A Construction Contract Variation is generally a change to the work required under a Construction Contract. The signed Contract determines what constitutes a Variation, who can direct one, the notices required, how the change is valued and whether separate claims are required for additional time or other costs.
What is a Construction Contract Variation?
A Construction Contract Variation generally changes the work required under the Contract. Depending on the Contract, that can include adding or omitting work, changing dimensions or quantities, substituting materials, altering quality requirements or changing another aspect of the Works.
The NSW Government Construction Procurement Guide to Managing Variations explains that the general conditions in each standard form define what constitutes a Variation under that particular form. The definition and Variation provisions in the signed Contract therefore need to be applied to the particular change.
A Variation also needs to be distinguished from an amendment to the Contract itself. A Variation usually changes the Works using a contractual power the parties have already agreed. An amendment changes the terms of their Contract.
What should Contractors do when they receive a Proposed Variation or Variation Direction?
The contractual process depends on whether the Contractor has been asked to consider a possible change, directed to carry out a Variation, or given another direction that it considers changes its contractual scope.
Proposed Variations
A Proposed Variation usually allows the Principal or its representative to understand the price and time consequences before deciding whether to proceed. The Contract may require the Contractor to provide a quotation, explain the effect on the Construction Program and Date for Practical Completion, and provide supporting calculations or Subcontractor quotations.
The response period should be recorded when the proposal is received. Some amended standard form and bespoke Construction Contracts contain deemed acceptance provisions or other consequences if the Contractor does not respond within the specified period. Any assumptions affecting the proposed price or time, including access, sequencing, working hours and the timing of the work, should be stated in the response.
Submitting a proposal does not necessarily authorise the changed work. The Contract should identify the further direction, approval or other step required before the Contractor proceeds.
Directions to carry out a Variation
A direction to carry out a Variation can require the Contractor to proceed before the price or time consequences have been agreed. The Contractor should comply with the applicable notice and claim requirements, identify how the Contract requires the work to be valued and assess whether the change also requires an Extension of Time claim.
Where the work proceeds before valuation is resolved, keep separate records of the labour, plant, materials and Subcontractor costs attributable to the Variation. The Project records should also identify any effect on the Construction Program.
Other directions that change the Contractor’s scope
A revised drawing, design instruction, site direction or clarification may change the Contractor’s obligations without being described as a Variation.
A Contractor who considers that a direction changes its contractual scope should identify the existing requirement, explain how the direction changes it and give the notice required by the Contract. The direction itself, the original scope documents and any revised drawings or specifications should be kept together.
Where the other party says the work was already included, see Scope Changes and Construction Contract Variations for the detailed scope analysis.
Construction Contract Variation Flowchart
The Construction Contract Variation Flowchart distinguishes the three processes above: a Proposed Variation, a direction to carry out a Variation, and another direction that the Contractor considers changes its contractual scope.
It also identifies the point at which the Contractor should consider whether another Contract provision governs the event. This is important where the additional work or cost arises from a Latent Condition, discrepancy, Provisional Sum, defective work or another event with its own contractual process.
What has the Contractor received?
Follow the pathway that corresponds with the request or direction received. The signed Contract determines the procedure, deadlines and information required.
Proposed Variation
Check the proposal requirements
- Response deadline
- Information required
- Price and supporting quotations
- Program and Practical Completion effects
- Assumptions affecting the proposal
- Deemed acceptance or other consequences of failing to respond
Submit the proposal within time
Has the Variation been directed or otherwise authorised under the Contract?
Do not assume that submitting the proposal authorises the changed work.
Move to the Directed Variation process.
Directed Variation
Check the Contract requirements
- Authority of the person giving the direction
- Work covered by the direction
- Notice and claim requirements
- Contractual valuation method
- Separate Extension of Time requirements
Carry out the direction as required by the Contract
Keep contemporaneous records of labour, plant, materials, Subcontractor costs and program effects.
Other Direction That Changes Scope
This can include a revised drawing, design instruction, clarification or site direction.
Compare the direction with the existing contractual requirement
Does compliance require different or additional work?
Administer the direction under the Contract provision that applies.
- Identify the scope change
- Identify the contractual basis of the claimed entitlement
- Give the required notice within time
- Provide the required price information
- Assess any separate EOT entitlement
Follow the Contract's dispute process and consider any applicable Security of Payment rights.
Other Contract provisions that may apply to changed work
A Project event that increases the Contractor’s work or cost may be governed by a specific Contract provision rather than the general Variations clause. Latent Conditions, Provisional Sums, discrepancies between Contract documents and rectification of defective work are common examples. The applicable provision determines the entitlement, notice requirements and valuation process.
A Contractor who encounters a Latent Condition should follow the Latent Conditions provisions and any required notice process. A later direction arising from the condition may also engage the Variations provisions, depending on the Contract and what is directed. See Latent Conditions for the separate contractual process.
Directions to rectify defective work raise different questions. Where work does not comply with the Contract, the applicable defects provisions may require the Contractor to bring it into compliance at its own cost. If the Contractor disputes the alleged defect, the drawings, specifications, quality requirements and contractual basis of the direction need to be considered.
