The maximum project performance would be achieved if the work invariably flows smoothly within time limits and anticipated budget. Contract change management is a critical part of contract administration, contract management, and ultimately project management. Variation order is an outdated term still commonly used to describe an architect’s instruction requiring alterations, additions or omissions to the quality, quantity or design of the works. Variation or Alteration is an additions or omissions in work, materials, working hours, work space, etc. Variation orders result in time delay, cost overrun, quality defects, and other negative impacts. The main aim of this project is to know in detail about variation, variation order, administration of variation order, valuation of variation order and variation leads to claim. This paper is compiled by referring Civil code of the Empire of Ethiopia proclamation no. 165 of 1960, standard bid document national competitive bidder 2011, NEC3 and FIDIC. Conclusion and recommendations are also presented sequentially.

Keywords: Variation, Alteration, Variation orders.

Contract change management is a critical part of contract administration, contract management, and ultimately project management.

Variations have long been an inherent part of the construction industry. It is seldom to spot a construction project being executed without a change which normally arises as a result of some causes attributed to the different parties involved in the project execution. Upon acknowledging its existence, the change – or variation is formally regularized by the issuance of a change order which is a document describing the scope of the change and its impact on both cost and / or time. If no agreement is reached between the parties of the project on the change, it turns into a claim or dispute that may negatively affect the execution of the project and curtail its chances of successful completion.

In project management, a change order (or variation order) is a component of the change management process in which changes in the scope of work (or project brief) agreed to by the client, contractor and architect are implemented.

Alteration or amendment of contract is the forms of contract in common use in the construction industry have been carefully drafted to take account of most of the situations which regularly arise during the course of building works. The forms are regularly updated in line with decisions of the courts. The employer may wish to incorporate some special provisions in a particular contract to suit his own requirements. It is perfectly feasible to alter or amend a standard form provided: -

— The contractor is made aware of the alterations or amendments at the time of tender or at least before the contract is executed.

— If proposed after the contract is executed, both parties must expressly agree the proposed amendments.

— The amendments are carried out carefully so that no inconsistencies result.

— The amendments do not contravene legislation.

It is always advisable to obtain the assistance of a person specializing in building contracts and construction law if anything but minor amendments are needed, as any amendments may have wide-ranging ramifications.

Any amendments must be made on the printed form itself and signed or initiated by both parties. It is not sufficient merely to refer to amendments in the bills of quantities or specification because most forms contain a clause giving priority to the provisions of the printed form over any of the other contract documents. An alternative is to delete the priority clause and allow the usual principles of interpretation of contracts to prevail.

In legal terms, a variation is an agreement supported by consideration to alter some terms of the contract. No power to order variation is implied, and so there must be express terms in contracts which give the power instruct variations. In the absence of such express terms the contractor may reject instructions for variations without any legal consequences.

Standard forms of contract generally make express provisions for the contract administrator (generally the architect or engineer) to instruct variations (for example , FIDIC Clause 51.1, 1987, SBD-Works (NCB) - Prepared by the FPPA (Version 1, August 2011) clause 15.1 and also Civil code of the Empire of Ethiopia proclamation no. 165 of 1960 article 1335.-3 ).

FIDIC Clause 51.1, 1987

The Engineer shall make any variation of the form, quality or quantity of the Works or any part thereof that may, in his opinion, be necessary and for that purpose, or if for any other reason it shall, in his opinion, be appropriate, he shall have the authority to instruct the Contractor to do and the Contractor shall do any of the following:

1. Increase or decrease the quantity of any work included in the Contract,

2.  Omit any such work (but not if the omitted work is to be carried out by the Employer or by another contractor),

3.  Change the character or quality or kind of any such work, Section IV. Part I. General Conditions of Contract,

4.  Change the levels, lines, position and dimensions of any part of the Works,

5.  Execute additional work of any kind necessary for the completion of the Works, or

6. Change any specified sequence or timing of construction of any part of the Works.

No such variation shall in any way vitiate or invalidate the Contract, but the effect, if any, of all such variations shall be valued in accordance with Clause 52. Provided that where the issue of an instruction to vary the Works is necessitated by some default of or breach of contract by the Contractor or for which he is responsible, any additional cost attributable to such default shall be borne by the Contractor.

SBD-Works (NCB) - Prepared by the FPPA (Version 1, August 2011)

15.1 The Engineer shall have power to order any modification to any part of the works necessary for the proper completion and /or functioning of the works. Such modifications may include additions, omissions, and substitutions, changes in quality, quantity, form, character, kind, position, dimension, level or line and changes in the specified sequence, method or timing of execution of the works. No order for a modification shall have the effect of invalidating the contract, but the financial effect, if any, of all such modifications shall be valued in accordance with GCC Clauses 15.5 and 15.7.

Civil code of the Empire of Ethiopia proclamation no. 165 of 1960

Art. 1335.-3. Alteration.

The working plan may be altered on the request of either party where exceptional circumstances prevent its being carried in to effect or it appears for economic reasons desirable that it be altered.

Such provisions enable the continued, smooth administration of the works without the need for another contract.

Art. 3034. - Alterations required by contractor.

