insights