Provisional Sums, Prime Cost Items, quantity adjustments and rise and fall mechanisms can also have their own valuation provisions. Price escalation is dealt with separately in our guide to Rise and Fall Clauses in Construction Contracts.
Who can direct a Construction Contract Variation?
The signed Contract identifies who has authority to direct a Variation. Depending on the Contract, that person may be the Superintendent, Principal’s Representative, Contract Administrator, Project Manager or another nominated representative.
People who manage the work on site do not necessarily have contractual authority to vary it. A supervisor, architect, engineer or consultant may give operational instructions while the Contract reserves the Variation power to somebody else.
Where authority is unclear, the Contractor should record the instruction and obtain any confirmation required by the Contract. Any written delegation of the relevant contractual power should also be checked.
How should Contractors deal with verbal Variation instructions?
A verbal instruction should be recorded promptly where the Project team considers that it changes the work. The record should identify who gave the instruction, when it was given and what the Contractor was asked to do.
The next step depends on the written-direction and notice provisions in the signed Contract. The Contractor may need to send its record to the authorised representative, give a Variation notice or obtain written confirmation before proceeding.
If the work proceeds while entitlement or price remains unresolved, keep the resources used for that work identifiable. Signed daywork sheets, photographs, labour and plant records, delivery documents and Subcontractor records can later establish what was done and the cost incurred.
What notice is required for a Construction Contract Variation?
There is no standard notice period that applies to every Construction Contract Variation. The notice period, required information, recipient and method of service come from the signed Contract.
A Contract may require an initial notice followed by a more detailed claim. The required information can include the direction relied upon, the contractual basis of the claim, a description of the changed work, estimated or actual cost and the expected effect on the Project program.
The notice provisions also determine how the notice must be given. Sending the information to members of the Project team will not necessarily satisfy a provision requiring service on a nominated person, at a specified address or through a prescribed electronic system.
Where timely notice is a condition of entitlement, a missed deadline can affect the Contractor’s claim. The notice requirements should therefore be identified when the relevant direction or event occurs.
How are Construction Contract Variations priced?
The signed Contract determines how a Variation is valued. Depending on its terms, the applicable method may be an agreed price, Contract rates, a Schedule of Rates, reasonable rates, daywork or another valuation mechanism.
The Contract also determines which components are recoverable. Labour, plant, materials and Subcontractor costs may be accompanied by supervision, design costs, overheads, margin or time-related costs where the relevant provisions allow them. Amendments to standard form contracts frequently change margins, rates and recoverable costs.
A Proposed Variation gives the Contractor an opportunity to state its pricing assumptions before the Principal decides whether to proceed. If the work must commence before a price is agreed, the Contractor should establish how quantities, resources and costs will be recorded while the work is performed.
Does a Construction Contract Variation give the Contractor extra time?
Where a Variation affects completion, the Contractor should assess its entitlement under the Contract’s Extension of Time provisions. The Variation and EOT provisions may have different notice requirements, claim procedures and time limits.
An EOT claim can require evidence of the cause of delay, the activities affected and the resulting effect on the Date for Practical Completion. A separate entitlement may apply to delay costs.
See Extensions of Time in Construction Contracts for the detailed EOT process.
Can the Principal omit work and give it to another Contractor?
An omission is commonly included within contractual Variation powers, but the existence of an omission power does not necessarily allow the Principal to remove work for the purpose of having somebody else perform it.
The High Court’s decision in Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 is an important Australian authority concerning the use of an omission power to transfer work to another contractor. A particular Contract may contain express omission and re-letting rights, so its wording needs to be considered before applying the general principle.
The valuation of an omission can also affect direct costs, margin, preliminaries and overhead recovery. The applicable valuation provisions determine how the deduction is calculated.
How can Contractors deal with Disputed Variations?
The reason for rejecting or reducing a Variation determines what the Contractor needs to address. A dispute may concern whether the work was already within scope, the authority of the person who gave the direction, compliance with a notice requirement, valuation or the effect of the work on the Project program.
A scope dispute requires the original Contract documents and the direction said to have changed them. A valuation dispute is more likely to turn on the contractual valuation method, quotations, invoices, labour and plant records, measurements or other cost information. Where notice is disputed, the relevant clause should be considered with the notices and Project correspondence relied upon by the Contractor.
The signed Contract may prescribe a notice of dispute, conference, negotiation or another dispute resolution process. A Contractor who receives a rejection or reduced assessment should check whether another contractual time limit begins to run from that decision.
Security of Payment legislation can provide a separate statutory process for claiming payment. In Queensland, the Building Industry Fairness (Security of Payment) Act 2017 provides payment claim and adjudication processes for construction work and related goods and services. The Contract, payment claim, payment schedule and supporting Project records remain relevant where a disputed Variation proceeds to adjudication.
See Construction Contract Disputes for broader dispute issues.
Construction Contract Variations Legal Services
Blaze Business & Legal advises Contractors, Subcontractors and Suppliers on Construction Contract Variations before and during Construction Projects. The work includes advice on Proposed Variations, Variation directions, contractual notices, valuation, scope disputes and related Extension of Time and payment issues.