(1) Where it appears necessary for technical reasons to make alterations in the work as originally agreed, the contractor shall, except in urgent cases, give notice thereof to the client.

(2) The contractor shall give such notice notwithstanding that the proposed alterations do not result in the client having to pay an increased price.

 2.1 Alteration of existing Buildings

Existing buildings often undergo alterations during their life to change, modify or improve their performance or the nature of their use.

Common examples of alterations include:

• Total or partial change of use.

• Extension

• Partial demolition.

• Linking or separating spaces.

• Making or closing openings.

• Retrofitting a new a component or feature.

• Refurbishing an existing a component or feature.

• Renovating an existing component or feature.

• Repairing an existing component or feature.

• Maintenance.

• Decoration.

Variation order is an outdated term still commonly used to describe an architect’s instruction requiring alterations, additions or omissions to the quality, quantity or design of the works.
Variations Alterations, additions or omissions in work, materials, working hours, work space, etc.

The contractor shall not make any alteration and or/ modification of the permanent works. Unless and until the engineer instructs or approves a variation. 

A change order is work that is added to or deleted from the original scope of work of a contract, however, depending on the magnitude of the change, it may or may not alter the original contract amount and/or completion date. Variations may also be deemed to occur if the contract documents do not properly describe the works actually required.

Variations may not (without the contractors consent):

• Change the fundamental nature of the works.

• Omit work so that it can be carried out by another contractor.

• Be instructed after practical completion.

• Require the contractor to carry out work that was the subject of a prime cost sum.

A project manager then typically generates a change order that describes the new work to be done (or not done in some cases), and the price to be paid for this new work. Once this change order is submitted and approved it generally serves to alter the original contract such that the change order now becomes part of the contract.

SBD-Works (NCB) - Prepared by the FPPA (Version 1, August 2011)

a.) If for any reason, the Engineer shall find it necessary to give an order orally, he shall as soon as possible thereafter confirm the order by change order;

b.) If the Contractor shall confirm in writing an oral order given for the purpose of GCC Clause 15.2 (a) and the confirmation shall not be contradicted in writing forthwith by the Engineer, an change order shall be deemed to have been issued for the modification.

A change order for modification shall not be required for increase or decrease in the quantity of any work where such increase or decrease is the result of the quantity exceeding or being less than that stated in the bill of quantities or price schedule, as the result of valuation of works laid down in GCC Clause 63.

15.3 Except as provided by GCC Clause 15.2 prior to any change order for modification, the Engineer shall notify the Contractor of the nature and form of such modification. As soon as possible, after receiving such notice, the Contractor shall submit to the Engineer a proposal containing: -

a.) a description of the tasks, if any, to be implemented or the measures to be taken and a program for execution; and

b.) any necessary modifications to the program of implementation of tasks or to any of the Contractor's obligations under the contract; and

c.) any adjustment to the contract price in accordance with the rules as set out in this Clause.

15.4 Following the receipt of the Contractor's submission referred to in GCC Clause 15.3, the Engineer shall, after due consultation with the Public Body and, where appropriate, the Contractor, decide as soon as possible whether or not the modification shall be carried out. If the Engineer decides that the modification shall be carried out he shall issue the change order stating that the modification shall be carried out at the prices and under the conditions given in the Contractor's submission referred to in GCC Clause 15.3 or as modified by the Engineer in accordance with GCC Clause 15.5.

FIDIC 1987

Instructions for Variations 51.2

The Contractor shall not make any such variation without an instruction of the Engineer. Provided that no instruction shall be required for increase or decrease in the quantity of any work where such increase or decrease is not the result of an instruction given under this Clause, but is the result of the quantities exceeding or being less than those stated in the Bill of Quantities.

New Engineering contract (NEC)3 Engineering and construction contract 2nd edition

A6.3.1.20 The ECC explains that “Variations to the works are made by a Project Manager’s instruction to change the Works Information…A variation may comprise deletion or addition of work or alteration to work. It may include changes to the Employer’s design, to design criteria or to performance requirements for the Contractor’s design. Issue of a revised drawing or specification is a compensation event.”

Prepare Change orders using the guidelines when contract revisions, additions, or deletions to the work are necessary. Prepare Change may be required due to: -

• An error or omission in the contract

• Differing site conditions

• Adding a specification

• Adding new items of work

• Resolving a dispute

• Changing the sequence of work or 

• Other contract changes.

Submit change orders requiring a design exception to either the appropriate design division or Field Coordination Section for approval. Ensure that any change orders meeting either of the following conditions are signed and sealed by a licensed professional engineer: -

• Proposing major modifications or 

• Modifying structural designs.

Send all change orders with original signatures to the Construction Division, Labor and Contract Administration Branch. Approved change orders must be maintained in the original contract file located at the construction division.

Show all information and quantities about the proposed change on the change order. A performance bond is not required if the change order increases the contract cost.

For change orders requiring administrative approval, include a completed copy of the checklist with the transmittal letter of the construction division package forwarded to labor and contract administration to expedite the change order approval process.

If an agreement is not reached with the contractor regarding the scope of work and basis of payment for the change order, indicate on the change order form whether the work will proceed under force account or interim adjustment to the contract.