For Contracts that have not yet been signed, see Construction Contract Review and Construction Contract Advice.
How do AS 4000 and AS 2124 deal with Construction Contract Variations?
AS 4000-1997, AS 4000:2025 and AS 2124-1992 contain contractual mechanisms dealing with Variations. AS 4000:2025 is the latest edition of AS 4000. Although Standards Australia formally lists AS 4000-1997 and AS 2124-1992 as superseded, parties can still choose to use those earlier standard forms, and they continue to be used on Australian Construction Projects.
The applicable process comes from the standard form incorporated into the signed Contract and the amendments made to it. A Contractor working under an amended AS 4000 or AS 2124 Contract should apply that Contract rather than a procedure remembered from another Project.
See Variations under AS 4000-1997 and AS 4000:2025 for the AS 4000 processes, including Proposed Variations, directed Variations and Contractor-requested Variations. Variations under AS 2124-1992 will be dealt with separately in our AS 2124 guide.
Is a Construction Contract Variation the same as amending the Contract?
A Variation usually changes the Works through a power already contained in the Construction Contract. For example, the Contract may allow the authorised representative to direct additional work, omit work or alter part of the Works.
An amendment changes the contractual terms agreed between the parties. Changes to payment terms, liability provisions, risk allocation or other contractual rights and obligations may therefore require an amendment rather than use of the Variation power.
Where a document described as a “Variation” also proposes changes to the Contract conditions, its legal effect should be considered before it is signed.
How should Contractors administer Variations during the Project?
Variation records should allow the Project team to trace a change from the original request or direction through to assessment and payment. The records should identify the direction, contractual authority, notices, price, time consequences, supporting documents and current status.
The register should distinguish Proposed Variations from directed Variations and disputed scope changes. It should also show whether the amount has been submitted, assessed, approved, included in a payment claim and paid.
Detailed Variation register management, including reconciliation against Project cost reporting, payment claims and forecasting, is covered in How to Manage a Construction Contract Variation Register.
In My Experience
I spent six years working full-time as a Commercial Manager, including assessing and negotiating Variation claims. Claims with a clear documentary trail could usually be assessed more efficiently because the records showed the original requirement, the later direction, the notices given and how the Contractor calculated its price.
The more difficult claims often arose from ordinary Project instructions that were acted on before their contractual effect was addressed. When the claim was prepared later, the Project team had to reconstruct what had been requested, whether the person giving the instruction had authority, what the original scope required and which costs related to the changed work.
When I review Variation provisions before a Contract is signed, I also consider how the Project team will administer them. Notice periods, authority, proposal procedures, valuation rules and EOT requirements need to be workable during the Project, including when several potential changes are being managed at the same time.
FAQs About Construction Contract Variations
1. What is the difference between a Proposed Variation and a Variation direction?
A Proposed Variation generally asks the Contractor to provide information about a possible change before a decision is made to proceed, while a Variation direction requires the Contractor to carry out changed work under the Contract. The signed Contract determines the procedure and information required for each.
2. What should a Contractor do if another direction changes its scope?
A Contractor who considers that a direction changes its contractual scope should identify the difference between the existing obligation and the new requirement and give any notice required by the Contract. The direction does not need to use the word “Variation” for a scope issue to arise.
3. Can a Contractor claim a Variation without a written direction?
Entitlement without a written Variation direction depends on the Contract and the circumstances. Where the Contract requires written directions, a verbal instruction should be recorded promptly and the required written confirmation sought.
4. What happens if a Contractor misses a Variation notice period?
The consequence depends on the wording of the signed Contract. Some contracts make timely notice a condition of entitlement, so the Contractor should give the notice as soon as the omission is identified and assess the contractual position.
5. How is a Construction Contract Variation valued?
The valuation method comes from the signed Contract. It may use an agreed price, Contract rates, a Schedule of Rates, reasonable rates, daywork or another contractual method.
6. Does a Construction Contract Variation automatically extend the Date for Practical Completion?
A Variation does not automatically satisfy the Contract’s Extension of Time requirements. Where the changed work affects completion, the Contractor should assess and claim any EOT under the applicable time provisions.
7. Can a Subcontractor claim a Variation that has not been approved under the Head Contract?
The Subcontractor’s entitlement is determined under its Subcontract. Approval of the corresponding change under the Head Contract is a separate contractual issue unless the Subcontract makes upstream approval relevant to the Subcontractor’s entitlement.
8. Can a disputed Variation be included in a Queensland payment claim?
A disputed Variation may be included in a payment claim where it forms part of an amount claimed for construction work or related goods and services under the Building Industry Fairness (Security of Payment) Act 2017. The contractual entitlement and supporting Project records remain relevant where the amount is disputed.
Get Advice on a Construction Contract Variation
Blaze Business & Legal advises Contractors, Subcontractors and Suppliers on Proposed Variations, Variation directions, notices, pricing, scope disputes and related Extension of Time and payment issues.
For an existing Variation issue, provide the signed Contract, relevant scope documents, the proposal or direction, notices already given and the other party’s response. Include any approaching contractual or statutory deadline.
